$2B Development Would Reshape Downtown Raleigh

Jun 25, 2019

Rendering of the proposed Downtown South development in south Raleigh.
Credit Downtown South / Gensler

Professional soccer club owner Steve Malik and Raleigh mega-developer John Kane publicly unveiled their plans for a nearly $2 billion project that would bring a 20,000-seat soccer stadium, 1.6 million square feet of office space, 750 residential apartments and 1,200 hotel rooms to a 55-acre plot in south Raleigh.

But while the unveiling ceremony – and a private event Monday night – brought fanfare, the project still needs to clear a big hurdle before shovels move dirt. The developers are asking for $13 million per year for 20 years from a fund that collects taxes on hotel stays and restaurants and bars, and on Tuesday, they weren't on that list.

During a question and answer period following the unveiling, Kane was blunt about the funds. When asked if the whole project would be killed without that funding, he responded quickly and without inflection, "Correct."

Malik owns North Carolina Courage of the National Women's Soccer League, and North Carolina FC of the United Soccer League. Joining him and Malik Tuesday was Billie Redmond of Trademark Properties, who is serving as the real estate broker.

Wake County established a tax in 1991 to fund projects that would drive tourism; in theory a fund that builds on itself. Funding recipients include PNC Arena and the Raleigh Convention Center, among others. It's called the Interlocal Fund, though is commonly referred to as the hotel and food and beverage tax. It generated $55 million last year and is projected to increase to $70 million by 2024 and $100 million by 2034. Funding does not come from any property taxes.

Rendering of the proposed Downtown South development in south Raleigh.
Credit Downtown South / Gensler

Malik argued that a project like this one, which developers are calling Downtown South or Downtown Raleigh Entertainment District Development, is the perfect fit for support from the tourism tax because it would drive additional tourism through soccer and other events at the stadium, as well as from the hotel rooms.

"We need Interlocal funding to create a stimulus for this area to justify the rest of this investment," Malik said. "What's the best fit for this is tourism taxes, no new taxes, ones that are specifically designed to put more heads in beds, and what we are offering here is not only that, but a leverage point to do something for economic equity for south Raleigh."

If approved, that would send at least $260 million from the hotel and food tax to the stadium project, but Malik argued that's just a small part of the $1.9 billion of private investment it would spur in an area of town that has historically been underserved.

"The rest of us have experienced here in Raleigh great benefits from the growth we see," said Malik. "But the southeast pert of town has not experienced some of those benefits."

What's more, developers argued the project would drive $3.7 million per year back to the Interlocal Fund, as well as $20 million per year into the general funds of Raleigh and Wake County.

Rendering of the proposed Downtown South development in south Raleigh.
Credit Downtown South / Gensler

Kane successfully redeveloped North Hills, but didn't get taxpayer support asked for at the time. He pressed ahead with development anyway, and has reaped the rewards. He said this proposal should get more attention from the city and county leaders because of its location in an underserved area.

"We're dealing with a demographic that is very different than the demographic in North Hills," Kane said. "This is a part of our city that we all need to support, and that's why I think the stimulus of the soccer stadium and event venue here will be the one thing that will actually be the catalyst to make this a reality."

Of course, when major development comes to underserved areas, it also raises concerns about gentrification and the accompanying increase in housing costs. Malik and Kane did not lay out specific plans for affordable housing, though said it has been discussed and that there could be a housing project in an adjacent lot to the stadium property that might be incorporated.

"We've made great efforts to have this project fit in the great work that many others have already done," said Malik. What people in that community want are jobs. ... We are also willing to commit to minimum minority subcontractors and contractors on the project. We want this to be a crown jewel for that area and we do intend to work with the city and the county on affordable housing. Some of that is having that additional land that gives us that option."

Now, Kane and Malik will need to make their case to local politicians, which could become a hard pitch. On June 19, the city and county managers met and publicly presented their funding recommendations. NCFC's stadium project was not one of the projects recommended for direct funding. The city council and board of commissioners have not given final approval, so there's still time for the stadium project, but it will require a change in direction, and mean that other projects bump off the list.