The Capitals and Wizards will stay in their Chinatown building through 2050 under a tentative deal with the District that extends the teams’ leases, according to multiple reports Wednesday.

News of the deal was announced just hours after the city of Alexandria officially pulled the plug on negotiations for a ritzy new basketball and ice hockey palace at Potomac Yards.

D.C. Mayor Muriel Bowser has agreed to invest $515 million in improvements at Capital One Arena while locking the teams into the District for decades. Any public funds must be approved by the D.C. Council.

Ted Leonsis, owner of the teams and head of Monumental Sports and Entertainment, the teams’ parent company, told employees in a letter that the deal would include 200,000 square feet of expansion of the arena complex into the nearby Gallery Place space, the creation of an entertainment district in the city’s surrounding Chinatown neighborhood and safety and transportation upgrades, according to The Associated Press.

Earlier in the day, Alexandria officials announced that the city’s proposed $2 billion arena project was dead.

“The City of Alexandria has ended negotiations related to the Potomac Yard Entertainment District opportunity and the proposal will not move forward,” Alexandria officials said in a statement.

Democrats in the Virginia General Assembly had put the proposal on life support by ignoring Gov. Glenn Youngkin’s funding requests. The Republican had negotiated his own deal with Mr. Leonsis.

“Virginians deserve better. A one-of-a-kind project bringing world-class athletes and entertainment, creating 30,000 jobs and $12 billion in economic activity just went up in smoke,” the governor said in a statement. “All the General Assembly had to do was say: ‘thank you, Monumental, for wanting to come to Virginia and create $12 billion of economic investment, let’s work it out.’ But no, personal and political agendas drove away a deal.”

The arena plan, which the governor and Mr. Leonsis announced with great fanfare in December, set off surprisingly robust blowback from legislators in Richmond and residents in Alexandria.

Supporters touted the economic benefit of moving two professional teams to the state, and opponents noted concerns about the use of public funding and the effects on traffic in Potomac Yard.

Plans for the arena called for $1.5 billion in funding from public bonds, with Mr. Leonsis’ Monumental Sports & Entertainment contributing $400 million to the project. Public funding was dependent on an agreement from state lawmakers to establish a stadium authority to issue the bonds and oversee the arena.

Mr. Youngkin touted the arena as a boon for Virginia’s economy. He has said the development would create 30,000 jobs and billions of dollars in tax revenue without any upfront cost to taxpayers.

“I’d like to thank Ted Leonsis and the Monumental team … and countless other partners for their professionalism, belief in Virginia and fortitude,” Mr. Youngkin said. “Congratulations to Monumental for striking a great deal, I’m sorry you won’t be in Virginia.”

MSE didn’t respond to The Washington Times’ request for comment.

State Sen. L. Louise Lucas, Portsmouth Democrat, said the governor’s proposal was overly dependent on public funds.

While the arena could have moved forward during budget negotiations, it was blocked by Ms. Lucas.

With Virginia off the table, Mr. Leonsis’ arena options were limited to Maryland and the District, Maryland Gov. Wes Moore met with Mr. Leonsis this month to discuss a potential new stadium in the Old Line State. Officials with the governor’s office said they were not able to comment on the discussion.

Ms. Bowser spent the last few months lobbying to keep the Wizards and Capitals in the District. Before Mr. Leonsis announced plans to move the team, D.C. officials said they would invest up to $500 million to renovate Capital One Arena, where the teams currently play.

Monumental would be responsible for a $300 million investment.

Mr. Leonsis initially turned down the offer, instead opting for the Potomac Yard proposal. Ms. Bowser responded by penning an article in The Washington Post in February.

“It’s only right that D.C.’s teams stay in D.C. Leonsis has previously acknowledged the huge responsibility that comes with owning a team,” the mayor wrote. “Now, I’m not a billionaire, but I do believe it’s possible to have enough money. A great legacy and reputation, however, are priceless.”

A spokesperson for Ms. Bowser said they could not provide any additional information about the deal.

• Liam Griffin can be reached at lgriffin@washingtontimes.com.