ICON Group delays study due to Maloofs

[LPKingsFan]

If the Kings move, it sets a precedent that goes against Stern's dream. Now I know there will be potshots at Stern but he has been on the whole a positive influence on the NBA. He has brought the NBA to all of us although perhaps if the Kings go to Anaheim, his plan may start going in reverse. Although it seems that Stern is disgusted with Sacramento, I think he also has to worry about the bigger picture.

Yeah, Stern's switch seems to be the most curious thing about this. I guess he's just fed up with the inability of local leadership. I mean, the NBA hitched its horse to the land swap plan that clearly wasn't perfect and a fairly longshot in itself; he shouldn't be simply done w/ the city since that didn't go anywhere. On the other hand, the NBA was investing a lot of resources for a while, and if that's the best that anyone could come up with, then maybe he figured it's simply a lost cause. Just tough that it seems like w/ a new revenue sharing plan coming into place, a young an exciting team continuing to develop, the economy turning around, the promise of Taylor/Icon... we really could use another year. Just one more year.

 

[LPKingsFan]

Although I should add, that Stern should be careful, because a business model that relies on small market cities bending over backwards to publicly finance new arenas is not one that will realize his vision.

 

[Trueblood]

I'm writing another note to leave my simple response to bajaden and kennadog alone.

I think the NBA has a problem and I have said it over and over. If three teams go to one media market, what's to stop an avalanche of teams moving to bigger markets like two more each for Chicago and New York. Three in LA area, four in New York/New Jersey, and three in Chicago. This is NOT Stern's dream. Read about what this man's vision is other than making tons of money. He wants a worldwide NBA influence. He wants every American to experience the NBA.

If the Kings move, it sets a precedent that goes against Stern's dream. Now I know there will be potshots at Stern but he has been on the whole a positive influence on the NBA. He has brought the NBA to all of us although perhaps if the Kings go to Anaheim, his plan may start going in reverse. Although it seems that Stern is disgusted with Sacramento, I think he also has to worry about the bigger picture.

I don't think we'll see that happen. Well, I could definitely see the NBA giving in to Ellison and San Jose at some point but outside of that and the Kings going to Anaheim, big market saturation shouldn't become a trend.

In New York, the Nets haven't been able to make things work in New Jersey. If they can't draw in New Jersey with just the Knicks as competition in the region, then I doubt you'll see some outside team move to Newark and then have to compete with the Knicks AND the Nets in Brooklyn.

As for Chicago, there is no arena outside of the United Center and there's no way the Bulls sign a lease to allow a 2nd team in their crib. Not gonna happen.

Even if the Kings wind up in Anaheim, they're no worse than the NHL who has 3 teams in the Islanders, Rangers and Devils and 2 in socal. The NBA would just be the reverse of that with 3 in socal and 2 in NY.

Let's not forget that MLB has teams sharing the market in FIVE different areas with the A's and Giants in the bay, Dodgers and Angels in LA, Cubs and Sox in Chicago, Nationals and Orioles in the beltway and the Yankees and Mets in NY. The NBA will never come close to that type of saturation.

 

[Arena Skeptic]

If our Council was really serious about retaining the Kings, wouldn't they add this item to the agenda under "emergency circumstances", and invite the other three groups back so they could further develop feasibility studies to compete with the one Taylor-ICON has now decided it's not going to produce?

Of course, they'd only have 5 weeks to complete their own studies, but at least invite them back to give it a whirl?

And if they come up with something like Orlando, where the Magic only pay $1M/year in rent, they can always just reject such ideas. The story in Orlando that wasn't reported yesterday is that the deal already has a 15% deficit, and they're going to have to come up with money one way or another to pay bond-holders. A 15% shortfall would bankrupt Sacramento; we'd need to require guarantees that involved the tennants making up the difference, and the Maloofs would never agree to that, because, "That's not the way these deals get done in today's market," or some similar BS reason.

 

[Arena Skeptic]

I'm writing another note to leave my simple response to bajaden and kennadog alone.

I think the NBA has a problem and I have said it over and over. If three teams go to one media market, what's to stop an avalanche of teams moving to bigger markets like two more each for Chicago and New York. Three in LA area, four in New York/New Jersey, and three in Chicago. This is NOT Stern's dream. Read about what this man's vision is other than making tons of money. He wants a worldwide NBA influence. He wants every American to experience the NBA.

If the Kings move, it sets a precedent that goes against Stern's dream. Now I know there will be potshots at Stern but he has been on the whole a positive influence on the NBA. He has brought the NBA to all of us although perhaps if the Kings go to Anaheim, his plan may start going in reverse. Although it seems that Stern is disgusted with Sacramento, I think he also has to worry about the bigger picture.

I heard Tom Tolbert jokingly say once that he thought the entire NBA should move to Las Vegas. All 30 teams.

I'm sure he wasn't serious, because you'd end up with 400 people at each game, with a salary cap of roughly $500,000.

 

[Section 101]

Let's not forget that MLB has teams sharing the market in FIVE different areas with the A's and Giants in the bay, Dodgers and Angels in LA, Cubs and Sox in Chicago, Nationals and Orioles in the beltway and the Yankees and Mets in NY. The NBA will never come close to that type of saturation.

MLB has been around over 60 years longer too with 2 distinct leagues. If you notice teams in the same city are in different leagues so they play different teams. Yes there is interleague play now, but the teams were establish well in advance.

 

[Section 101]

And if they come up with something like Orlando, where the Magic only pay $1M/year in rent, they can always just reject such ideas. The story in Orlando that wasn't reported yesterday is that the deal already has a 15% deficit, and they're going to have to come up with money one way or another to pay bond-holders. A 15% shortfall would bankrupt Sacramento; we'd need to require guarantees that involved the tennants making up the difference, and the Maloofs would never agree to that, because, "That's not the way these deals get done in today's market," or some similar BS reason.

Yes the Magic only pay $1 mil/year, but they also put money up front to build it, $50 mil plus cost overruns. The difference here was the Maloofs were doing a $10 mil/year with no upfront costs.

 

[Superman]

Yes the Magic only pay $1 mil/year, but they also put money up front to build it, $50 mil plus cost overruns. The difference here was the Maloofs were doing a $10 mil/year with no upfront costs.

Their $10 million/year would have paid for the entire cost of building the arena, just not up front. There's always the possibility of default, and other issues, and even not knowing the particulars, I can understand why the city would reject that kind of proposal. But I think it's not as stingy as maybe it's been portrayed. I doubt there's another pro sports team in the country paying $10 million/year for their lease. From what I understand, the Lakers don't pay anything; they gave a minority stake to the owner. The Colts pay $250k/year, which is a gigantic sweetheart deal. These lease agreements range and vary on an individual basis, so there's no standardized way to judge them, but I don't think the Maloofs offer should necessarily be scoffed at.

 

[Section 101]

Their $10 million/year would have paid for the entire cost of building the arena, just not up front. There's always the possibility of default, and other issues, and even not knowing the particulars, I can understand why the city would reject that kind of proposal. But I think it's not as stingy as maybe it's been portrayed. I doubt there's another pro sports team in the country paying $10 million/year for their lease. From what I understand, the Lakers don't pay anything; they gave a minority stake to the owner. The Colts pay $250k/year, which is a gigantic sweetheart deal. These lease agreements range and vary on an individual basis, so there's no standardized way to judge them, but I don't think the Maloofs offer should necessarily be scoffed at.

It would cover probably 75% of the costs. There is the difference in total cost plus the interest to the bond holders. Looking back now the city really should have jumped at this if it was truely offered.

AEG is a part owner of the Lakers. They own staples. The colts only have 10-13 (8 regular season, 2 pre season, max of 3 home playoff games, but normally 1-2) games at their stadium.

 

[Superman]

It would cover probably 75% of the costs. There is the difference in total cost plus the interest to the bond holders. Looking back now the city really should have jumped at this if it was truely offered.

AEG is a part owner of the Lakers. They own staples. The colts only have 10-13 (8 regular season, 2 pre season, max of 3 home playoff games, but normally 1-2) games at their stadium.

Yes, assuming they were to push the risk off on bondholders, then you have to add in interest and all that jazz, but a team paying for even 75% of the cost of a new facility is not usual. Every once in a while, an owner fronts the entire cost, but more likely, the community is the major contributor. Even Jerry Jones didn't pay 75% of Cowboys Stadium.

I don't know whether they city should have jumped at that offer or not. I think that, on the surface, it's a great offer, but if the trade-off was relinquishing all profits from all events, even non-Kings events, then I can understand why the city didn't like that proposal. I don't know the specifics, but the dollar amount is significant.

Yes, AEG is a part owner, but that's because that's the lease agreement. IIRC, the Lakers don't pay anything to use Staples, in exchange for AEG's minority stake in the team.

As for the Colts comparison... The Maloofs would have been paying almost as much per game as the Colts pay annually to use LOS. Tons of other differences (Irsay paid $100 million up front, for instance), but the dollar amount is staggering in comparison with other lease agreements.

 

[Section 101]

I don't know whether they city should have jumped at that offer or not. I think that, on the surface, it's a great offer, but if the trade-off was relinquishing all profits from all events, even non-Kings events, then I can understand why the city didn't like that proposal. I don't know the specifics, but the dollar amount is significant.

See this is where there is a a miscommunication. If they are leasing the building and doing the event promotions then yes they should get all the profits. They are taking all the risk in this senario. The city gets it's money from the lease and from the taxes generated.

 

[Superman]

See this is where there is a a miscommunication. If they are leasing the building and doing the event promotions then yes they should get all the profits. They are taking all the risk in this senario. The city gets it's money from the lease and from the taxes generated.

I don't want to split hairs. I'm just saying that we don't know all the particulars of that specific proposal. The dollar amount sounds great, but it may have been poison-pilled in one way or another, making it unpalatable for the city.

 

[Section 101]

I don't want to split hairs. I'm just saying that we don't know all the particulars of that specific proposal. The dollar amount sounds great, but it may have been poison-pilled in one way or another, making it unpalatable for the city.

I think we are on the same page. But if you had someone offer you 75% to cover costs of a project that seems like a pretty good starting point to come up with the other 25%. Again, assuming that information was correct.

 

[Superman]

I think we are on the same page. But if you had someone offer you 75% to cover costs of a project that seems like a pretty good starting point to come up with the other 25%. Again, assuming that information was correct.

Absolutely. I wouldn't summarily dismiss it, that's for sure. That proposal has been painted in a negative light because it would have been paid over 30 years, but like you said, 75% of the upfront cost is secured, one way or the other. Could have provided the city/developer with a stake in the team to securitize, which is tricky because of the backwards nature of the transaction, but I think that proposal had legs. Assuming it was legitimate.

• City/developer fronts $300 million, to be repaid by Maloofs over 30 years

• Maloofs give 15% stake to city/developer, with "full payment upon departure" clause, which would force them to pay the loan in full if they were to leave before 30 years

• City/developer could also sell stake to potential bondholders to generate more upfront revenue

• 
  County approves small sales tax increase

• Team charges a ticket tax, which, in addition to county tax increase and potential stake sale would cover overruns

• Maloofs control facility and all events, split profits 70/30 with city/developer

• Maloofs pay all facility maintenance; any net losses associated with facility maintenance and operation (not team expenses) are deducted from 30 year balance, to a certain limit

Not perfect, but it could work. It's at least a baseline.

 

[whozit]

Problem with the 15% stake is that from whose shares would they come from. Even splitting the shares evenly with the minority owners would take away their majority share and possibly cause them to lose control of the team.