The Seattle Arena Situation - I Am Geting a Little Paranoid

[Purple Reign]

I know I am bout to get bashed by some of you all, but I am getting just a little concerned about the Seattle/Sacramento Arena situation. I know a lot of this chatter comes from the emotion of the Thunder in the NBA Finals and Seattle getting shafted. I too have kind of bought into the hype after recently watching "Sonicgate", an excellent, excellent piece on the Seattle/OKC relocation. Then over the past few days I read the foolowing quotes:

Neil deMause, editor of the website "Field of Schemes," which tracks sports arena and stadium issues, says he doesn't understand the Maloofs' strategy of killing the deal in Sacramento at the last minute "unless they really want to scorch the earth and then sell the team." "They could call (Chris) Hansen tomorrow and say, 'Fine, let's make a deal,' or they could sit around for another 10 years and keep playing games," deMause said.

Stern loves the Sacramento market, the 20th largest market in the country and one that is devoid of competition from other sports leagues. He goes out of his way to praise the city at every opportunity for the job they did getting an arena deal done. But he’ll have a hard time forcing the Maloofs to take a substantially smaller offer to stay in California’s capitol.

The only plan that makes any financial sense is for them (The Maloofs) to sell the team to the highest bidder, and with billionaire Robert Pera reportedly paying approximately $350 million for the Grizzlies to keep the team in Memphis and Tom Benson paying $338 million for the Hornets, it’s possible the Maloofs can top the $400 million mark on their way out the door.

You would be lying if you said "those things don't make me nervous". To me this situation comes down to a matter of trust:

I can completely trust this guy

Kevin Johnson
Mayor Johnson will do what is right for Sacramento. His track record in this arena effort is outstanding. His ability to gain stakeholders (City Council, AEG, ICON, David Taylor) has been perfect. But the situation is out of his hands


I do not know if I can trust this guy

David Stern
Commissioner Stern's track record on all things NBA is suspect at best (Two Lockouts, Referee Scandal, and now the Jim Rome PR Mess). He is in my opinion an outstanding Commissioner; he praises Sacramento as a partner of the NBA, but business is business; and I can't help to think that he is sick and tired of the Sacramento mess. Plus last week he actually met the Mayor of Seattle. And if the Maloofs get a solid offer from Seattle, and Sacramento does not have a counter offer that matches, what can Stern do?


I don't know this guy to trust him

Ron Burkle
Some of ya'll have drunk the "Ron Burkle, Billionaire, I Love Sacramento Kool Aid". To me, Burkle is like the Lockness Monster, Big Foot and every other Urban Myth/Legend. I have not heard him speak, I have not even seen live footage of the man. As far as I am concerned, that could be Piers Morgan's cousin or brother LOL!!!. What is his Sacramento connection? What is his angle? Until I hear from the man, he is a myth as far as I am concerned.


I know that I do not trust these guys

THE MALOOF BROTHERS
The relationship between the Maloof Family and the community they serve is as bad as any other currently in professional sports. Because of their burnt bridges with Sacramento, I can see them selling the team to Chris Hansen for $500 million. What will Stern, Burkle and Johnson do then?

Until the Maloofs get back to the original Arena Deal table and sign a 30 Year Lease.....

I DO NOT TRUST THEM, I DO NOT TRUST THEM, I DO NOT TRUST THEM!!!!!

 

[Jose]

It's a free market... so if someone is willing to pay more to buy the team, then so be it. However, there is an approval process that new owneds need to go thru. Just buying a team so they can move it somewhere else is not something that's going to sit well. Happened before, gave Stern a black eye. Not likely to happen again.

Too many things need to happen:

- Someone with an eye towards moving out comes up with a ridiculous offer
- Burkle or any other Sacramento-oriented buyer can't match that
- Maloofs actually decide to sell
- NBA approves new owner
- We are unable to move forward with the arena
- Seattle gets theirs done
- Stern/NBA approve a move (guaranteed to happen if all of the above happens)

That's too many "ifs"...

What I don't understand is... A new owner doesn't need to buy the team from the Maloofs outright, or buy the team in its entirety. Buy some controlling shares from the minority owners (I'm sure there are some that are unhappy with the way things are and would be willing to sell - and the Maloofs can't afford to buy). Let's say you get to 25% ownership... then make a ridiculous offer to the Maloofs for enough shares to get to 51%. You accomplish 2 things: get majority of the controlling shares (which is really all you need/want to own/control the team), and inflate the price of your franchise. It also saves them some $$$, as they can acquire control of the team without the expense of buying it all.

Not sure why any of the potential buyers are not exploring that (maybe they are?). It allows for a change of control/ownership, allows the Maloofs to still be "owners" (with no control), keeps the team here.

 

[Purple Reign]

Too many things need to happen:

- Someone with an eye towards moving out comes up with a ridiculous offer
- Burkle or any other Sacramento-oriented buyer can't match that
- Maloofs actually decide to sell
- NBA approves new owner
- We are unable to move forward with the arena
- Seattle gets theirs done
- Stern/NBA approve a move (guaranteed to happen if all of the above happens)

That's too many "ifs"...

I can absolutely envision each and every one of those things happening. Stern does not control the other 29 owners. If the Maloofs get a great offer from Seattle, the Maloofs are not obliged to open the process up to bid. That only happens when the team is on the Auction block (i.e. the Golden State Warriors). Guber and Lacob out bidded Larry Ellison by 49 million dollars for a team that was placed on the auction block. The Grizzlies owner just recently sold the team and nobody knew about it until the deal was done.

I can see the Maloofs going the Auction model, but I also can see them selling the team under the nose of Sacramento and the League. Only then the owners can step in and block the sell.

 

[Section 101]

I can absolutely envision each and every one of those things happening. Stern does not control the other 29 owners. If the Maloofs get a great offer from Seattle, the Maloofs are not obliged to open the process up to bid. That only happens when the team is on the Auction block (i.e. the Golden State Warriors). Guber and Lacob out bidded Larry Ellison by 49 million dollars for a team that was placed on the auction block. The Grizzlies owner just recently sold the team and nobody knew about it until the deal was done.

I can see the Maloofs going the Auction model, but I also can see them selling the team under the nose of Sacramento and the League. Only then the owners can step in and block the sell.

Ellison could be a potential buyer if he wants to keep the team here. Your still leaving out relocation costs. While Seattle and KC would be lower amounts, San Jose would be larger and Anaheim the largest. The rumor was Anaheim would be $300 mil and was one of the factors of the Maloofs not filing last year.

 

[JB_kings]

Hansen and his investors have to not only buy the team at the highest price, but they have to pay off the '97 loan. The agreement signed states if the team moves out of the city, the outstanding balance must be paid including an early pay off penalty. Of course they can renegotiate a new loan, but what exactly is going to be used to secure that?

The next hurdle is that if the team is moved, a 20 million dollar chunk of team ownership has to be given to the city. This is totally separate parties from the loan as the loan is due to be paid back to the institutions who provided the bonds. I'm assuming they will negotiate that and buy back that provision for cash since team ownership for the City of Sacramento does little to offset losses.

So it's not just simply offering more money to the Maloofs for their ownership. They have to offer more, then pay off well over 100 million in bond debt and penalties associated with the '97 loan. Then after that there is the relocation fee due the NBA which is a minimum of 35 million and likely more.

After all that, then Hansen's group has to finance the Seattle arena. So what I am saying here is, if the Maloofs debt laden ownership of the Kings in Sacramento is pretty daunting, the debt incurred by moving the team adds on to that greatly. And remember that there has to be ongoing team operating costs which is going to bite hard into their revenues. Those same revenues which are supposed to pay back investors and costs associated with building their new arena.

Hansen himself is not a billionaire. He has had a lot of very big names associated with his attempt to bring the NBA back to Seattle. Namely Nordstrom and Ballmer. I think the leap of faith coming from Seattle fans is that these guys are going to "bank" all these daunting costs just to bring back the NBA. And by bank, you might be thinking charity right? Because otherwise you can't be thinking that splitting up that 40 odd percent of the current Maloof Kings empire between this dream team of billionaires is going to equal their required contributions of hundreds of millions of dollars.

So Seattle is pinning hopes that their ownership group is going to front/finance over 150 million in moving costs, 3-400 million in new arena building costs, and the total cost associated with purchasing the Maloofs share of the team. Lots of leaps of faith that money will be pumped in with nothing or little coming back to those who are doing the pumping.

 

[Trueblood]

One thing to remember is that a lot of debt gets subtracted from the actual sale price. For example, Mikhail Prokhorov was pretty much given the Nets for free as long as he financed the arena and took on the Net's debt.

Bob Johnson's selling price for the Bobcats was $275 million but MJ only paid $175 because he had to take on the $100 million in debt.

If the Kings were to hypothetically be sold to Chris Hansen, I'm sure that the number would be for over $400 million but assuming Chris Hansen would be on the hook for the original loan and money borrowed from the NBA, he would actually just be paying somewhere in the $2 to $300 million range.

 

[JB_kings]

One thing to remember is that a lot of debt gets subtracted from the actual sale price. For example, Mikhail Prokhorov was pretty much given the Nets for free as long as he financed the arena and took on the Net's debt.

Bob Johnson's selling price for the Bobcats was $275 million but MJ only paid $175 because he had to take on the $100 million in debt.

If the Kings were to hypothetically be sold to Chris Hansen, I'm sure that the number would be for over $400 million but assuming Chris Hansen would be on the hook for the original loan and money borrowed from the NBA, he would actually just be paying somewhere in the $2 to $300 million range.

Of course they don't purchase for the full $400 million. But the problem is that this all has to pencil out in the big picture for investors. I think people get trapped into thinking if there are rich people involved, this is all just so easy because they can afford to throw money at it and only expect part ownership of the team in return. It's mostly done on purpose to lull the public into thinking that the problem is solved because rich people write checks. But it doesn't work that way. Rich people got rich because they figure out how to get other people to write them checks. In this case, at some point the City of Seattle is going to be on the hook to pay off way more than they are talking about now. Otherwise this is one big push for nothing. When the City of Sacramento figure out how to come up with 255 million to do this deal, it became very possible. Seattle right now is still in Chris Hansen as the NBA/Arena fairy mode. It's not real.

 

[Purple Reign]

Of course they don't purchase for the full $400 million. But the problem is that this all has to pencil out in the big picture for investors. I think people get trapped into thinking if there are rich people involved, this is all just so easy because they can afford to throw money at it and only expect part ownership of the team in return. It's mostly done on purpose to lull the public into thinking that the problem is solved because rich people write checks. But it doesn't work that way. Rich people got rich because they figure out how to get other people to write them checks. In this case, at some point the City of Seattle is going to be on the hook to pay off way more than they are talking about now. Otherwise this is one big push for nothing. When the City of Sacramento figure out how to come up with 255 million to do this deal, it became very possible. Seattle right now is still in Chris Hansen as the NBA/Arena fairy mode. It's not real.

Seems like you are very much in tune with this. What you are saying is that the hurdles are even that much more monumental to move whether it's Seattle or Anaheim?

With that in mind, it seems like the Maloofs are really up against it, unless they sell locally. Are there any other interested parties other than Burkle that is known around the area that can pony up 350-400 million to keep the team here?

 

[kennadog]

Seems like you are very much in tune with this. What you are saying is that the hurdles are even that much more monumental to move whether it's Seattle or Anaheim?

With that in mind, it seems like the Maloofs are really up against it, unless they sell locally. Are there any other interested parties other than Burkle that is known around the area that can pony up 350-400 million to keep the team here?

Well KJ has hinted that he has brought other willing owners to the Maloofs, including at least one offer that was supposedly for more than market value.

What complicates selling the Kings is that the ownership owns the team AND the arena. They have serious debt on both. The value of the team may or may not be enough to pay off debt, but we pretty much know the arena and lad is not worth the debt on it (far from it, by estimates). The city's main security for the loan is the arena and land.

Do I think it might be possible to find a buyer for the Kings, who wants the Sacramento market? Heck yes. The issue is will the Maloofs sell to such a buyer? If Seattle buyers make an offer, will the league give Sacramento a chance to produce a buyer who will match or exceed a Seattle offer?

Seattle doesn't have a guaranteed arena deal yet, any more than Sacramento does.

 

[Glenn]

I wonder if prospective buyers of the team also want to buy the arena and the land. I wouldn't. That could be a major hangup. They might want to own the Kings and rent or lease PBP for awhile yet stick the Maloofs with the long term debt.

 

[pdxKingsFan]

Getting the arena in Seattle has FAR more hurdles than Sacramento which is just team ownership. There's no way Stern allows the team to be bought and moved if an arena isn't already in place, if the owner will build it in Seattle he should build it in Sacramento first, under the terms the NBA negotiated. If the team moves I'd bet that it doesn't move to Seattle.

 

[JB_kings]

Getting the arena in Seattle has FAR more hurdles than Sacramento which is just team ownership. There's no way Stern allows the team to be bought and moved if an arena isn't already in place, if the owner will build it in Seattle he should build it in Sacramento first, under the terms the NBA negotiated. If the team moves I'd bet that it doesn't move to Seattle.

Ok, you said it in far less words than I did. Haha
Yes Stern got burned by the Seattle politicians once before. He's not going to leap into that again easily. Not unless all the potential owners willing to keep the team in Sacramento fail to materialize.

 

[mr. moustache]

Ok, you said it in far less words than I did. Haha
Yes Stern got burned by the Seattle politicians once before. He's not going to leap into that again easily. Not unless all the potential owners willing to keep the team in Sacramento fail to materialize.

Seattle's the most likely moving spot for any team that could potentially move. The NBA wants to be in Seattle badly. I think Stern would prefer it if the Maloofs sell to someone who will take Sac up on the new arena deal, then focus on getting the Bucks, or another meh franchise to move to Seattle. If the Maloofs want to sell to Seattle ownership, Stern will not get in the way.

 

[VF21]

If the Maloofs are truly convinced that Sacramento cannot be a profitable market, I'm guessing their mindset on potential sellers would be to only sell to someone who wants to keep the team here. Kind of their version of a "be careful what you wish for." I cannot imagine that they would sell to anyone who would be able to move the team when they couldn't. It's just a hunch, but I think the Maloofs will be bitter and vindictive, thinking they'll show Kevin Johnson, Think Big, the NBA and everyone else that they (the Maloofs) were right.

 

[kennadog]

Apparently Marcos Breton from the Bee is up in Seattle. Seattle's no where near an arena deal.

http://www.sacbee.com/2012/06/20/4574860/marcos-breton-seattle-beware-of.html

 

[TyFreak Evans]

Seattle's the most likely moving spot for any team that could potentially move. The NBA wants to be in Seattle badly. I think Stern would prefer it if the Maloofs sell to someone who will take Sac up on the new arena deal, then focus on getting the Bucks, or another meh franchise to move to Seattle. If the Maloofs want to sell to Seattle ownership, Stern will not get in the way.

I disagree. Stern WILL get in the way if the Maloofs want to sell to Seattle ownership, because Stern WANTS to see a team in Sacramento...

 

[JB_kings]

I'm sensing some sort of entitlement coming from those in the Seattle camp. Sorry but the NBA doesn't owe them a team. Stern will demand to see that all the arena constructions obstacles are removed and public funding identified and assured. Stern got told to hit the road last time in Seattle and only now are they getting the idea that this is what they needed to do back then to keep the team. Now they have to put together a deal on faith and hope Hansen can negotiate for a team that is allowed to move. Oh, and Hansen has to compete with other buyers who will not move the team.

Lesson learned: Keep the team you got any way possible.

 

[pdxKingsFan]

^Bingo.

I'm sorry people of Seattle, you (well your state) kicked your team to the curb, now get in line to get it back. You don't get cutsies on everyone else because your old team is in the finals and you don't get to steal a team from a city that has agreed to pony up the cash to build a new arena.

You now get to be like Kansas City, Louisville and other towns with no anchor tenants that build arenas and pray.

 

[kennadog]

^Bingo.

I'm sorry people of Seattle, you (well your state) kicked your team to the curb, now get in line to get it back. You don't get cutsies on everyone else because your old team is in the finals and you don't get to steal a team from a city that has agreed to pony up the cash to build a new arena.

You now get to be like Kansas City, Louisville and other towns with no anchor tenants that build arenas and pray.

Exactly.

 

[Purple Reign]

Here is Another National Article

http://www.grantland.com/story/_/id...emp-new-supersonics-mean-old-sacramento-kings

Nearly everyone I talked to at the rally had their own theory about which team was coming to Seattle. The consensus pointed toward the Kings. When asked about the irony of taking a team away from another city — especially one that has no other professional sports options — an overwhelming majority of fans admitted that in an ideal world, the Seattle SuperSonics would be an expansion team. But with no plans from the NBA to expand in the near future and with the grim state of the arena deal in Sacramento, those fans hoped that Kings fans would understand that the bigger market of Seattle would be the ideal spot for relocation.

There aren't a lot of NBA franchises and the league isn't going to be expanding, at least in the near term. So being able to put Seattle at the top of the list, when the opportunity presented itself, was priority number one."

All of this makes sense for Seattle, but it does little to quell the anxieties of fans in Sacramento. As early as February, Kings fans and city organizers began organizing their own grassroots-style movement to keep their team in Sacramento. On February 13, THINK BIG SACRAMENTO, an organization launched by Mayor Kevin Johnson, published an open letter addressed to Hansen, which included the following address: "On behalf of the 99% of us who make up the wonderful mosaic of the great City of Sacramento, we have one message for the top 1/10 of the 1% who is engaged in actions detrimental to our community: KEEP YOUR HANDS OFF OUR KINGS." Later in the letter, THINK BIG challenged Hansen to "defend why you want to inflict the kind of economic harm on working people that took place in Seattle."

 

[kennadog]

Except the arena suituation in Seattle appears at least as grim as Sacramento according to Breton, who attended the recent city council meeting in Seattle on this issue.

 

[pdxKingsFan]

Seattle's best play is to get an NHL team as anchor tenant and build the thing then go after the NBA. Just not sure if the NHL is exciting enough to the citizens to overcome the public financing hurdles needed to get it done. Also it would mean Seattle would be supporting every major pro sport in the country in a town with notoriously fickle fans.

 

[Mike0476]

Leading investor in Seattle arena project stresses patience

http://www.nba.com/2012/news/06/19/seattle-arena.ap/index.html?rss=true

The leading investor in the project hopes those supporters don't become disillusioned if it ends up taking five to seven years for pro basketball to return if Hansen's current arena proposal is approved by local lawmakers.

"We keep saying it, and I think people are listening and hearing us say it, but they're probably hopeful it happens before then," Hansen said in an interview with The Associated Press on Tuesday morning. "I think they're so excited about the prospect of us getting the deal through that they haven't thought about the patience required on the other end.

"I'm sure there could be some disillusionment if this takes a long time. That's one of the things that worries me."

 

[kennadog]

Seattle's best play is to get an NHL team as anchor tenant and build the thing then go after the NBA. Just not sure if the NHL is exciting enough to the citizens to overcome the public financing hurdles needed to get it done. Also it would mean Seattle would be supporting every major pro sport in the country in a town with notoriously fickle fans.

I don't know that I would describe them as fickle. Remember this is a city that voted to fund a new football stadium and a new baseball stadium and the citizens just balked at funding a new arena. Sonics fans seem very passionate. I don't have contact with Seahawks or Mariners fans, so I can't address their fans loyalty/passion.

Seattle might actually be a decent city for the NHL. Better than Sacramento. Bigger market and they are close to Canada and Vancouver.

 

[pdxKingsFan]

I don't know that I would describe them as fickle. Remember this is a city that voted to fund a new football stadium and a new baseball stadium and the citizens just balked at funding a new arena. Sonics fans seem very passionate. I don't have contact with Seahawks or Mariners fans, so I can't address their fans loyalty/passion.

Seattle might actually be a decent city for the NHL. Better than Sacramento. Bigger market and they are close to Canada and Vancouver.

"fickle" is the nice word I am using in place of "fair weather". They've got a ton of options there and so they tend to support the winners and abandon the losers. Even the record breaking crowds for the Seattle Sounders in MLS famously demanded and received a refund after a humiliating defeat at the hands of the LA Galaxy.

The Sonics just weren't well attended before they left.

 

[mr. moustache]

"fickle" is the nice word I am using in place of "fair weather". They've got a ton of options there and so they tend to support the winners and abandon the losers. Even the record breaking crowds for the Seattle Sounders in MLS famously demanded and received a refund after a humiliating defeat at the hands of the LA Galaxy.

The Sonics just weren't well attended before they left.

The same is true for every city. The Sonics never had the level of malaise Sacramento did from 09-11.

I'd also argue that the very last year the Sonics were in Seattle was an outlier. Seattle supported that team as much as Sac ever did from '92 to '07. That's a pretty good run. The Seahawks are supported even more.

You might have a point with the Mariners. People only seem to be interested when they're good and they haven't been for ages.

 

[pdxKingsFan]

It seemed like the Sonics were as bad as the Blazers in attendance/fan apathy during those final years. I'd argue the Seahawks are more of the outlier and that's because there's no such thing as a "small" game in the NFL. Most telling will be what happens when the Sounders hit a rough patch. So many of those fans have built their whole identity on winning. Nobody wins forever.

 

[Glenn]

Stern just said the Kings weren't going to get permission to move. Why is everybody so upset?

 

[PurpleHaze]

Stern just said the Kings weren't going to get permission to move. Why is everybody so upset?

Of course what Stern said in his most recent comment on Kings situation is the franchise would not be moving "at this time." It implies that things could change later, like next March 1 when Maloof's could petition NBA to relocate... somewhere.

 

[Glenn]

Of course what Stern said in his most recent comment on Kings situation is the franchise would not be moving "at this time." It implies that things could change later, like next March 1 when Maloof's could petition NBA to relocate... somewhere.

Yes, but they will be remodeling PBP. Right? Back to Stern, so you think the first time the Maloofs have a chance to petition for a move, he will go back on his word. I figured it was good for at least one year.