NEWS10: New documents detail failed Sacramento arena negotiations

[JB_kings]

http://www.news10.net/news/article/...s-detail-failed-Sacramento-arena-negotiations

In the emails, Harvey Benjamin, a league executive negotiating on behalf of the Kings, responded to Maloof's concerns.

"I thought you understood in Orlando that there's no way of avoiding (collateral)," Benjamin said in an email.

As for game day expenses, Benjamin wrote, "every team pays game day expenses. You pay them now."

Also, the NBA was looking at other California cities to see what municipal service payments were normal, as opposed to the Maloof's idea of not paying at all.

The NBA also said a 30 year lease for a building that is built mainly with public funds is completely normal.

However, the Maloof Family submitted a term sheet to the City of Sacramento with revisions the NBA advised against.

Well this clears up the ambiguous statements made by Stern on the back and forth between the NBA and George Maloof. Sort of what we always knew, the NBA was 100% behind the deal and George negotiated in bad faith.

 

[rainmaker]

Thanks for posting JB. Since I'm not a lawyer, I'm having trouble recognizing what more exactly is needed to prove the Maloofs didn't negotiate in good faith. Something which has crossed my mind, is that there is a paper trail of evidence proving just that, and the NBA/KJ/Sac knows it's there and are waiting for it all to surface to build an even stronger case. I'd think there already would be enough for a case showing they didn't negotiate in good faith, but if there's more which is yet to surface I can understand the wait.

 

[Livinthedream]

Thanks for posting JB. Since I'm not a lawyer, I'm having trouble recognizing what more exactly is needed to prove the Maloofs didn't negotiate in good faith. Something which has crossed my mind, is that there is a paper trail of evidence proving just that, and the NBA/KJ/Sac knows it's there and are waiting for it all to surface to build an even stronger case. I'd think there already would be enough for a case showing they didn't negotiate in good faith, but if there's more which is yet to surface I can understand the wait.

IF the NBA is on the verge of taking some action against the Maloofs, they will not do it during the playoffs. So, I wouldn't even worry about anything happening until after that time. But, getting these little bits of information leaked along the way is great.

 

[JB_kings]

"I thought you understood in Orlando that there's no way of avoiding (collateral)," Benjamin said in an email.

This sounds like George may have backtracked on something agreed to in Orlando. The Maloofs let this email go out because they think it shows that they have had issues all along. It can be read both ways I think.

 

[Gary]

So, basically the Magoofs wanted a deal better than what everyone else in the league gets because they think this team which has been at minimum salary is worth it somehow? They have their heads in the cloud and this almost validates that they are using this team to make money rather than actually compete. The maloofs are broke

 

[kennadog]

Further proof that the Maloofs are stupid and broke.

So they think they proved something about issues they had? They proved that they cannot possibly function in any normal publicly-funded arena, anywhere in the country. And they obviously can't afford to build an arena themselves.

Crap, if they think Van Dusen's $100 million cosmetic makeover of the current arena to gain 10 more years is so great, then let them pay for it themselves.

I am so sick of the Maloofs.

 

[The Hammer]

Despite the "balanced" view trying to be presented by Montacelli, this story does much more to make the Maloofs look like the were trying to blow up the deal.

If a certain party claims to be "committed to Sacramento" and "trying hard to get something done", they don't make certain things that every other team does/pays for "non-negotiables". (The game day expenses come to mind.) You just don't. You only do that if you DON'T want a deal to happen. And the collateral really was the ultimate deal killer. There's no way they can, in good faith, think they should get away with not putting up adequate collateral, and then go on and pretend that it was Mayor Johnson who killed the deal (yes, George actually said in his press conference that it was Mayor Johnson who killed the deal). It's absurdity to the max. Never seen anything like this.

No judge, no jury, no court of law will ever rule in favor of the Maloofs on anything given even what has happened so far, let alone how they might self destruct even further in the near future. And if the Maloofs don't take it to court, as another poster mentioned, the Lakers and Clippers damn sure will.

I'm still a little curious as to why some of you still think there's a possibility they will eventually move (and get away with it?). Would you mind elaborating for me/us? LD?

 

[Kingsfan23]

And the collateral really was the ultimate deal killer. There's no way they can, in good faith, think they should get away with not putting up adequate collateral, and then go on and pretend that it was Mayor Johnson who killed the deal (yes, George actually said in his press conference that it was Mayor Johnson who killed the deal)

Well, to me thats the issue, can they put up collateral? No one can answer that?

It's obvious and apparent to anyone with above a 10 IQ that the Maloofs intentionally threw wrenches into the deal to make it not come to fruition. The question is why>

1. Maliciously hellbent on relocating the team to another market

2. They simply can't afford to leverage themselves out economically on this deal.

Whether or not it is 1 or 2 no one can say yet?

 

[ParniValjak]

Well, to me thats the issue, can they put up collateral? No one can answer that?

It's obvious and apparent to anyone with above a 10 IQ that the Maloofs intentionally threw wrenches into the deal to make it not come to fruition. The question is why>

1. Maliciously hellbent on relocating the team to another market

2. They simply can't afford to leverage themselves out economically on this deal.

Whether or not it is 1 or 2 no one can say yet?

Or most like both of the above!

They can't leverage themselves economically so for them, the only sick and twisted way they can see themselves keeping the team, or selling at a profit is to move the team to a bigger market and rely on the TV revenue, or increase in team's value just by simply moving to a bigger market.

 

[Uk kings fan]

Why cant they leave us all alone I dont get why three fat, thick brothers want to destroy the heartbeat of sacremento

 

[JB_kings]

It would have worked if the Maloofs would have put up the same collateral as they would have for the Samueli loan. Just sayin...

 

[Section 101]

It would have worked if the Maloofs would have put up the same collateral as they would have for the Samueli loan. Just sayin...

I think they already did with Samueli, it would have just been on paper.

 

[JB_kings]

I think they already did with Samueli, it would have just been on paper.

Samueli is not a pushover. I'm sure if the team had defaulted on their Anaheim lease, the Maloofs would have lost the team. They probably left out that specific language in the Honda Center contract so that the NBA would not, in effect, have to also approve Samueli taking the team if they defaulted. There was probably going to be a private side agreement with the Maloofs team ownership used as collateral.

 

[The Hammer]

Samueli is not a pushover. I'm sure if the team had defaulted on their Anaheim lease, the Maloofs would have lost the team. They probably left out that specific language in the Honda Center contract so that the NBA would not, in effect, have to also approve Samueli taking the team if they defaulted. There was probably going to be a private side agreement with the Maloofs team ownership used as collateral.

Which is COMPLETELY against NBA rules, and never would have happened, which is why I'm convinced Anaheim is a pipe dream for them, and that they really are just totally flailing, and broke. But mostly flailing.

 

[Jose]

The evil part of me thinks they were trying to con Sameli:

- Take the loans, move to Anaheim; increase the value of the team
- Default on the Sac loan, stick the city with the debt & arena
- After a year or so in Anaheim, file for bankrupcy
- Default on the Samueli loan (no collateral, protected by bankrupcy)
- Sell the team at a value higher than what they could have sold it in Sac

Seems like a good way to pocket a lot of cash. Now, I'm not sure what kind of protections they would get from filing for bankrupcy, but I'm sure some variation of the above plan would net them some good cash and protect their "assets" while screwing the other parties involved (very Donald Trump-esque).

 

[Kingster]

http://www.sacbee.com/2012/02/29/4299212/kings-fans-in-celebratory-mood.html


Remember this? Joe and Gavin at center stage rejoicing about the deal.

Something major happened after this point. I don't think it was deceit when Joe and Gavin celebrated. I think they got a call from their accountant, banker, or both, who informed them that they couldn't take on the additional debt without having other loans called in. I really think these guys didn't know the extent of their financial difficulties before this point. They've been unraveling ever since.

 

[bajaden]

The irony of this, is that obviously the Maloofs are leaking this information in an attempt to show that they did have issues with the original deal, right after it was agreed to, and that they had informed the league of that. Some of the letters to the league are dated just 2 days after the original agreement. The letters themselves, and the dates may validate what they say, but unfortunately for them, the content of the letters is quite condeming, and shows that they had no real interest in helping build a new arena. Either that, or they're the stupidest people in the world, thinking that anyone, much less the NBA would agree to any of their demands.

 

[kennadog]

Either that, or they're the stupidest people in the world, thinking that anyone, much less the NBA would agree to any of their demands.

I vote for this one.

 

[VF21]

http://www.sacbee.com/2012/02/29/4299212/kings-fans-in-celebratory-mood.html


Remember this? Joe and Gavin at center stage rejoicing about the deal.

Something major happened after this point. I don't think it was deceit when Joe and Gavin celebrated. I think they got a call from their accountant, banker, or both, who informed them that they couldn't take on the additional debt without having other loans called in. I really think these guys didn't know the extent of their financial difficulties before this point. They've been unraveling ever since.

This makes sense. I think they may have other loans out there that we know nothing about ... loans that required collateral that actually precludes them from getting to some of all that so-called wealth they still have. For example, they kept talking about how much Wells Fargo stock they own. What if, for example, that stock is currently tied up as collateral for a loan they were going to repay with money they hoped to get from Samueli when they moved? I honestly think if/when their financial picture is really made public that it will make some of the bank shenanigans of recent history look like child's play.

 

[Kingsfan23]

As I think about it, I think they are going through A LOT - the smearing of their name, vrs David Stern and the other owners, backlash of their existing fanbase just for the right to attempt to relocate the team a few years from now.. meaning, at this point I believe something else as well has to be behind why they can't come aboard this arena deal (like economic reasons not made public)

 

[kennadog]

This makes sense. I think they may have other loans out there that we know nothing about ... loans that required collateral that actually precludes them from getting to some of all that so-called wealth they still have. For example, they kept talking about how much Wells Fargo stock they own. What if, for example, that stock is currently tied up as collateral for a loan they were going to repay with money they hoped to get from Samueli when they moved? I honestly think if/when their financial picture is really made public that it will make some of the bank shenanigans of recent history look like child's play.

I believe they have financial problems. That's why I think they should sell the Kings. It's really the only business they have left and that's a problem. Owning a pro sports team isn't something to make money at, it's a hobby for the super rich. The Maloofs don't fit in that category anymore. Considering their stated problems with certain terms, that are fairly common to all publicly-funded arena deals, they just aren't going to get what they want. Probably not anywhere.

In my opinion they really need to wake up and smell the coffee of reality. It would tell them to sell the team.

 

[Jose]

You are all wrong. They are looking out for the best interests of Sacramento and the community by stopping the City from engaging in this horrible, bad deal that will hurt the City's finances. The City can't afford it. Like George said, "Where's the money?" All hail the Maloofs, saviors of the City's economy!

<end sarcasm>

Now that I got that out of the way... it's obvious that they're going to sell. It's inevitable. It's more profitable to sell a team in Anaheim than a team in Sacramento. Staying here does not fit into their exit strategy. Neither does paying off their loans, by the way...

This is going to be a mess unless the NBA intervenes.

 

[Arkitect]

I believe they have financial problems. That's why I think they should sell the Kings. It's really the only business they have left and that's a problem. Owning a pro sports team isn't something to make money at, it's a hobby for the super rich. The Maloofs don't fit in that category anymore. Considering their stated problems with certain terms, that are fairly common to all publicly-funded arena deals, they just aren't going to get what they want. Probably not anywhere.

In my opinion they really need to wake up and smell the coffee of reality. It would tell them to sell the team.

The problem is that they actually become more poor if they sell the team. If you look at all of the numbers that are out there (arena loan, NBA loan, price the Maloofs paid, worth of Arco, estimated team value) the Maloofs would have lost 10 million dollars over the last 13 years of owning the team. Considering their initial investment was about 60 million, that is terrible. That is money they will never see again if they sell. However if they can hold on to the team and actually make a little money, they will be able to pay off some of the debt and actually come out ahead after a while. The Kings are one of the only income generating assets they currently have. Unfortunately in order to turn a profit on an NBA team, it has to be a team that has a minimal payroll both on and off the court and they can not take on any more debt. In other words we are in a stalemate. Unless the NBA can figure out a way to force them to sell(best interest/viable arena requirement), Arco collapses, or the entire Maloof clan dies in a fiery plane crash we will be stuck with them for the immediate future.

 

[Jose]

The problem is that they actually become more poor if they sell the team.

Not really. As per Forbes's published estimates of team values:

#1 Lakers: $900 million
#20 Clippers: $324 million

^ You know that gap is going to close very quickly now, with the Clipper's success and the Laker's new TV deal. Heck, even the WARRIORS are valued at 450 million. That number is going up.

#24 Kings: $300 million

^ You know that amount is going down in a hurry. We're valued above the Pacers, Hawks, Hornets, Grizzlies, Bucks, LOLcats. Wouldn't be surprised to see the next numbers put us at below $280 million (and that's being nice).

So, move the Kings to Anaheim to get a piece of the LA market (sponsors, merchandise, TV, etc). Get that value up to $400+ million in a few years, then sell. Add a few strategic loan defaults (Sorry Sacramento!), and they stand to make a huge chunk of cash.

 

[pdxKingsFan]

The problem is that they actually become more poor if they sell the team. If you look at all of the numbers that are out there (arena loan, NBA loan, price the Maloofs paid, worth of Arco, estimated team value) the Maloofs would have lost 10 million dollars over the last 13 years of owning the team. Considering their initial investment was about 60 million, that is terrible. That is money they will never see again if they sell. However if they can hold on to the team and actually make a little money, they will be able to pay off some of the debt and actually come out ahead after a while. The Kings are one of the only income generating assets they currently have. Unfortunately in order to turn a profit on an NBA team, it has to be a team that has a minimal payroll both on and off the court and they can not take on any more debt. In other words we are in a stalemate. Unless the NBA can figure out a way to force them to sell(best interest/viable arena requirement), Arco collapses, or the entire Maloof clan dies in a fiery plane crash we will be stuck with them for the immediate future.

And that is the genius business logic that ran them into the ground with the Palms. Sunk costs don't matter. If you're underwater and still taking in water you jump ship or drown. Being in the casino business George should understand more than anyone what happens when you get so desperate you start chasing the big bet just so you can come out even.

 

[pdxKingsFan]

Forbes numbers are relatively meaningless as there is rarely more than one team available at any given time. Not to say the Lakers wouldn't command a premium over others, but aside from that the sale price has more to do with the overall health of the league than the health of the team.

 

[The Hammer]

Forbes numbers are relatively meaningless as there is rarely more than one team available at any given time. Not to say the Lakers wouldn't command a premium over others, but aside from that the sale price has more to do with the overall health of the league than the health of the team.

I would be surprised if the Kings sold for any less than 425M.

You've got a new, sweet arena deal in place, you can negotiate a new, sweet TV contract, the League just put a new CBA in place that is more favorable for owners, studded with young talent, one team town and will stay that way for the foreseeable future, best fan base in sports...

Objectively, the Kings are a gem of a franchise, if run properly of course.

If the Dodgers, whose attendance is in the ****ter, just sold for over 2B, the Lakers are worth at least 1.2B, in my completely uneducated guess.

 

[Capt. Factorial]

I would be surprised if the Kings sold for any less than 425M.

Keep in mind that the Maloofs only own a bit over 50%, so their share is about half of the "sale value" of the team.

If the Dodgers, whose attendance is in the ****ter, just sold for over 2B, the Lakers are worth at least 1.2B, in my completely uneducated guess.

Well, I'm not sure I would say the Dodgers' attendance is that poor. Last year they averaged about 36,200 (#11 in MLB) in spite of the McCourt mess and ended up over 2.9M on the season. This year they're up a bit at almost 38,800 per game (#6 in MLB), which is a pace for over 3.1M. In the past several years before that they've been in the 3.7M attendance range so the McCourt fiasco did cause a bit of a dropoff, but it's not like their attendance was terrible or they didn't have a history of massive success in the market.

I think everybody was a bit surprised by the $2B bid on the team anyway. What this really goes to show is that franchise value is what somebody will pay for it, not what Forbes thinks it is. The group that bought the Dodgers obviously thought that they could make it work at $2B, and a lot of that probably has to do with TV rights. For the Kings, well, the debt on the team (ARCO, NBA) looks like its in the $150M+ range, and even shared across all the minority owners that leaves $80M+ of debt on the Maloofs' share. Seeing as the debt goes with the team, I guess they'd be lucky to get $150M for their shares (translates to about $425-450 total debt-free value of the franchise).

 

[bajaden]

Not really. As per Forbes's published estimates of team values:

#1 Lakers: $900 million
#20 Clippers: $324 million

^ You know that gap is going to close very quickly now, with the Clipper's success and the Laker's new TV deal. Heck, even the WARRIORS are valued at 450 million. That number is going up.

#24 Kings: $300 million

^ You know that amount is going down in a hurry. We're valued above the Pacers, Hawks, Hornets, Grizzlies, Bucks, LOLcats. Wouldn't be surprised to see the next numbers put us at below $280 million (and that's being nice).

So, move the Kings to Anaheim to get a piece of the LA market (sponsors, merchandise, TV, etc). Get that value up to $400+ million in a few years, then sell. Add a few strategic loan defaults (Sorry Sacramento!), and they stand to make a huge chunk of cash.

Only one flaw in that plan. They need the permission of the league to move the team, and at the moment, I don't think thats going to happen. Now they could take the league to court on some sort of antitrust suit, but that could drag out for years and could end up in the United States Supreme Court. I might add, it would also cost the financially strapped Maloof family a ton of money. In the meantime, the League could use the " Best Interest " clause to force them out, while at the same time cutting off the revenue sharing to the team, due to misuse, costing them even more money.

Golden rule! Don't bite the hand that feeds you. It never ends well...

 

[pdxKingsFan]

I think everybody was a bit surprised by the $2B bid on the team anyway. What this really goes to show is that franchise value is what somebody will pay for it, not what Forbes thinks it is. The group that bought the Dodgers obviously thought that they could make it work at $2B, and a lot of that probably has to do with TV rights. For the Kings, well, the debt on the team (ARCO, NBA) looks like its in the $150M+ range, and even shared across all the minority owners that leaves $80M+ of debt on the Maloofs' share. Seeing as the debt goes with the team, I guess they'd be lucky to get $150M for their shares (translates to about $425-450 total debt-free value of the franchise).

The only flaw here is that operates under the assumption that all the other deals in the 350-500mil range the owners bought clubs that were 100% debt free and also 100% of the shares. I don't think we can actually make those assumptions, but I may be wrong. I also don't think the NBA would approve a sale that low because externally it makes all the other franchises appear cheaper.