Sacramento Business Journal on 1/6/2011 meeting with City Council

[Arena Skeptic]

http://www.bizjournals.com/sacramento/news/2011/01/06/financing-shaky-for-four-arena-proposals.html

The big problem here is that none of the four plans have anything like a financing proposal. Just read the article.

There's really no way the Council can decide to proceed with any of these plans before March 1, and in my mind, that's a very bad thing. It will be months before they get that far.

And I don't expect any exclusive negotiating periods this time. Agreeing to that with the original Kamilos group was a monumental error -- all it did was helped waste a year, for a proposal that was a huge long-shot.

I feel like this is now in real trouble. Honestly, I think the deadline was effectively March 1. I now fully expect the Maloofs to file, simply because they can no longer gamble that the 90 day period everyone seems to want will produce something (anything, even if it's wrong).

I'm not happy about it, either. Losing the Kings won't be fun. But just look at the reception they got today. It's not good.

 

[pdxKingsFan]

The ICON venture is probably the newest group and it is the only one with a shot, so I don't think news that the other 3 appear to be DOA is that much cause for alarm. Just hope ICON can get their S together in half the time that they want.

 

[Arena Skeptic]

The ICON venture is probably the newest group and it is the only one with a shot, so I don't think news that the other 3 appear to be DOA is that much cause for alarm. Just hope ICON can get their S together in half the time that they want.

But wouldn't you think the ones without a chance are the ones without details on financing? I would.

That eliminates all of 'em.

This is serious.

 

[hrdboild]

That article is cause for concern because it means none of these proposals have moved very far along the development track yet. If Kamilos is still relying on selling Cal Expo land to partially finance an arena that deal is dead. It's just not going to happen with the current Cal Expo board. Am I right in reading that the Natomas deal is entirely dependent on selling $480 million worth of bonds? That seems unlikely too. And the other two proposals sound like they've hardly done any of the necessary research yet. So we still have a long ways to go. But I wouldn't rule out the last two plans yet simply because they haven't figured out funding plans. It sounds like they're still trying to put that together so we'll see in 6 months how much more likely they are.

 

[JB_kings]

ICON looks like it at least is not trying to play games. They admit some public funding will be needed to make this happen. A realistic arena project has always required some public support to make it happen. It just doesn't pencil out otherwise. To be clear that doesn't mean the public is on the hook for the whole cost. But they do have to participate. No free rides there.

You can elimnate Core and the Makanani groups too because they are proposing dipping into the Maloofs revenue stream from the Kings. I'm tired of Cal Expo being thrown about and going after the legislature. But if you give ICON and Kamilos until May to produce something, then that is what will have to be. Just knock off this exclusive negotiating stuff here and let the groups work out the details.

I don't think the Maloofs will file this March. The NBA is going into a lockout next season. I can't see why they would rush to make a decison on a move when they don't have to. But they won't wait much longer.

 

[pdxKingsFan]

But wouldn't you think the ones without a chance are the ones without details on financing? I would.

The impression I got was that the other plans were actually more developed with financing plans that were roundly rejected on their face whereas the ICON group came in and said look, "We're the new kids in town here and we are still developing our proposal can you give us some time?" I happen to think a huge group with experience across the country as well as a local investor who broke off the Kamilos group knows what's up and wouldn't be there to waste people's time with some long shot deal. Which is why they haven't rushed together to put together financing until they know there is sufficient interest in the plan itself to move forward.

 

[kupman]

But wouldn't you think the ones without a chance are the ones without details on financing? I would.

That eliminates all of 'em.

This is serious.

With all do respect, you have been saying "this is it," "the maloofs file this March" and the like for at least 3 years now - probably more.

 

[pdxKingsFan]

With all do respect, you have been saying "this is it," "the maloofs file this March" and the like for at least 3 years now - probably more.

Not to mention the other article posted today notes that the Taylor-ICON group has been together all of 3 whole weeks. Despite that they've established themselves as clear frontrunners. I think they'll get a financial proposal together in due time.

 

[Arena Skeptic]

With all do respect, you have been saying "this is it," "the maloofs file this March" and the like for at least 3 years now - probably more.

It's because that's when the next revolver is due. No other reason.

The Maloofs need cash on March 1.

Five years ago, would you have thought you'd hear yourself say, "The Maloofs need cash -fast."?

The reality is, parties that own sports franchises need to have them as a relatively small part of their portfolio. If it's their entire portfolio, you end up with Chris Cohan and Donald Sterling. Is that what we want? I know I don't.

But when you have a multi-billionaire owner, you realize that gains and losses of $25M are petty cash. If losing $25M is not petty cash, you should not own a sports franchise.

That suit to recover Garcia's pay because of the exploding rubber ball reeks of desperation to me. And they may even be right to sue; I don't know.

But if the Kings is the only major asset the Maloofs own, they need to sell the team.

Does that make sense?

We're just too close to the wire. Between a very uncertain arena situation, losing control of the Palms, the upcoming revolver, the debt they've incurred with the Kings, the loss of the signage rights, and the upcoming lockout (they'd never be able to sell during the lockout -- that'd just be walking away from tens of millions of dollars), I think, at least as an insurance policy (the application to move would not be 100% binding), they have to apply to move. If it was my property, I would.

When it happens, it'll be really fast. You won't hear rumors; there will only be a headline in the paper after the fact. This won't be as slow to develop as the GSW sale.

That's my rationale.

 

[Capt. Factorial]

It's because that's when the next revolver is due. No other reason.

The Maloofs need cash on March 1.

There's a pretty darn big difference, nay, gaping chasm, between filing for relocation and selling the team. If the Maloofs were to need cash to float the Palms, and wanted to sell the Kings to do so, they'd sell - not file for relocation.

Of course, there's never been anything public that suggested the Maloofs would sell the team to save the Palms. And the whole "hostile takeover" thing going on, or whatever it is, suggests to me that the Maloofs are resigned to the possibility of losing majority control (though not apparently all stake) in the Palms. That, of course, would leave the Kings unaffected. But again, IF they wanted to forsake the Kings to save the Palms, they'd sell, not file for relocation.

 

[Trueblood]

The reality is, parties that own sports franchises need to have them as a relatively small part of their portfolio. If it's their entire portfolio, you end up with Chris Cohan and Donald Sterling. Is that what we want? I know I don't.

You probably meant Cohan and George Shinn. Sterling owns half of Beverly Hills and tons of property elsewhere. In fact, I'm sitting in a Sterling owned apartment as I type this.

 

[Arena Skeptic]

Great article today ties it all together.

Look, the Maloofs are out of money. The perfect storm, as anticipated, has arrived. They have no more net worth than the average Sacramento resident.

We really should be hoping for a quick sale here. I'm sorry it has to be so distressed, but Larry Ellison does appear to be available. He's the best chance for keeping the team here.

The Maloofs? Well, if you like bankrupt NBA franchises, I guess you'd root to keep 'em.

 

[Trueblood]

If Larry Ellison is interested in the city of Sacramento, he can build the arena with his own personal couch change. It's just that from everything I hear, he's dead set on moving a team to San Jose.

In 2006, he actually offered $425 for the Sonics which was $75 million more than what Clay paid for them. The league wanted OKC due to their support for the Hornets and did not want to oversaturate the bay area market.

This year, he claims to have offered over $450 million for the Warriors but was beat because the GS bidding war had a time limit and his offer came past the buzzer. Say what you will but I can tell you for sure that Cohan set it up that way so he could sell to someone besides Ellison.

Now, Ellison is saying that he offered $350 million for the Hornets. What I see is that his largest offer was for the Warriors because in that case, he would've had the bay area to himself. The Hornet and Sonic offers were lower because in those scenarios, he would've had to share the market with the Warriors.

How is this relevant? Well, if he is going to bid on the Kings, the offer is probably going to be in the lower range. If he wants to stay in Sacramento, he's going to have to fund the arena himself. If he goes to San Jose, he is sharing the NBA market. Either way, the Seattle people are probably going to outbid him if the Maloofs are indeed looking into selling.

 

[Trueblood]

Here's the article that arena skeptic is talking about.

http://www.sacbee.com/2011/01/08/3308577/report-maloofs-struggle-to-keep.html

 

[Section 101]

Great article today ties it all together.

Look, the Maloofs are out of money. The perfect storm, as anticipated, has arrived. They have no more net worth than the average Sacramento resident.

We really should be hoping for a quick sale here. I'm sorry it has to be so distressed, but Larry Ellison does appear to be available. He's the best chance for keeping the team here.

The Maloofs? Well, if you like bankrupt NBA franchises, I guess you'd root to keep 'em.

Lol if you think the Kings and Palms are they only assests. They have tons of stocks and other investments. Plus they aren't dumb, they have their personal finances seperate and have plenty of money.

 

[bajaden]

Great article today ties it all together.

Look, the Maloofs are out of money. The perfect storm, as anticipated, has arrived. They have no more net worth than the average Sacramento resident.

We really should be hoping for a quick sale here. I'm sorry it has to be so distressed, but Larry Ellison does appear to be available. He's the best chance for keeping the team here.

The Maloofs? Well, if you like bankrupt NBA franchises, I guess you'd root to keep 'em.

You actually sound happy to hear bad news. Which is why I don't believe you really want an arena or the Maloofs here. I can't remember the last time you've ever said anything positive about the arena possiblilities. The Maloofs have been terrific owners, and I'm not about to be happy or excited about any financial hardships that might be facing them in the future. You are Mr. negativity to the highest degree. Its one thing to relay information, good or bad. But its quite another to appear gleeful about it. And whether you know it or not, thats how you come across. As I've said before. When I'm in a foxhole surrounded by the enemy, the last person I want next to me is someone yelling, "Were all going to die". Go find another hole!

 

[Larry David]

Lol if you think the Kings and Palms are they only assests. They have tons of stocks and other investments. Plus they aren't dumb, they have their personal finances seperate and have plenty of money.

While I'm sure they have some stock, the decade old story in the Bee when they opened up the books shows they weren't very diversified. They had their money tied up into a huge chunk of Wells Fago stock (huge chunk), the Kings, Palms, and beer. Over time, they added several small entertainment companies which were later closed.

At this point, the better was liquidated and while they might hold onto some of the Palms, they’ve just suffered a huge loss at this point. (At one point, they were the majority owner in a valuable casino. Going forward, they would appear to be a minority owner in a casino that’s worth much less.)

From a cash flow standpoint, they appeared to be destined to be a minority owner in a money losing casino, and a majority owner of a basketball team that tries to break even. Not a rosy picture.

 

[PurpleHaze]

It's definitely not a rosy picture and anyone who dismisses Maloof's financial picture by saying they have plenty of money laying around probably could not read an audited P&L statement. Their huge portfolio of Wells Fargo Bank stock has plummeted in recent years - like most big bank securities. While that institution enjoyed several stock splits since Maloofs sunk a lot of their cash into it, that's not been the case more recently. Simply put, the Wells Fargo play has not been paying off of late, just like their struggling, over-leveraged businesses. The Maloof empire couldn't even get a loan recently to extend financing for the Palms - a clear sign of real financical difficulties.

 

[Section 101]

It's definitely not a rosy picture and anyone who dismisses Maloof's financial picture by saying they have plenty of money laying around probably could not read an audited P&L statement. Their huge portfolio of Wells Fargo Bank stock has plummeted in recent years - like most big bank securities. While that institution enjoyed several stock splits since Maloofs sunk a lot of their cash into it, that's not been the case more recently. Simply put, the Wells Fargo play has not been paying off of late, just like their struggling, over-leveraged businesses. The Maloof empire couldn't even get a loan recently to extend financing for the Palms - a clear sign of real financical difficulties.

You realize their personal finances and business are seperate. Just saying the Maloof themselves will still have money if their business goes broke. It's not like they will be out on the street.

And Wells Fargo stock rebounded like other stocks. Its back over $30/share after being under $10 a year ago. To put it in perspective, it's never been over $40/share the past 10 years.