Part 3
HB: Well, no. And let me tell you something. I mean, the preliminary terrm sheet - there were certainly things in the preliminary term sheet that were entirely consistent with the deal that was made.
GN: All right.
HB: There were other things in the preliminary term sheet that were vague and purposefully vague because all of the parties agreed that there was no sense tipping their hands as to details with respect to matters that they had to negotiate with the developer. Let me give you an example. It says in the prelminiary term sheet that the parties and the developer will negotiate a mutually satisfactory parking program and for additional parking and parking revenue available during events. And then, in a later part, it says that the tenant, which was the team, will control and will be entitled to receive and retain all revenues from - and there's a whole list of things and it includes parking revenues from the Kings' adjacent spaces which is that parking structure and event parking, which going back to the earlier thing I read was all parking during Kings games and other events.
Now the reason I point this out is you'll nowhere see in here a reference to 3,000 spaces in the parking garage, you won't see the reference to 5,000 spaces in terms of revenue, but that was done purposefully because no one wanted to tip the developer off about what the end game was. That was clearly the decision of all of the parties in the room and for someone to come back later on and say, "Well, where did the 8,000 and 3,000 come from? They're not on the term sheet"... It was purposefully not on the term sheet and everyone agreed that it should not be on the term sheet.
So, I mean, that's the kind of thing that's really a terrible mischaracterization of what actually transpired.
ML: Harvey Benjamin, executive counsel of business and finance for the NBA, is our guest here on Sports 1140, KHTK. Harvey, I want to ask you a fairly broad question...
HB: Sure.
ML: If you look at the West Coast right now, Sacramento, Seattle, Portland having problems with their building, so in the grand scope of what's going on in the NBA, when you look at success stories in Memphis, in Charlotte, what's happening in Oklahoma City, what's different there and how could it help what could transpire in Sacramento?
HB: That is a rather broad...Laughter by Grant and Mike... ...rather broad question. I mean, first of all, my sense of living here on the East Coast is that it's much more difficult to get voters in California to approve a tax increase.
ML: Yes.
HB: Or government subsidies, perhaps, for private ventures. So that in itself is a marked point of difference. In terms of Seattle, the new owners of Seattle are reasonably confident that they're going to get government help through a legislative act so they're extremely optimistic and working very hard at it. What were some of the others?
GN and ML: Portland
ML: I asked about Portland and Seattle as opposed to Memphis, Charlotte where new arenas have been built and, for that matter, Orlando's new agreement.
HB: That's right. Well... it's hard for me... I mean I can't draw generalizations because I think every place has its own set of issues. I mean, in Portland really, the problem there was that the arena was not generating sufficient revenues to pay the debt service on the arena. There's nothing wrong with the arena. Incidentally, that arena was built with essentially private funds that were borrowed and, of course, Paul Allen brings a level of pocket depth that others don't.
GN: Yep, that's for sure. Hey, Harvey, before we let you go I just think it's worth summarizing once again about the meetings that were in Vegas and I don't want to put words in your mouth but I want to ask you again...Basically, in a nutshell, the agreement that was talked about and verbally agreed upon by the parties involved including the Maloofs - the Maloofs did never try to change that verbal agreement, they never tried to change the deal and... and... and it's hard to imagine how this whole mess started and why the Maloofs are getting ripped because you don't see it that way, do you?
HB: No. I certainly don't. Let me just add one thing which I think is important to understand. When the city and the county said to the Maloofs that they would go arm-in-arm to the developer to get what it was that the team needed to have a successful arena, the expectation of all of us was that the city and the county would live up to it and that means that they would go to the developer with the team and they would say to the developer, "Okay. Here is the infrastructure money that we, the city, have promised you if you would go forward with the development. Now, having put the infrastructure money on the table what we want from you is acreage from the arena and at least a fair negotiation with respect to parking revenues and this area of protected zone and what have you." And that's the way we all expected it to come out. We learned only recently from the developer that he has not been able to pin the city down with respect to the infrastructure money that was promised to him. So the city, in effect, by not providing the infrastructure money, had no leverage whatsoever to sit down and put any pressure on the developer. And we were just sort of aghast at that because the understanding always was that the city was ready to give the developer something that the developer wanted and needed and in exchange for that would get the land required to build the arena. And the developer, when we met with him a few weeks ago and this was a meeting in which there were no clients present in the sense that the Maloofs were not there, the city government people were not there - it was just the developer, two people that work for him, the lawyer for the team, myself and a consultant and the lawyer that had been hired by the city and the county to do this project - the developer said, look, he'd be willing to engage in discussions with respect to the land and the share of parking revenues and some area of non-competition. He'd be happy to engage in those conversations because he saw the arena was a very important part of his development. But, he said, I'm not prepared to engage in those negotiations because I still don't know whether the city is going to come through on the $500 million of infrastructure money that they promised me. And until they do that, I'm not in a position to ... I'm not sure I'm ever gonna close on my land if I don't get that money and I'm certainly not in a position to have a negotiation about what I'm gonna give up in terms of helping the arena to get built.
So, the city really - and the county, I suppose - this is more the city - was never in a position to go arm-in-arm with the team to the developer because the city wasn't prepared to put up the infrastructure money that they had promised the developer.
ML: Well, Harvey, it's just a little thing. $500 million in infrastructure. (ML and HB chuckle...)
HB: I should say he described it as two batches and the first one was $300 million for the first phase of the development.
ML: Harvey, real quickly. We have one minute left. This was a real deadline with the election tomorrow. If this had been full of artificial deadlines instead of a real deadline and there had been more time, do you think this could have got worked out?
HB: I think it could have gotten worked out if the city was ready to assure the developer that the city was going to be forthcoming with the infrastructure money so that the developer would then be cooperative and, you know, make whatever concessions he needed to make in order to get the arena done.
GN: Harvey, great stuff and we really, REALLY appreciate your time. Thank you very much.
HB: Thank you for giving me a chance to set the record straight about the Maloofs. Bye-bye.
----------------------------------------------------
That's the interview, except for some typical Grant-rantings after HB hung up.--VF21
