BY Art Thiel 09:46PM 02/28/2013

Thiel: KJ unveils investors, plan; light on details

Defiantly denying Seattle and exhorting his flock in the manner of a Baptist minister, Sacramento mayor Kevin Johnson turned his annual State of the City speech into a civic pep rally Thursday night by delivering on his promise to identify the people and the plan to keep the Kings in his hometown.

Before announcing the names of Mark Mastrov, who made his fortune creating 24-Hour Fitness centers, as the counter-bidder for franchise ownership, and California supermarket developer Ron Burkle as the builder of a new arena downtown, Johnson fired a shot across the bow of Seattle native Chris Hansen and fans and politicians who believe the Kings will be renamed the Sonics and play at KeyArena starting this fall for two or three seasons:

“With all due respect to Seattle — I do hope they get a team someday — let me be perfectly clear: It is not going to be this team. Not our team. No way.”

Mastrov and Burkle were linked to the plan almost since the day it was announced that the owners of the Kings, the Maloof family, signed a sale agreement with Hansen, who has proposed to relocate the team to a $490 million basketball/hockey arena he wants to build in SoDo. What was new was the location, a downtown plaza rather the nearby railyards that was part of a deal a year ago made with the Maloofs, who later walked away.

Another newsworthy development was that a largely known group of more than 20  business people — now including former NBA star Mitch Richmond, who played seven of his 13 NBA years in Sacramento — pledging $1 million each to be part of club ownership, was actively pursuing a seven percent share of the club that is in federal bankruptcy proceedings. A minority owner uninvolved in the Maloof-Hansen transaction, which valued the franchise at $525 million, is liquidating assets to satisfy creditors. At that price, a seven percent share is worth $36.75 million.

Lawyers for the minority owner, Bob Cook, have said they believe terms of their ownership include a right of first refusal on any sale. If true, they may be able to thwart the sale to Hansen. On the other hand, Hansen made a $30 million deposit on the sale that has created a business relationship with Maloofs. Any move that competes with the relationship could  be subject to litigation based on tortious interference.

Burkle was the lone “whale” identified by Johnson. The owner of the NHL Pittsburgh Penguins who helped bring the team from bankruptcy to the 2009 Stanley Cup championship, Burkle was said by Johnson to have reached agreement with the new owners of the plaza, JMA Ventures, to develop the arena and surrounding businesses.

Burkle, listed by Forbes as the 148th richest American with assets of $3.1 billion, has seen his Penguins jump in value from an estimated $110 million during the bankruptcy to $222 million, according to Forbes. The club is rated by the magazine as the fastest growing team brand in the NHL and one of the fastest growing in all sports.

He was a force behind the creation of the $321 million Consol Energy Center that houses the Penguins. Most of the mortgage on the public building — $15 million a year over 30 years — comes from state and local gambling revenues. The team contributes more than $4 million a year. The club also received potentially lucrative development rights to an adjacent 28 acres of land, including the Mellon Arena site.

Johnson said Mastrov will submit a bid to the NBA Friday. He was among the final bidders for the Golden State Warriors before Joe Lacob and Peter Guber bought the team for an NBA-record $450 million in 2010.

“I’ve been assured by the commissioner of the NBA (David Stern) that we will be given full consideration,” said Johnson, a two-term mayor and a former NBA All-Star who was the lone speaker. Mastrov and Burkle have not spoken publicly about their involvements.

However, Johnson’s speech was light on details. Not disclosed was the amount of Mastrov’s proposed offer, how the Maloofs will be forced to consider it, or any details of the arena plan and the public contribution to its creation. The previous proposal for the railyard location included a $255 million contribution by turning over to arena developers future downtown parking proceeds for up to 30 years. Earlier this week the city council approved a $150,000 budget item to study a new arena proposal.

In Seattle, Hansen already owns the land, has approvals from the city and council pending an environmental review, and has booked KeyArena to house the team for two or three seasons. Sacramento will be in a full scramble to create a similar achievement before NBA owners vote on the request to relocate the Kings April 19.

The normal NBA protocol is to have a purchase offer considered separately from a relocation vote. The league’s by-laws require only a two-thirds majority vote to approve a sale but a simple majority two-thirds majority for a relocation.

Stern said at the NBA All-Star Game that he combined the committees to consider this  scenario, but didn’t explain how that would work. Having two cities submit roughly similar proposals for one team is unusual, and perhaps unprecedented. Normally the city losing the team has exhausted its options for retention.

But Johnson has consistently made the argument that the NBA has never left a city where everything was done that was asked of it. Thursday was his first concrete step toward fulfilling that commitment.

Now that Sacramento will make a formal offer, chances increase for legal challenges to the Maloofs for the legality of deal with Hansen, and later perhaps to the NBA by the losing city regarding its procedures for determining an outcome. Litigation would seem likely to  delay a resolution in time for the NBA’s October start to to the 2013 season.

Updated at 12:12 p.m.: Correction on NBA votes required for sale and relocation.

 

 


YourThoughts

  • jafabian

    Impressive list of investors, my hat is off to KJ on this. He put some OT on it. But with all of it relatively slapped together the NBA will still question just how solid of a foundation their financial package is. If it’s all built on loans it won’t fly. Hansen’s ready to go on all counts, he just needs a team. And if the NBA doesn’t move in on the Seattle market they have to be aware that the NHL will come in, taking away even more of the small foothold that’s still there for the Seattle sports dollar. Especially since while the NBA has been gone from here the Sounders have given Sonic fans an alternative.

    Hansen has a signed agreement in place and has Steve Ballmer, Erik Nordstrom and Peter Nordstrom among his investors. If the NBA goes with KJ’s offer they will lose this group. I don’t see them willing to do business with the NBA if they waffle back and forth so much.

    • art thiel

      No doubt Hansen is ahead on this, but Sactown has six weeks to turn slapdash into respectable. NBA isn’t voting today. It’s a long shot, but Burkle is a major player in sports, entertainment and construction. He’d part of one team bidding for AEG, the sports-arena building colossus. Mastrov is just a local front guy, and my guess is he’ll be propped up by other investors.

      As far as Hansen losing the bidding, if it happens, he’ll be pissed, but he won’t quit. He knew there was a possibility, and I’m sure has contingencies.

  • Billy bob

    Simliar bids art? How so? I see no similatities at all. One deal is done. The other s vague with no arena plan and no details. Its funny how giddy art is about KJs big dog and pony show last night. He was quick to throw out the word ‘impressive’ regarding Kjs efforts, but its funny he hasnt been nearly as laudatory regarding hansens efforts over the last year, only pointing out why it cant work or potential flaws. art, i hope you enjoyed your champagne last night, but the fact KJs biggest ‘whale’ is mastrov, is a huge problem for sacramento, despite your slobberfest.

    • art thiel

      What’s impressive, Billy, is your selective memory. I wrote multiple times lauding Hansen’s effort, brains and community commitment to get to the MOU signed off. Now the project gets REALLY hard — pirating a team. And if I am as impartial as any journalist should aspire to be — as opposed to a cheerleading fan like you — I need to be respectful of the people of Sacramento, who are on the verge of being done to as Seattle people were done to five years ago.

      But you obviously weren’t here when the Sonics left, so you can’t relate to their efforts, which over a couple of months have been more impressive that the community effort in Seattle to keep the Sonics.

      Johnson and Sactown have six weeks to go, and I’m guessing they’ll fall short. But their rally is worthy of professional respect — especially from the people of Seattle.

      • Jared S.

        I appreciate your balanced coverage, but I don’t really
        agree that Sacramento’s efforts are more impressive than Seattle’s were.
        Context is important. There was a long period there, before the Maloofs tried
        to move to Anaheim, of numerous failed arena attempts. Stern has been much more
        patient with them than he was with Seattle, and they haven’t even had a lease
        like Seattle did (which the NBA chose not to respect). Nor is he dismissing
        their efforts as he did when the Ballmer group emerged in 2008, when he lied
        about the viability of a renovated Key Arena and continued to back Bennett. And
        unlike Seattle, Sacramento cannot have claimed to be suffering from stadium
        fatigue, since they have no other teams, and their arena is much older than Key
        Arena was in 2008 (and was built with private money anyway).

        So I applaud their efforts and I won’t be unhappy to see
        them succeed, but I would also argue that they aren’t facing a lot of the
        obstacles we did when we were losing our team.

        • rdwb

          When Schultz decided to sell the team in 2006, no local group or person made an offer to buy the Sonics from him. Later that same year Seattle passed I-91. Finally, Ballmer’s last ditch effort to upgrade Key Arena never even got brough up for a vote in the spring of 2008. Yes, Sacramento has done much more to keep the Kings than Seattle and Washington did to keep the Sonics. It is not really close.

  • Super

    Art is turning a bit turncoat on us, isnt he? I am surprised of his Anti-Sonic rhetoric lately. I heard him on the show with the loser from the Port, Brian Robinson, and Art in the panel discussion. Art played the role of the stooge of the Port for some reason. I used to enjoy his work, but not anymore. He is clearly anti-Sonics return, which makes him an enemy of the state.

    • billy bob

      So Art thinks owners will tell another owner who they have to sell to, unprecedented in league history. Art thinks Sacramento will sue, but on what grounds? Art thinks David Stern still holds a grudge against Seattle because of I-91, even though it’s been reported from several sources that Stern wants a team back in Seattle before he retires.

      • art thiel

        Billy, if the NBA decides to keep the Kings in Sacramento, it won’t veto the sale, it will deny the relocation. Separate actions requiring separate votes. Hansen’s purchase is predicated on the ability to move the team, so if relocation is denied, he will not complete the purchase.

        I can’t believe anyone still believes what comes from David Stern. He’s manipulating people like you, who aren’t paying close attention.

        I do know he likes Steve Ballmer’s profile and money, and he likes Hansen and his bid. But he will never forget what happened to him in Seattle, as his All-Star game statements attest. I’m not saying that’s a deal-breaker, but it is worth keeping in mind — if you care to understand instead of cheerlead.

        • Jared S.

          I agree that it’s a bad idea to believe anything Stern says. I still don’t quite understand why I-91 (or whatever else) made him so angry. We in Seattle have more reason to hate him than he does us, in my biased opinion, not the least because he continues to distort what happened here and tries to push the blame entirely on the politicians.

          • art thiel

            In no other city does a law exist like I-91, making mandatory a profit on a sports-team lease of city facilities. It’s not an unreasonable ask, but the custom has always been that since team-sports leases have always been on sweetheart terms, the arena breaks even or makes an overall profit on concerts, flat shows, etc. Most of the time, it works. But Stern seized upon the vote as a repudiation of the way the NBA does business. Irrational, in my view, but a monopolist never has to explain himself.

          • Trygvesture

            Well, the way the NBA does biz is the elephant in the room painted as a bullseye; is the commissioner’s new clothes– whatever metaphor works. Of COURSE he doesn’t want any intimation that his dog won’t hunt ( out of homilies, similes and metaphors now) and remains prickly about it in the extreme.

          • billy bob

            Not sure why Stern would still care about I-91, if we are able to get an arena built despite that joke of a law.

        • Billy Bob

          I am paying close attention Art, I read every one of your articles. Shouldn’t that make me well informed?

        • Billy Bob

          You never explained on what grounds Sacramento could sue the NBA if the team moves to Seattle.

    • art thiel

      See above, Super.

      Enemy of the state? Wow, Joseph Goebbels will be happy to hear he was right about some people.

      And Brian Robinson is neither a loser nor a port commissioner. He’s a good guy who has championed the Sonics’ return. Tom Albro is also not a loser, but he is a port commissioner.

      So besides making no points, congrats on insulting everyone you mentioned.

  • Trygvesture

    Nice report, Art, sans any fratboy rah rah perspective that tends to see straight shooting as somehow threatening and offensive to their reality. How weird not to want to know what’s going on from an arm’s length perspective: As if seeing things through a lens without the hometown rah rah could somehow implicate the outcome. In fact, what you wrote is what’s happened. It’s complex. There are decision points ahead that only the NBA goofballs control. There are litigious opportunities for both sides emerging at the horizon. We want Hanson et al to win, but knowing the road to the Sonics in Seattle isn’t newly paved with gold and green lights seems to really threaten some people’s private universe of hope. Strange. I like to read what’s happening and suspect most others do too. Keep it up.

    • billy bob

      really? much of what he wrote was speculation on his part, not whats happening.

      • art thiel

        Really.

      • Trygvesture

        Rev em up biilyb. Have another brewski. Your postings are nothing short of, nor more than, entertaining.

    • art thiel

      Thanks, Tryg. I would think that a presentation of facts, coupled with informed speculation about possible outcomes, would be of value to most readers. Especially when so little is truly known about what has transpired and what may be to come.

      But some will always want yippee-yahoo.