BY Art Thiel 06:30AM 02/20/2017

Thiel: Why Hansen thinks KeyArena can’t work

In a one-on-one interview, Sodo arena developer Chris Hansen lays out his skepticism regarding KeyArena as a future home for the NBA, although he would bring a team there if he believed it would work.

A retrofitted KeyArens isn’t likely to work for NBA/NHL, says Chris Hansen. / King5.com

First of two parts

The arena battle in Seattle has added drama with the arrival of two reputable national firms bidding to try to renovate KeyArena, the Sonics’ former home. But Chris Hansen has been there and done that exam. It was so long ago, 2011, people may have forgotten what he learned, and why he spent more than $125 million in Sodo real estate to put his arena there.

In a one-on-one interview with me last week at a Pioneer Square coffee shop, Hansen spent an hour answering questions about the competing projects, including his willingness to bring a team to the city-owned Key operated by a third party — if it makes business sense.

“My job is to bring a basketball team back here,” said Hansen, a Roosevelt High grad who has come to great wealth by managing hedge funds. “If it ends up working at Key, I’ll be happy to work with them. if they can build a world-class arena in the next two or three years, I’m 100 percent for it.

“My worry, like with most sports fans, is they see how long it has taken our process. The Key would be another five- to seven-year process to get shovel-ready. If opportunities come up in the interim (for expansion or relocation), what’s gonna happen?”

Rather than both projects being considered separately, Hansen said his new proposal, which includes a change to 100 percent private funding, can be green-lighted at any time with a street vacation of Occidental Avenue, even as the mayor’s office makes a decision on whether to build out or tear down the Key, or choose nothing, by a promised deadline of June 30.

“We’re not going to act on the street until we have a team,” Hansen said. “If a team is available, (a retrofitted) Key wasn’t going to be ready anyway, right? If the option is a teardown, there’s really no way the Key is ready. If a team is available in the next eight to 12 months or longer, we can welcome them to the Key (with some Hansen-funded upgrades), and have our arena built within two years.

“That’s a fundamentally different option for the city that increases the chances for success.”

The two Los Angeles-area bidders, Anschutz Entertainment Group and Oak View Group, each will offer a remodel plan, plus an option for a teardown, by mid-April. Company spokespersons for each have said plans dictate creation first of a concert/entertainment arena, and then fit an NBA or NHL team later.

Because AEG and OVG have financial interests in other teams and arenas, league bylaws prevent them from owning a Seattle team. That means a prospective team owner would enter a city-owned arena with a third-party operator servicing large construction debt, plus an events calendar filled with more lucrative concerts.

Chris Hansen thinks impacts on the residential neighborhood near a renovated Key would be large. / KNKX.org

Hansen thinks that limits an owner’s ability to control revenue streams, which limits the interest in owning a team in such a set-up.

“If you were to survey owners in pro sports, most like to control their arena/stadium without a third-party operator,” he said. “Complications come up, like putting money into a practice facility, or certain amenities (for players and fans).

“A sports owner may take a very long-term view of what those things mean to his franchise, in terms of attracting talent and fans, and a third-party operator is often going to be looking at the bottom line.”

He said there’s a fundamental difference in priorities between his group and the Key bidders.

AEG and OVG “are primarily in the music business,” he said. “They’re interested in building out their music platform in a great music city like Seattle. It’s commendable. Seattle deserves a world-class music venue.

“Our goals are a little bit different. We’re interested in a world-class sports arena that can also be a world-class music arena.”

Apart from the business model, there’s the more familiar potential physical limitations on the Key, which was renovated in 1995 with $100 million in public money. By 2001, the  building was deemed financially obsolete for the ravenous NBA by Sonics owner Howard Schultz. He sold the team in 2006 to Oklahoma City robber barons, and you may have heard the rest.

Hansen said he did with the Key in 2011 what he does with his day job as an investor in companies  — due diligence that included interviews with current and former employees, former owners, architects and a lot of data analytics on parking and traffic ingress/egress.

“Three things we learned,” he said. “Traffic is a really big problem. Parking is even a bigger problem, which has only gotten worse since so much parking has been taken away (for residential/commercial development).

“And there is no streetcar/light rail that makes for easy connectivity to that area, and it doesn’t look like there are plans for awhile.”

Hansen knew that the Key’s iconic roof would be eligible for landmark status after its 50th anniversary in 2012. The city is now pursuing a resolution with the landmarks commission, which should make a ruling before June 30. Hansen said the roof met all the criteria, and thus would have to be preserved in any remodel.

“If you keep the roofline, you can’t demolish,” Hansen said. “You have to retrofit. That limits the amount of square footage you can access. The site footprint is really small — 300,000 square feet. The next smallest NBA arena is 600,000 square feet. And it’s not just small seating capacity. The amenities that an NBA/NHL team requires  — suites, restaurants, bars, social spaces — is very limited.

“If you could demolish, that opens up to opportunity to perhaps put a 500,000-square-foot arena in there. But that arena would still lack things like a practice facility, adequate parking, adequate loading, adequate space for amenities that are increasingly important for live sports.”

Since the ice sheet for hockey can take away 25 percent or more of the capacity for a basketball set-up, some architects believe that offsetting the hockey arena configuration can produce a capacity of 15,000 for hockey. Hansen is skeptical, based in part on the troubles the New York Islanders are having in Brooklyn’s Barclays Center, which has an offset configuration.

The Islanders moved from the aging Nassau Coliseum on Long Island two years ago to Barclays, which seats 15,800 for hockey, but some sight lines are poor. The Islanders are averaging less than 13,000 fans a game, and are reportedly looking for a new home.

“The NHL is likely not to be supportive of a permanent solution with an offset ice rink,” Hansen said. “You can see it didn’t work out in Brooklyn.”

Perhaps the biggest impediment to the Key being home to a minimum of 82 winter-sports regular season games and sometimes more than 100 with playoffs, is the impact on the lower Queen Anne and South Lake Union neighborhoods, both of which have undergone extensive development since the Sonics’ departure in 2008.

“When we compared Key to Sodo based on facts, and not anyone’s interpretation of facts, it seemed clear to us there was a lot more disruption to the community than we would incur at Sodo during construction,” Hansen said. “Then when we start bringing in 200 event nights with people leaving at 10 p.m. or later, we felt like that would cause a lot of friction.

“In Sodo, there’s already two other stadiums here that handle much higher volumes of people than 18,000 at an arena. There’s no residential, and many businesses are closed by the time an event starts at 7 p.m.”

Apprehension about a big expansion of events at the Key was reflected in a recent survey of neighborhood residents. The Uptown Alliance, a community group, received 800 responses from residents, workers, business owners and visitors to a written survey of several questions about the future of the Key.

More than 53 percent of the respondents agreed or strongly agreed that their preference was to see the Key as a performance venue with the NBA/NHL sited elsewhere in the region.

It should be noted that once the new Highway 99 tunnel is operational, three additional east-west streets will pass over the roadbed instead of only Denny Way, which should relieve some congestion around Seattle Center.

Hansen also brought up the point that a successful bidder for a Key retrofit also picks up the city as a partner, as well the Seattle Center’s many constituencies that use the grounds.

“We thought renovating the Key would take a really, really long time,” Hansen said. “It’s civic land that would have to be developed in conjunction with the city, rather than a private development. The city will be your partner in everything you do with construction.

“That will just increase time and expense. It has nothing to do with sports; it’s true with any project.”

Part Two Tuesday: Why Hansen believes he’s not blacklisted by the NBA; why he wishes the Port of Seattle would stick to the facts, and why he thinks an all-private arena can work economically.

 


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  • ReebHerb

    Is Mr. Hansen overlooking some ‘pay to play’ foundation? In past years, it was always helpful to have a ‘civic servant’ on your side to get a big project going. Rumors were in the late ’50s and ’60s banking at a certain bank showed you were keeping people happy.

    It’s time to think out of the box. Find a location on the East Side or Renton. Work a deal with Boeing to move 737 production to South Carolina and take their site.

    • Pixdawg13

      Righhhht. Boeing, just go away. That’ll play really well, especially with the people who are employed by Boeing or its contractors and subcontractors.

      Are you Nick Licata?

    • art thiel

      Reeb, that’s really old school. And asking Boeing to leave is no-school.

      • ReebHerb

        All tongue in check. The Boeing reference is of course if they decide to leave on their own. They always use that reference to their advantage. Still think the East Side somewhere closer to their customer base is best for all.

        • art thiel

          I’ll assume your tongue is in your cheek too.

          The East Side is closer to the suiteholders and season ticket holders. But several efforts to create an arena in Bellevue have so far come to naught. If all three bidders in Seattle fall through, then maybe.

          I think you should write a check to Kemper Freeman to get it started.

  • Jamo57

    Seems pretty clear to me. The improvements as a result of the tunnel project is news but it only improves access and egress from the north side and West Seattle. It won’t affect people from the east side or out of county it seems. Hansen’s analysis of the bigger picture seems spot on.

    Last month I was in Phoenix for a wedding and took in a Coyotes game out in Glendale. Coming from the airport area, I really got to experience first hand how difficult the arena was to get to. Free parking was nice, but driving through rush hour traffic to meet a buddy in time for dinner before the game was really a chore. As that franchise is teetering once again in terms of being able to survive in that market, it really behooves Seattle to get this right. The drama we all lived through in the 80s and 90s about franchise venues, financial health, and unwieldy landlord/tenant relationships is something we have to be smart enough to not return to.

    • art thiel

      After the Kingdome and KeyArena fights, I grow weary of the prospect of city/private operator/sports owner quibbling annually over operational details of what Murray seems interested in for the Key. Ask any of the electeds of that time how much they enjoyed it.

  • 1coolguy

    The Key is a fools errand. Anyone who attended Sonics games can tell their myriad stories of their very, very poor commutes to the Key from ALL starting locations other than Downtown, Queen Anne or Magnolia/Ballard. I suspect, if a pin survey was attached to any article concerning the start point of all Sonics fans, 95% may well have NOT been from the aforementioned locales.
    I also would like to see a survey of local affected residents in say, a 3 mile radius of the Key, as to whether they want an enlarged Key with upwards of 200 dates. THAT would elicit howls of protest from these residents, I humbly suspect, when the question also includes “vs. those events held in SODO”.
    I understand, that as the effective trustee of all city properties, the mayor must go through this exercise, yet even as the “master mind” behind such foolishness as Pronto, even he has a modicum of fact based logic stored somewhere in his gray matter.
    Bottom line to the city: SODO will be a much better SALES TAX generator than Key, and as a PRIVATELY OWNED site, will pay REAL ESTATE taxes to the city that Key does not.
    In conclusion, FOLLOW THE MONEY.

    • Playhouse

      Conceivably, Terminal 5 renovation is going to redefine what they do with T46 as it is. And considering the Port won’t come to the table to talk about anything, I’m not sure Hansen can do much beyond what he’s contributing to the Freight Master Plan and the Lander Street overpass project (by way of earmarked funds from his potential purchase of the Occidental Ave strip). That’s quite a bit, actually.

      • art thiel

        True, playhouse. Asking Hansen to solve more of the port’s problems is way over the top. Hansen as a landlord is making more steps to solve an infrastructure problem than anyone has a a right to ask. It’s more than the port is offering.

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    • art thiel

      Solid analysis, coolguy. Regarding the port, some or all of the resolution lies in the completion of funding for the Lander St overpass, an issue for the port that pre-dates Hansen. The proof for negative effects of the arena is difficult, because a low percentage of events will be during the day.

      The port has many other issues negatively affecting its future. But Hansen’s payment for the street vacation ($20M?) will close significantly the Lander funding gap.

      • Playhouse

        Which might be even more beneficial if the feds should decide to rescind the FASTLANE grant money for dubious reasons.

        • art thiel

          Well, Trump is about infrastructure, right?

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  • Playhouse

    I’m still hard pressed to believe the tunnel is going to relieve a lot of the traffic stress in LQA, considering it opens right up into the bottlenecked area. It’s not exactly into Denny, but drops right into Mercer, which is going to affect everything.

    • art thiel

      I have yet to dive into the post-dig scene for LQA so I’m holding off judgments. The big question: Will the improvements keep up with growth density?

      • Playhouse

        HUGE question, especially in that area.

  • Good stuff. It is frustrating revisiting 2012.
    I just don’t think I can take another quarter century of hockey fans rightfully criticizing a choice of remodeling that arena into a sub-par hockey venue.

    • art thiel

      The offset ice sheet is a question that needs answering ASAP, or declare null the NHL opportunity at Key.

  • woofer

    Hansen has been barking up this particular fire hydrant now for nearly half his lifetime, so his commitment to the project is well established and he has surely learned a lot along the way. These two facts alone should be sufficient to disqualify him. Seattle has a long hallowed tradition of preferring amateurs and dilettantes. Where is Howard Schultz now that we really need him? We could even bring back the always feckless Wally Walker, even though by now his legs cannot be nearly as fetching as they once were.

    Even so, it seems likely that historic preservation will eventually win out at Key Arena and prevent any major renovation there. The Mayor’s keen sense of camp will demand retention of the distinctive roof line, which will join such architectural icons as Andy’s Diner, Pacific Sanitary Rag, Yo Ne Macaroni-Spaghetti-Egg Noodle, Helen’s Hol-n-One Donuts, Bob’s Ballard TV and the West Seattle Radio Shack on the list of civic shrines to be sheltered against further desecration.

    Where does that leave us? Hansen’s patience seems endless. My guess is he may outlast them all.

    • art thiel

      But we’ve lost The Doghouse on Murray’s watch. That is unforgivable.

      Your friend Mr. Walker is helping Hansen.

      And indeed, Hansen has biblical patience, and the commitment to his hometown is, as far as I can tell, sincere.

  • kmlman

    Art, what did you think of Geoff Baker’s article today? Interesting that Hansen won’t agree to be interviewed by him. I’m sort of torn, I grew up with the Sonics at the Coliseum, nee Key Arena and from a nostalgia viewpoint would love to see them back there. But I also think Hansen has been hosed on a lot of levels. He made some mistakes but at his core I think he’s doing the right thing. I think he’s right on about the difficulty of penciling things out for an NBA owner at Key, but Baker asks some legitimate questions about his financing

    • art thiel

      Read Part Two today of my interview, which answers most of your questions. If not, write me back.

      • kmlman

        Thanks Art. I read the article, and it does answer most, but the issue of financing still seems to be a question to me. I certainly get Hansen’s point, and also Geoff Baker’s. It seems to me that the answer to the question of whether he needs the Occidental vacation to attract investors or attract a team is probably based on a results-oriented approach, i.e. “where you stand is where you sit.” But I also like Geoff Baker and think he is a great columnist and don’t believe he has an ulterior motive. So why would Hansen not sit for an interview with him–assuming the latter is true?

        • art thiel

          I have to say that the relationship between Hansen/Times is neither my concern nor business.

          Regarding the sequence, it’s been clear since the 2012 MOU that Hansen needs the street vacated in order to get a master use permit to build the arena. That commitment will attract a team, and the team will attract investors.

  • Beckett Tallmadge

    Hey Art…….somewhat off topic question in which you might have some insight. The Seattle times (in particular Geoff Baker) reporting on this topic has been slanted against Hansen and the sodo project from the beginning. Is this simply trying to appease the port? If your employer directed you to report on only one side of the argument…..what would you do? I find their take on this issue baffling. Is this practice common in journalism or is this somewhat of a unique case. Is it possible that I am taking crazy pills and their reporting on this matter is fair and unbiased?

    • art thiel

      The Times publisher has always been an advocate for the Mariners. Ergo . . . the editorials lambasting Hansen’s position.

      I’ve seen no evidence of his influence in the sports section. Baker is an aggressive reporter, and the world needs more of that. Might I disagree with some angles? Sure.

      But as far as I know, the columnists have been left alone to disagree with the Times editorials.

      But really, feel free to ask them.

  • Husky73

    It’s a question all of us on a limited budget face….do we put a few thousand dollars into an old car….or do we put $30,000 into a new car (or more) and strap ourselves with payments for the next 5-7 years? And, when the new car is finally paid off, it needs work or replacement. All my life’s a circle…..

    • art thiel

      In this case, neither Hansen not the would-be Key developers are asking anything from taxpayers except the optional purchase of a ticket to the arena. Not really a budget issue.

      • Husky73

        Respectfully, it’s always a budget issue…traffic control, security and infrastructure costs somehow land at the city’s (and taxpayer’s) door.

  • 3 Lions

    Seattle Center and Key Arena would be better served by tearing the arena down and putting in a world class trade and convention center in the space. It could supplement or replace the current facility and keep Seattle center viable by generating the tax dollars the city craves. Just an idea…

  • Lee Stamper

    get away from control of the Seattle City council area and mayor and all will be fine … PERIOD