BY Art Thiel 09:08PM 04/12/2017

Thiel: Arena proposals offer big cash, optimism

Two well-regarded arena developers submitted bids of more than $500 million to remake KeyArena. But neither have an NBA/NHL team commitment, and the transportation/parking issues remain sketchy.

Oak View Group’s plan includes adding an atrium of covered space to help expand the usaable square footage beyond the arena’s roofline. / Oak View Group

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Although much in their plans will get thoroughly nibbled and pecked until decision day June 30, two nationally recognized arena developers Wednesday succeeded in rocking Seattle’s entertainment world: They hit the deadline for submitting plans, worth a combined $1 billion, to turn KeyArena from frump to siren.

On their nickels. Under the old roof. In the heart of a city that is always one traffic accident away from Donner Pass immobility. The developers may be nuts. But that’s their problem.

Dazzling as is the shiny-object portion of the rollouts, don’t lose site of the fact that Oak View Group and Anschutz Entertainment Group are about making money. Both of them think they will make some, despite the impressive cost — $546 million in OVG’s bid, and $520 million for AEG.

That is nearly twice the cost estimated in a report commissioned in 2015 by a Seattle City Council increasingly skeptical about an arena plan by Chris Hansen in Sodo. The figure of $285 million for that remodel was laughably low. But it persuaded the council and Mayor Ed Murray, up for re-election in November, that maybe the dowager queen of Lower Queen Anne could be fixed with some spackle and Bondo.

The interior of AEG’s proposed “Seattle Coliseum.” / Seattle Partners

So the city whipped up a request for proposals in January and discovered two heavily backed companies, experienced in arena developmen that saw more of Seattle’s upside than the downside of building on spec.

Neither bidder has a commitment from the NBA or NHL to bring a team, although both bidders are counting on the irresistability of Seattle’s growth and wealth to charm the team owners into sharing some of the fruits of their monopoly operations.

“It is amazing in this day and age that Seattle doesn’t have a world class arena for concerts and winter sports,” Tim Leiweke, OVG’s chief executive officer, told ESPN 710 radio Wednesday. “There’s no guarantee that in 10 years we won’t be sitting here with no team. But there’s no risk in this proposal to the taxpayer. I’ll take the risk, because it’s a good risk for us.”

Murray, who could use a little cheering up these days — a Seattle Times editorial called for him to drop his re-election bid after it disclosed that he was being sued for child sexual abuse for episodes 30 years ago — issued a statement of delight that his wild swing hit something.

“Today is an important day in our goal of bringing the Sonics home and the NHL to Seattle,” he said. “Two well-known organizations submitted proposals to redevelop KeyArena, totaling more than $1 billion in investments between them. Their interest shows how Seattle has become one of the most desirable cities in America for sports and entertainment.”

According to its executive summary here, OVC will expand the current building’s 338,000 square feet — the smallest in the NBA before the Sonics abandoned the barn for Oklahoma City in 2008 — to 660,000 by digging the seating bowl 15 feet deeper and putting many seats below grade.

The configuration will allow an unobstructed view of the NHL ice sheet, which KeyArena does not. Included is a plan for an 850-car parking garage and multiple loading bays for the biggest concerts.

Seating for hockey is 17,100, for basketball 18,350 and about 19,100 for concerts, which are Leiweke’s planned moneymakers. Sixteen event-level “bunker” suites will be on the floor and 40 sideline suites are above the main concourse.

The arena exterior will feature atrium entrances whose ceilings extend horizontally from the roof’s dripline that will create roomier entrance angles for the 9,000 seats in the lower bowl.

OVG proposes a lease of 35 years at $1 million a year, with increases if revenue thresholds are met. In the first year, it anticipates net revenues of $18.5 million, which will cover debt service and leave some profit. Leiweke is counting on naming rights and corporate sponsorships, which will be part of an “alliance” network of arenas around the country, currently numbering 26, to be major revenue streams.

The financial might of his company comes from partnerships with entertainment mogul Irving Azoff and Madison Square Garden, owned by James Dolan, semi-notorious owner of the NBA Knicks and NHL Rangers. They have agreed that OVG will privately finance the construction with equity and construction loans and also fund ongoing operations and capital improvements for the arena, while the city will own the building and the land.

The much larger AEG, where Leiweke worked until two years ago, busted a business move ahead of its RFP submission. It has entered into a joint venture with real estate firm Hudson Pacific Properties, whose owner, Victor Coleman, tried unsuccessfully two years ago create something similar with Hansen and his Sodo arena project.

Hudson Pacific owns Seattle-area buildings and properties worth $750 million. Coleman, from Vancouver, B.C., and a big hockey fan, was seen as a possible owner of a Seattle NHL franchise if one were sold or relocated. But he and Hansen reportedly had differences about the financial commitment involved in buying a team as well as a half-interest in the arena project, which Hansen pegged at $490 million five years ago.

While nothing is being said about potential team ownership, Coleman likely sees an opportunity if AEG, which has managed KeyArena for the last several years, wins the bid.

AEG has adopted the name Seattle Partners for the project and is emphasizing its connection with Seattle businesses in its executive summary here. It is less specific than the OVG summary, but promised a return to the city of $144 million in “surplus revenue.”

AEG will invest $5 million to “accelerate existing transportation strategies” and create a “shared mobility hub” adjacent to the area.  But AEG made no mention of the Monorail, a topic near to Leiweke’s heart.

The World’s Fair-legacy, one-mile tram from Westlake Center to Seattle Center is cited as an undervalued option by OVG to get people to and from an arena that is increasingly surrounded by an urban village that seems to get more dense every week. The inclusion of the 1962 leftover to help solve traffic problems in 2020 made it the object of social media and talk-radio ridicule.

Even if both projects have figured out a way to fit a hockey rink and a basketball floor under the current roof, transportation and parking will be the topics receiving the most scrutiny. With the new SR 99 tunnel opening in 2019, at least a year ahead of the optimistic arena opening in 2020, much will change regarding Seattle Center traffic, for good and ill.

The city will host an open house with the proposers and the public May 11 at KEXP from 5 to 8 p.m. The city’s Office of Economic Development has an advisory panel appointed by Murray to help with the scrutiny.

By June 30, the city will decide which of the bids to accept. It’s possible that the city could choose neither, should they find them fatally flawed.

In that event, Hansen is standing by, behind Door No. 3 with $125 million in Sodo property waiting for the city to grant him a two-block vacancy of Occidental Avenue so he can make his project shovel ready for the first available team.

For a city that not long ago had no winter-sports team and no options, things have changed. Perhaps the biggest change is that the taxpayer is not seeing the bony fingers of pro sports owners creeping into the public exchequer.



  • WestCoastBias79

    Both look incredible, but they might as well be on the moon. Like you said, transportation is the issue here.

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    • art thiel

      That will be the primary focus of the city inquiry.

  • Tonic99

    Is the roof stretched out on that one plan? And if so, how is that permissible given the landmark status? It looks ugly.

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    • art thiel

      The atrium idea is a shelter extension from the dripline, not a change to the roof itself. The esthetics are in the eyes of the beholder.

  • Tom G.

    Can’t say I’m super thrilled about either proposal.

    First off, KeyArena is an awful site in terms of traffic and parking all because Seattle government is anti-car.

    From there, you’re going to be dealing with red tape and long timelines in terms of construction with both projects because……’s Seattle.

    And then after that, both projects have their own little warts. The AEG project is problematic because they’re implying a public financing component is going to be used and then Oak View’s arena is problematic because there’s no NBA or NHL owner.

    With SODO you can say Chris Hansen would own the Sonics, with AEG you could say Victor Coleman would most likely own the NHL franchise and in Tukwila (IF that ever came back to life, and I realize the chances of that could be remote) you’d have Ray Bartoszek likely own the NHL team.

    But with Oak View? No team owner in either league. You could very well be building Sprint Center II. Great for the arena developers, not for the sports fans.

    I wish they’d just pick SODO and get that over with already, but you just know this process is going to be manipulated to favor Key for political reasons.

    • art thiel

      The need in 2017 for a primary owner by 2020 is negligible. Even Hansen has said that he would allow someone else to be majority owner of the NBA team.

      The need to overcome skepticism by NHL/NBA over Seattle’s ability to deliver is why the building must come first. For good reason, they don’t trust Seattle.

      • Tom G.

        How do you explain what happened in Kansas City with the Sprint Center then? Because that was built and you had no teams come.

        So that proves “connections” don’t mean EVERYTHING.

        From there, if you want to argue about how valuable Seattle is because of market size, then that doesn’t really explain why the team left in 2008 for market ≈#45.

        That’s why I feel like having a shovel-ready arena combined with the ability to welcome teams need to go hand-in-hand with each other.

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  • 1coolguy

    I can understand the city politicians getting behind Key Arena proposals, as it is the City’s property, that most likely either breaks even or loses money each year. Unfortunately, the City should do what’s right for the taxpayers and no matter what they do with Key, there is simply no way the Key will 1/ Earn greater revenue than SODO and 2/ Given traffic, the taxpayer is much better served by a SODO development than one at the Center.
    So either way, the City must choose SODO if they are truly looking out for the best interests of its residents.
    That would leave the Key available for any developer, and I could see a mixed use development with residential units above. A quality developer could make that corner of teh Center absolutely amazing AND, if it were sold to the developer, the city would then collect property taxes.

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    • art thiel

      Many people have many ideas for the Key, Memorial Stadium and the KCTS building. I’m not sure you or I know as much about the concert-rev biz as AEG/OVG, but if they think they can make it, it’s worth a free listen.

      But Sodo will have much less impact on its neighborhood, despite the port’s exaggerated laments, than the Key on LQA.

    • Kirkland

      Under Oak View, the city would own the building and the land, which I think means they get a bigger cut of event and lease revenue than from privately owned SoDo. So that’s their motivation, making money from a building they control.

  • Steed

    How is the tunnel going to change Seattle Center traffic? People approaching from the south may take the tunnel instead of the viaduct, but it doesn’t seem like it’s going to change anything for people once they get out of the tunnel.

    • art thiel

      The tunnel has no downtown exits from start to finish. No more Seneca or Western Ave exits. But it will allow the east-west Republican, Thomas and John streets to cross over what are now dead ends at the SR 99 roadbed.

      Much uncertainty about how drivers will navigate the changes to get to the Center.

  • Stymie

    I for one am really shocked that they have come back with a proposal that has their private investor group putting up 100% of the $564M into a city-owned property AND promising to still be paying the city rent.
    Perhaps it was a different news story, but I thought i read a blurb somewhere that one of these groups had thrown in that “some portion” of the debt from their private money would be paid back via “tax revenue that would not be realized if not for the renovated arena”.

    Art you have always in my opinion been the most observant of these little details…

    Are they truly putting up $564M of their own money…via bonds of course, but is it really the case that 100% of those bonds will be paid back from direct arena revenues with NONE of them paid with city of seatte tax revenue (any sort of tax revenue, existing or any taxes collected as a result of arena activity)?

    • art thiel

      OVG is paying 100 percent of its cost. AEG is floating an idea of $250M borrowed by the city. More on that this afternoon.

  • Kirkland

    The building plans themselves look nice, particularly Oak View’s with the pitched end zone seats and side (not overhead) scoreboards. If you put them in a location with reasonable access, I’d be fine. But “location, location, location” is the Achilles heel of these projects.

    I want to see what the LQA residents say in the public meetings. A lot of them in a recent survey said they hate the current Key traffic, and it’ll only get worse before light rail in 2035. Will there be a lot of “Save LQA” signs in the background of the Council hearings, like there were “Save SoDo” during the street vacation hearings last year?

    • art thiel

      Now that there is something substantial to deal with, I agree about being interested in the public response. The OVG people seem to think there’s more people positive about the outcome than the survey said.