BY Art Thiel 06:30AM 06/08/2017

Arena deal done? ‘It’s the second inning’

After Mayor Ed Murray did the expected and anointed Oak View Group as the fixer of KeyArena, Sodo arena developer Chris Hansen said his project’s death is greatly exaggerated.

As former Sonics coach Lenny Wilkens applauds, Mayor Ed Murray shakes hands with Oak View CEO Tim Leiweke at the Seattle Center. / Art Thiel, Sportspress Northwest

For a man whom everyone figured was home beating on the figurative chest of his inert arena project, waiting for a heartbeat, Chris Hansen was remarkably serene Wednesday after a rival arena project was celebrated by the mayor and his staffers as a deliverance on a righteous crusade.

“There’s one very important difference with our project,” Hansen said. “We are doing this for civic reasons. Economic return has never been the most important part of this for me. We can afford to do it and we should do it.”

Hansen staked out the moral high ground to an audience at Civic Cocktail on The Seattle Channel at the Palace Ballroom downtown. It was barely four hours after Mayor Ed Murray officially announced what privately had been accepted for weeks, and maybe from the start: The Oak View Group had won his recommendation to nip and tuck for $564 million the aging KeyArena under its old roof into world-class grandeur.

Hansen conceded nothing, and lamented little regarding the project in which he has invested six years and $125 million in Sodo real estate purchases. It may be because, as someone on his team said privately, “It’s just the second inning.”

That’s what he said: An effort to create a fresh home for the NBA that began in late 2011 has reached the second inning of game that Hansen insists is far from over.

What happened Wednesday, despite a lot of self-congratulations among Murray’s staff and Center employees, was merely a determination of who was up at the plate. It is Tim Leiweke, CEO of Oak View and a rhapsodizing speaker who, to hear him tell it, knows just about everyone in the worlds of sports and music and swoons at the wonderfulness of Seattle.

If name-dropping were an Olympic sport, Leiweke is Michael Phelps.

Give the man credit: He dazzled Murray, a man who could use some dazzle as he seeks to tie up his dwindling political career with something other than a sex scandal. Leiweke understood the task and stayed on point, while Seattle Partners, the temp name for the partnership between Anschutz Entertainment Group and Hudson Pacific Properties, apparently had a revolving door of swells.

Said one city staffer who followed the proceedings, “There were a lot of rotating suits with AEG. Leiweke stuck with it.”

But the competition wasn’t all that rigorous. Seattle Partners was doomed from the onset of the bidding with a request for $250 million in municipal construction bonds, a public contribution that flew in the face of restrictions placed by the city in its request for proposals in January.  Hansen made a similar request in his original Sodo proposal in 2012, but withdrew it and submitted a revised pitch late last year that was all private money. That offer is in the hands of the city council independent of the Key tussle.

Speaking of the city council, guess who among them was at the carefully choreographed ceremony on a Center lawn on a sunny day? None. This was the Ed Murray Show, not to be confused with the Ed Sullivan Show, although the parade of black Escalades that brought the big shots to the stage left a show-biz impression.

Murray’s recommendation goes to the council, which, as with the mayor, is genetically predisposed to liking any offer of private money to upgrade a public park. But it is not obliged to accept anything Leiweke offers merely because there is no Key competitor.

Therein, said Hansen, lies the trick.

“You give somebody a monopoly in a market like Seattle, and you give no other avenue, it tilts the balance of power in those negotiations,” he said. He knows his Sodo plan will be the only leverage available to the council, which is unlikely to pay any attention to the mayor since his clout went away with his decision not to seek re-election. His lame-duck period ends Dec. 31.

The one thing Murray said that sounded as if he wasn’t star-struck was a warning, in response to a media question, that “if we can’t solve the transportation and financial issues (with OVG’s proposal), it’s a deal-killer.”

Those are the principal areas where OVG is light on details. A community group made up of residents and businesses nearest the Center, the Uptown Alliance, sent a letter to Murray Thursday saying both proposals were inadequate on the topics and the group could recommend neither proposal.

It is up to the council to negotiate with OVG for the final deal, which also likely includes a determination of responsibility for the inevitable cost over-runs. In the media scrum after the ceremony, I asked Leiweke, whose proposal was vague on the point, who pays.

“We will,” he said, although he was looking down at his shoes when he said it. Which prompted a follow-up: Is there a financial point beyond which OVG will not go to create this “top 10 in the world” palace?

“We have a high,” he said, “and a low.”

That gets close the rub on the OVG proposal: If the $564 million bid was inadequate on matters of transportation, neighborhood integration and revenue redirected to OVG from city taxes, what happens when costs are affixed to the resolution of those shortcomings?

Hansen was willing to offer his thoughts based on the OVG financial projections disclosed to the city.

“Another thing that surprised us (was) the net operating profit of $5 million on $247 million in equity,” Hansen said. “That’s not a good return for a for-profit enterprise. That’s like, two percent. MSG (Madison Square Garden, a funding partner in OVG)
is a public company, and to put up that kind of money, there must be something more to this.”

Hansen was setting up a point that OVG should expect the same scrutiny from council and the regulatory agencies as his project was before it passed muster through a two-year environmental impact statement as well as a financial scouring.

“(The Seattle public) was privy to the very detailed process we went through,”  he said. “Every detail was raked over in finite minutae. They should expect that.”

Which gets us back to the point about the second inning. Much buzz attended word from Leiweke that two billionaires with a hockey passion, Hollywood producer Jerry Bruckheimer and investment banker David Bonderman, the latter a University of Washington grad, were partnering with OVG to be potential principals in owning a National Hockey League team in Seattle.

Those names are nice for splash, and help deflect criticism from the sports community that the OVG proposal over-emphasizes the concert business at the expense of pro sports usage. But brandishing the names now creates an impression that the deal for a Key remodel is more done than it is.

Leiweke is trying to create irreversible momentum for the project. But it cannot escape the same Seattle slog of process that Hansen experienced. That means that even if Leiweke answers the hundreds of questions his proposal has yet to answer definitively, the NHL at the Key is still four years away, at best. Picking owners for something that doesn’t exist has no practical virtue.

Seahawks QB Russell Wilson also attended the Civic Cocktail event and sat alongside Hansen and answered a few questions. He too shared Hansen’s belief that much contest remains..

“We like,” he said, “close games.”

He’s done well in fourth-quarter comebacks. Now he’ll try from the second inning.


YourThoughts

  • Jamo57

    Thanks for the analysis, Art. With a little distance from the dog and pony show, it seemed to me the press conference accomplished little more than an ego stroke for the mayor, a positive news cycle away from all his other troubles.

    This project will in the lap of the next mayor who may have different ideas about the arena or not care at all. Who knows what the city council will look like or do? And then there are the inevitable court challenges by neighborhood and other groups (most likely challenging each location).

    And then there’s the transit issue……….

    My real concern is are we going to be no closer to an arena 10 years from now, still spinning our wheels?

    But it was a nice day for a press conference.

    • Art Thiel

      I think a direction is possible by the end of the year, but if Leiweke doesn’t like what he’s seeing, he can wait for the next mayor.

  • Matt712

    It sure will be interesting – and very telling – to see if that same level of scrutiny for OVG does indeed come to pass. Quite the lesson in politics, this has been.

    And speaking of politics, I really don’t think it matters as much, in terms of bringing basketball back to Seattle, which facility ends up getting built. What matters in the end, based on all that we’ve seen, is the whim and favor of the NBA and still, most likely, David Stern’s life expectancy.

    • Art Thiel

      I think Adam Silver is less of a petty tyrant than Stern, but he still sees Seattle as resistant to public funding, which is an NBA lifeblood. It’s not impossible, but the owners have zero urgency to slice the revenue pie thinner. 

  • Eric Sirkin

    Thank you, Art. Appreciate your coverage very much. Despite Upzoned Uptown and decades of traffic congestion without answers, Mayor Murray insists upon pursuing
    KeyArena. Amazing. Meanwhile down in SoDo, the Port of Seattle has built up a very robust network of transportation connectivity that makes traffic flow easily in and
    out. KeyArena is in the past. SoDo is the future.

    • Art Thiel

      No Seattle mayor can say the Seattle Center is in the past. And since KeyArena is the one major way of drawing revs, I get why the city wants it there. But is it truly the best place for a pro sports arena? I don’t think the city can be objective about that answer.

  • Tom

    As far-fetched of a scenario as THIS may be, here’s something I thought of last night.

    •Chris Hansen gets voted down in City Council again in August/September for the street vacation.
    •A deal between the City and Leiweke/OVG fall apart by November/December.

    Can you imagine the reaction people in this area are going to have if THAT happened? 😬

    Of course, it wouldn’t be the first time the City overplayed its deck of cards either.

    • Art Thiel

      O-for-3 is survivable in baseball, not in privately funded arenas.

  • Kirkland

    Bruckheimer is a well-known name in hockey circles, being a big fan who’s tried to buy teams in the past. Still, the devil is in the details, and I wonder how well Leiwicke’s Harold Hill act will hold up under the Seattle Process.

    Despite my big NHL in Seattle longing, I have serious doubts that this is the right avenue to get it, and Leiwicke is setting off my don’t-trust-this-guy spidey sense.

    • Art Thiel

      I suspect you’re not alone in your spidey tingle.

  • 1coolguy

    Hanson isn’t sweating it, as if his MUCH preferred SODO arena is not built, his extensive properties have increased dramatically in value. It reminds me of when Allen backed the park in South Lake Union and picked up all that acreage for $10m: His downside? The ability to own a large chunk of property on the cheap which he then transformed SLU into what it is today, worth how many billions?
    Hopefully the Clowncil approves the street vacation so Hanson can move forward. This shouldn’t be a choice of one winner and one loser. It should be both projects moving forward and proceeed in a competitive environment. What’s wrong with that? Seattle will grow and needs more than one venue.

    • Art Thiel

      Financially, Hansen is in good shape regarding his real estate ownership. But that’s not why he devoted six years to this project.

      Yes, the city would be wise to maintain its leverage by keeping Hansen’s bid alive. But will Leiweke tolerate it as a condition of continuing to bargain?

  • DAWG

    Think. Consider our regional growth. Yes, two (2) arenas are most definately possible.

  • Art Thiel

    I’m skeptical that there are enough revs to sustain both, because concert tours would pit the rivals against each other to drive up costs.