Thiel: Soaring cost isn’t slowing arena project

The easy joke would be to wonder what hole is deeper, the one Oak View Group is proposing to dig under KeyArena, or the debt the company is taking on to do it. With the recent disclosure that the projected cost of the redevelopment has already risen $100 million to $700 million, months ahead of ground-breaking, eye-rolling has had a robust commencement.

Then again, there is no public money at stake. As a rare private development of a public building, it’s as if Santa Claus has a taken up a summer home at Seattle Center. The gift sack seems bottomless. The public agencies and staff have to be careful not to snicker.

OVG and its backers and partners have not publicly blinked, flinched or twitched as smoke curls from the expense odometer.

Tim Romani summarized the breadth and depth of the budget strain.

“This building,” he said, “is not for the weak.”

Romani, CEO of CAA ICON, a management consultancy for sports facilities, was among several principals assembled at the Labor Temple downtown Tuesday morning for another milestone moment — OVG’s introduction of the joint venture of Skanska and AECOM Hunt as the project’s general contractor.

Romani was sufficiently honest to admit that when first approached by OVG, he didn’t think renovation of a 56-year-old building with an untouchable roof in the tight quarters of a residential neighborhood made financial sense, especially compared to a teardown and fresh construction.

“It was going to be complicated and expensive,” he said then. And he said it again Tuesday.

“It is complicated, and it is expensive,” Romani said. “Tim Leiweke said, “‘So go get it done.'”

Despite the rising costs, abetted by tariffs on imported goods as a consequence of President Trump’s unanticipated trade war, OVG’s president continues undeterred, assuring his audience that spending was “not out of control.”

By excavating 15 feet below the base of the four great pylons that support the roof, the developers will grow the footprint of the arena from 360,000 square feet — the NBA’s smallest when it last played in Seattle 10 years ago — to 750,000, allowing a seating capacity of 18,600 for hoops and 17,400 for hockey.

That includes a 50,000-square-foot atrium on the south side’s main entrance that will allow for long escalators to take customers into the depths of the grotto to floor-side. Since the entrance at grade is at the upper concourse, Chris Carver of the architectural firm Populous offered an intriguing analogy.

“In body and function, this arena is like an iceberg,” he said. “You have to really want to do this, because it’s really hard from an engineering and construction standpoint.”

Most arenas are surrounded by air. Icebergs are surrounded by water. Most of the new Seattle arena will be surrounded by dirt, separated by expensive retaining walls around the four sides.

Apparently, Leiweke really wants to do this, almost no matter the cost to investors and lenders.

For an elaboration, I sought out Tod Leiweke, Tim’s brother and the president and CEO of Seattle Hockey Partners, whose charge is to bring to life an NHL expansion franchise. If all goes well with a pending environmental impact statement, a team could be awarded to Seattle owners in September, followed by a building tear-out starting in October. The opening is scheduled for October 2020.

Will the building generate revenues sufficient to cover the increasing construction costs and satisfy investors?

Tod Leiweke, who in his earlier turn in Seattle helped take the Seahawks and Sounders franchises to great heights, said the city’s virtues make it nearly as unique as the arena construction plan.

Whatever skepticism he may have had vanished in March, when 37,000 fans in a matter of hours put down deposits for season tickets, a response that shocked the NHL bosses. It helped Leiweke quit his job as the NFL’s chief operating officer and return to Seattle.

“There’s not been a day like that in the history of sports,” Leiweke said. Asked if the $500 fee was a modest, easy ask, he said, “It’s not the cost. It meant something to these people — top business executives sitting at their offices using their computers trying to get online to buy. It’s validation.”

The rush for ticket deposits confirmed what he knew from his previous experiences here regarding risk/reward.

“There could be corners to cut, but we didn’t want to do it,” he said. “The increased expenses in the last 12 months came mostly from things we wanted to do. We wanted the best. You gotta believe in the city, you gotta believe in the facility and you gotta believe in the fans. A guy like me, I believe in this city and its fans. I think we believe that is arena can be one of the best in the country.

“It has soul, meaning and purpose.”

Rather than a new joint, Leiweke puts stock in the building’s history and place.

“The building has taken a lot of guff,” he said. “But its location and design have helped make it a historic landmark. It’s part of the city’s image. It’s so compelling, the way this story has come together. So compelling, that I left my job with the NFL. Buildings have been built that cost a lot more than this. But there isn’t a project quite like this, because on opening day it’ll have a soul, right in the center of Seattle.

“Every time I walk around Seattle Center, it means so much to me, which was a little unanticipated. I love it. I love going to work in a place like that every day.”

Leiweke’s expression an example of a virtue of an all-private venture. Unlike a publicly funded facility that has to please most people most of the time — especially including budget —  the wealthy guys get to indulge passions. Bankers can wait.