Sacramento calls do-over on arena, as yet another new owner rumor is launched

What do you want to hear first in today’s Sacramento Kings news, the hard news or the crazy half-baked rumors? I’m guessing you want to hear wild and crazy, so let’s start there:

If the Kings stay in town under new owners, those new team owners would expect a different deal, a city of Sacramento staff report said today.

Some of the possible differences could include other real estate development opportunities in addition to an arena and the new owners taking the development lead, meaning less risk to the city, according to the staff report. Also, as previously reported, the city won’t necessarily go with the railyard as the arena location. Much attention now is being given to the site of the Downtown Plaza.

Ha ha, fooled you! In the land of Kings arena deals, “we know we want to build an arena but don’t know where or how much it’ll cost or what it’ll include or who’ll pay for it” counts as hard news. For truly out there, we need to turn to Twitter:

As FOX40 News explains in a marginally longer news article, that’s current Kings minority owner John Kehriotis, who, according the unnamed source, plans to put together $750 million to not only buy the Kings but build an arena, all without “a major financial contribution from the city.” Which would maybe be possible in terms of the basic math — $341 million to buy out the Maloof brothers’ majority share of the team, plus another $400 million or so for an arena — but seems pretty insane from an investment point of view, since Kehriotis and friends would end up saddled with tons of arena debt and have to share arena proceeds with the other minority partners. In other words, it would have all the problems of the Seattle arena plan, only more so, given that Sacramento is a significantly smaller market than Seattle.

Of course, the other possibility is that when the source says no “major financial contribution” from the public, they don’t actually mean that, and the city would have to cough up tons of money for land acquisition or operating subsidies or free land for other development or god knows what else. Still, this latest rumor is bound to even further heat up talk about building a new Kings arena in Sacramento — Newballpark.org already has a long post up calling it “a potential game changer” — which, even if the details are encased in murk, can’t make the NBA too unhappy, since more people in a bidding war are always a good thing, even if they’re potentially crazy people.

Not to say that Kehriotis is crazy. After all, he’s apparently been researching a new Kings arena for some time, and is the owner of a successful real estate development firm that … oh dear.


16 comments on “Sacramento calls do-over on arena, as yet another new owner rumor is launched

  1. It seems the details of the Kings’ situation change nearly every day. Is Sac really going to have a detailed proposal to purchase the team and build a new arena ready for submission to the NBA in the next 72 hours?! And before this latest news broke regarding Kehriotis’ rumored intent to exercise his ROFR I had completely forgotten about that speculation. I call it “speculation” because so far NOTHING has been produced to support the existence of a ROFR clause. I have a hard time believing Hansen and his lawyers were unaware or unprepared to address that issue. Whatever happened to Cook’s bankruptcy lawyer who was claiming his client ROFR was being denied? It’s been awfully quiet on his end ever since the Maloofs provided him the details of the Hansen purchase agreement which indicates the ROFR likely doesn’t exist.

    Oh, and a big lol at the hyperlink to Kehriotis’ real estate investment firm!

  2. Per this article, building the arena at the Downtown Plaza mall will result in the loss of some of the 3,700 city owned parking spaces on that site: http://sacramento.cbslocal.com/2013/02/26/new-details-of-arena-financing-plan-beginning-to-emerge/. Regarding the other rumored prospective buyer, Fox 40’s Jim Crandell broke the Sleep Train/Power Balance/Arco Arena renovation story last year. So, I’ll take the new rumors with a grain of salt.

  3. Essentially, if Jim Crandell is reporting anything other than raw, indisputable statistics and final scores, I don’t believe him. He has little credibility.

    I wouldn’t even be surprised if someone fed him misinformation, just to see how he’d handle it. Just for fun.

  4. More to the point, though, it bothers me that in spite of the fact that the people who have been working with the “whales” must have an idea of the range of dollar amounts being considered, the resolution they’re now asking the Council to pass doesn’t mention dollar amounts anywhere.

    If I were a Council member, I’d have an awful lot to say about that, such as “No, I cannot vote for just any old dollar amount I bet you already have in mind.”

  5. It looks like FROR may be in the process of becoming a non-issue. Bankruptcy judge Klein has decided to keep terms of the sale to Hansen closed.

    http://www.sacbee.com/2013/02/26/5219033/bob-cook-sacramento-kings.html

    A seemingly minor item that will have a pretty large impact. This probably means that FROR doesn’t exist in the form pro-arena types believe it does.

  6. JC is not me. I’m supreme. I think it’s time all Sacramentens get on their knees and bow to the Kings logo. It has brought so much to the town. Then they could kiss my hand, since I ‘m the smartest. Sacramentens should pull out all of the hard earned money and give it to this franchise.

    Worship Sacramento Kings and Semen Whales and Me!

  7. I don’t think the details of the Kings situation change every day. I think that the rumors change every day. At this point Sacramento has had six weeks to find a whale and agree to an arena deal with said whale. The city is working on a new proposal to offer to a whale, who may or amy not decide to make an offer on the team. Until that happens everything else is static.

  8. MikeM, the article you linked to says, above the thing about keeping the Maloofs-Hansen transaction documents sealed,
    “Trustee David Flemmer and his lawyer Donald Fitzgerald have said whoever buys the 7 percent could have right to match the Seattle group’s offer for the Maloof family’s controlling share. If so, the auction could be pivotal to the battle for the Kings.”

    Sounds more like those transaction documents he requested a while ago were to stay sealed unless they were pivotal to bidders knowing the value of the minority shares. That’s why he asked for the documents.

  9. Flemmer wanted that information released so the so-called whales who wanted to bid on that 7% share would know what they were up against, and could create the winning bid.

    But even if they used the information for that purpose, it still wouldn’t work. Anyone who wants to buy shares in this team has to be “welcomed to the club.” Just because someone can write a check for $37M doesn’t mean you are required to accept them; the other owners get to vote on whether to allow some given person membership.

    That’s why this whole FROR argument has been so misinterpreted and overblown as a factor. If Neil could write a check for $75M for this 7%, it doesn’t mean that he’s in; it’s subject to approval by the rest of the owners and the NBA. We know Neil’s book is making billions; he should make a bid!

    (Sorry, Neil.)

  10. Just to clarify, in paragraph 2, when I say, “the other owners”, I meant “The other owners of this franchise”, meaning that the Maloofs, the Benvenutis, etc, get to say whether you can be part of this ownership group.

  11. I’ve only heard about the NBA examining ownership changes for majority owners, not minor owners. Then a minor owner would be entitled to a ROFR (according to the trustee and the lawyer). The NBA has a lot of power within its organization, but blocking/ruling on a bankruptcy auction winner is a perilous strategy.

    If the partners let one member go bankrupt and aren’t trying to buy the shares from them/at auction then I’d be surprised if they’d get the ability to nix a perfectly legal bankruptcy auction.

  12. ChefJoe, it’s not in the NBA’s bylaws; it’s in the bylaws of the Sacramento Kings. And it makes complete sense to me that they would do that.

    If having a 7% ownership entitles a minority owner to make a bid for a hostile takeover, I’d say that team has some pretty flawed bylaws. 7% sounds like a lot to me anyway. I think at some point, the BOG has a say, too. Otherwise, you could have a situation where close to half of a team could be owned by individuals not vetted by the BOG. I mean, if 7 minority owners combined owned 49% of a franchise…

  13. The Shultz-led Sonics in Seattle had 58 owners. It’s probably a part of why they were able to be parted out like they were (Nordstroms had shares of the team back then). http://seattletimes.com/html/localnews/2002911244_sonicsowners05m.html

    It’s not a hostile takeover unless the majority owner says “hey, I’m thinking I’d like to sell my portion of the team, would any of the minor owners like more shares or to buy the majority fraction”. A hostile takeover requires somebody to purchase shares (sometimes publicly traded) that aren’t from the major owner to exceed the major owner’s fractional ownership and become the new major owner. Hence, a major owner tries to hold 51% to secure dominance.

  14. Passed 7-2 tonight, but with amendments.

    I can’t find the Steve Hansen amendments, but one is new (adds requirement for community meetings within Council districts) and the other is a modification (requires that the $9M backfill is guaranteed instead of merely being projected). I’ll try to find the documents; I’m sure they’ll be somewhere tomorrow. Hansen had a handout at the meeting tonight.

    But with no indication the Maloofs will even consider a local offer, I think this is all just a waste of time anyway.

  15. You can see where Hansen goes through his amendments here:

    http://sacramento.granicus.com/MediaPlayer.php?view_id=22&clip_id=3200&meta_id=395555

    (Nice tie, eh?)

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