Kings sale to Ranadive finalized, now they just need … what was it … oh right, arena funding

That didn’t take long: Chief Sacramento whale Vivek Ranadive announced last night that he’s reached an agreement to buy the Sacramento Kings from the Maloof brothers, just two days after the NBA rejected the Maloofs’ sale to Chris Hansen’s Seattle group. Ranadive agreed to kick in an extra $6.5 million, bringing his payment to $347 million (actually $200 million in cash to the Maloofs, with the rest in debts to the NBA and city of Sacramento that he’s assuming), for a total franchise valuation of $535 million — $10 million more than his group had previously offered, and $90 million less than Hansen’s proposed team price.

So for all those who were asking whether there’s anything the NBA could do to force the Maloof brothers to sell, the answer is either 1) no, but they can twist their arms pretty hard by telling them this is the best offer they’re going to get, 2) no, but the Maloofs were only saying they wouldn’t sell to Ranadive because they were hoping to convince the NBA to approve the Hansen sale, or 3) no, but once Hansen was off the table, the Maloofs felt they had to settle for whatever they could get.

Either way, the question of who will own the Kings has apparently come to a conclusion, leaving us to return to the question of when and how Sacramento will finalize the deal to give the Kings $334 million in subsidies toward a new arena. There are still several loose ends to be tied up, plus there’s the little matter of the Sacramento council actually voting on a financing plan, as opposed to the rough description of a financing plan that they approved in March. (Not that there’s any chance of the council voting it down after winning the Kings back, but they still need to write it down on paper, which will require resolving some of the handwavy math involved.) And there’s still one group threatening a referendum, plus another filing a lawsuit against the deal for understating the level of subsidies.

Individually, none of these are likely to derail the deal; taken together … probably still none of them are likely to derail it, but there are enough different ways this could go sour that it adds up to a significant possibility. And there’s also still a very real chance that the plan is approved, but then the parking revenues that would be used for arena funding fall short, leaving the city to cobble together money from hotel taxes and possibly the general fund. Sacramento officials may have won the Kings back, but they still need to figure out how to pay for them.

26 comments on “Kings sale to Ranadive finalized, now they just need … what was it … oh right, arena funding

  1. $Hundreds of millions in additional subsidies for a business that gets close to $1 billion a year – just from the national TV deal and where the employees have an average salary of over $5 million. Thankfully, there are conscientious public servants ready to help out these kinds of struggling enterprises.

    All’s right with the world.

  2. We won’t have teachers, police, firefighters, or public health works, but by god we’ll have basketball! Nothing will make me genuinely happier than Ranadive moving the team to San Jose.

  3. I should follow up and say that I am not from California, or even the West Coast.

  4. I really hope this fails during the planning phase. If it fails at about the same point Orlando’s already has, I’ll probably just go ahead and move out of the County (I currently live in the City).

    I really don’t think it’ll take long for KJ to start talking about “just a little” bond sale.

    That photo I posted says it all. In an environment where Sacramento parkers can already use “early bird specials” to park from 8-5 for $6, they’re hoping to sell out a 2,700 spot lot 300 times a year at $20 per car. I think this is exactly the same assumption they made in Orlando and NYC, correct? Yeah, if that’s what they’re planning on here, this will hit “Revenues have failed to reach projected levels” in record time.

  5. Keith: The player’s average compensation may be north of $5m, but the team employees average is nowhere near that. You can bring a $5m avg down pretty fast when you factor in 100 temp concessions and cleaning jobs… (which may or may not be actual club employee jobs), and trainers, laundry attendants etc.

    Mike: Don’t forget Glendale… who famously believed they could charge $25/car to park at the arena when fans have never been willing to pay more than about $13 on average for a ticket to the game…

    Cities with pro sports teams don’t have a monopoly on denial, but man, they sure have a lot of it…

  6. Well, so much for the Magoofs “If you won’t let us sell a franchise we don’t actually own we’ll just keep it ourselves an’ you see if we don’t”…

    No surprised expressions here. This is first smart thing those idiots have done in at least four years… holding on to this asset until the arena deal has a chance to collapse (or just until Ranadive & co realize what they’ve committed to buying and for how much) would be idiotic.

    So, I guess I am actually surprised that the Maloofs didn’t do just that, given what we know about their history…

    Happy times for the NBA. Maloofs gone (job 1), commitment to a new arena in Sacto, an expansion franchise for Seattle upcoming at a healthy price… and who knows, maybe somebody somewhere wants to buy a second exp team for Vancouver or Anaheim or KC or….

  7. “You can bring a $5m avg down pretty fast when you factor in 100 temp concessions and cleaning jobs…”

    Well, I’m assuming that if pro sports teams had to build their own arenas, it would be the $5M jobs that would take the hit. Hard to squeeze much out of the folks who are making a minimum wage. Meanwhile, let’s say the league needs $450M to build a new arena every year (they’ll be cheaper – and last longer – when they have to build their own). If those 450 players @$5M+ have to take the full hit, their average salary drops to a measly $4M+.

    That’s not a complaint about athlete’s salaries. I’m okay with everybody getting whatever they can get. And $4M/year is still a whole lotta got.

    The bottom line: Don’t be giving taxpayer money to those who don’t need it. Don’t get involved in the process of deciding where discretionary income is spent.

  8. True, Keith.

    The end result of all this public subsidy is that millionaire players and billionaire owners make more money. A few construction workers and engineering firms make some dough for a couple of years, but ultimately, sports subsidies are about propagating an unsustainable business model through the application of tax dollars. Then again, so are AIG, Goldman Sachs, General Motors et al.

    It’s odd, I find, that this nation so ridiculed the false economies of the Soviet Union and other “closed loop” economy nations. The US economy today is all about hiring people to dig holes and then paying other people to fill them up again (even if those holes are dug with very expensive high tech weapons).

    Do we really not see how this will end? There’s been plenty of evidence that speaks to this in history. Strange world.

  9. I told my wife this morning that we need step up saving for that house so we could move out of Downtown Sacramento by the time this thing get’s built.

  10. Yes. You should all flee Sacto. Look at what happened in downtown L.A.!

  11. “…sports subsidies are about propagating an unsustainable business model through the application of tax dollars.”

    I guess I’d call it “propagating an unnatural level of profit through the application of tax dollars”. There’s nothing unsustainable about the underlying pro sports business model. As noted above, there’s more than enough money available to build their own venues. Everybody needs a place to play. Stadiums and arenas will be built.

    While people are throwing around “anti-trust” and “monopoly” when discussing the “right” of a team to move, I’m thinking the extraction of subsidies from communities is a true abuse of monopoly power.

  12. Sacramento is a city that sadly, has a massive inferiority complex. We say to ourselves that we are boring town that happens to be smack in the middle of ocean, bay, and beautiful mountains. The old joke is that we are the bathroom break between the Bay Area and Lake Tahoe. But all of that above makes me sad because we are a great city with great public parks, recreational areas, the oldest art museum in the Western US, great restaurants, a major public university, and some really good people. We don’t need a large project, that could bankrupt us, to make us feel better about ourselves.

  13. As Minnesotans have recently learned, the financing “plan” doesn’t matter. The arena in Sacramento will be paid for out of the general fund, just as the stadium in Minneapolis will be paid for out of the general fund. Once the process gets a little further along, the pols can honestly acknowledge this. They can’t be honest until the deal is done, or done-enough. Once the rubes have been placated and the phony financing plan has passed, the real deal will get done.

  14. I don’t know what Minneapolis’ financial situation looks like but in Sacramento, we won’t see 2006 General Fund Revenues until the middle of this decade, deficits as far as the eye could see, increased pension obligations, an understaffed and overworked police department, heavy infrastructure needs, and so on. But at least for the moment, we’ll have NBA basketball.

  15. I still think Sacramento’s central location is a selling point.

    I can get to Yosemite in 3 hours, or Point Reyes in 2. Can you?

    Anyway, looks like the Maloofs keep the $30M nonrefundable deposit.

  16. Keith: I was not suggesting that the NBA as a whole couldn’t survive without stadium subsidies, simply that it could not pay it’s athletes (and managers) what it does without them. I’m not defending those pay levels, just saying they are not sustainable absent massive subsidy.

    Ben: Are you suggesting there is no difference whatsoever between Sacramento and Los Angeles? It is just as ludicrous to suggest that any city could replicate “LA live” as it is to suggest that all stadium deals will be as horrendous as Cincinatti or Indianapolis’ NFL facilities have been.

    The fact that something can work under certain circumstances does not demonstrate that it always will.

  17. John, Sacramento is a lot more like Kansas City or Louisville than like LA, NYC or SF.

    Not coincidentally, LA, NYC and SF’s projects have been financially better than KC’s or Louisville’s. Talking about the new Nets’ arena here, not the Yankees’ new stadium, by the way.

    Tourists aren’t going to come to Sac because of this arena. Tourists already go to SF, LA and NYC.

  18. It’s really amazing to me that HBN made this deposit completely nonrefundable. So much so that it wouldn’t surprise me if this initial report was incorrect. If it turns out to be correct, I’d say Hansen isn’t as good a business person as I had assumed.

  19. Sports Illustrated is claiming Hansen refused the deposit refund. I’m thinking this happened either because hes planning on suing the NBA’s ass off, or hes kissing that same ass by showing that he is a man of his word, and will not be a sleezeball who constantly will try to weasel his way out of what he promises to do.

  20. Maybe if Hansen plays nice Ranadive will buy the bankruptcy 7% from Hansen instead of permitting him to take ownership and then cash call him for 7% of the arena building costs they’re about to incur.

  21. You know Chef, you got me thinking: what if the NBA approves the 7% and pretty much states to the city of Sacramento “if this arena doesn’t happen, this group then will sell the team to Hansen and we will then approve the sale and move the second time around, so you better hold up on your end of the bargain like we did”. It keeps the demand for the Sac arena to be built stay alive and well because the threat of leaving someday still remains, Hansen can’t sue the NBA for anything because he did get the 7% without any issues, and in addition the NBA can see how Hansen does as a minority owner as a test of what he could do as a majority owner. Remember, one of the reasons the NBA was wanting Ranadive to win is that they liked what they saw in his 3 years as a minority owner of the Warriors, and knew they could trust him if he was a majority owner. If Hansen sucks as a minority owner, they can make sure he doesn’t get another team, and is forced to either stick with that Kings minority or leave the NBA for good.

  22. Maybe, but I’m not sure if that 7% was Hansen’s or Ballmers or the whole Seattle partnership… seems kind of piddling small to evaluate a whole group like that.

  23. According to this article, Hansen’s offer for the 7% is expected to “fizzle.”

    You kind of wonder how the creditors will feel about that, though. “You mean, we were going to get money, and now we’re not? Hmm… Yeah, that isn’t making me happy.”

  24. The simple solution to the 7% problem: Ranadive agrees to pay $20M for it. Still a bargain at that price, and the creditors get a little more money.

  25. Kind of funny that the trustee was trying to push things through because he thought they’d get the most money now, before it was all settled. $13.1 million for 7% is pretty darn good, although it may come with cash calls on the arena end.

  26. Good insight from Michael McCann of re: 7% stake.

    @sdlovessmoke14 @boymeetsworld91 Unsure what grounds there are to reject Hansen for 7%. Neither relocation nor franchise control at issue.

    @boymeetsworld91 I haven’t heard Hansen will buy Ranadive’s share of the Warriors; Hansen hasn’t been rejected for the 7% share of Kings.