Warriors buy land in Mission Bay, now plan all-privately-funded arena

It’s been rumored for a while now that the Golden State Warriors owners Joe Lacob and Peter Guber were looking for a Plan B now that his proposed Piers 30-32 arena site was running into stiff opposition, but that still didn’t make yesterday’s news any less of a bombshell: The team owners have bought 12 acres of land in Mission Bay, south of the Giants‘ AT&T Park, and plans to build a new arena there by the 2018-19 season. And Lacob and Guber say the project will be entirely privately financed, including the price paid for the land.

This makes a lot of sense on many levels: The main opposition to the old waterfront site was from locals concerned about the arena and its accompanying condo towers blocking views of the bay, less of an issue in Mission Bay, which (for the moment, anyway) is mostly occupied by a hospital, office space, and old industrial sites. There’s a new Muni Metro underground streetcar line set to lead to Mission Bay by 2019. And by ditching the old site, the Warriors owners will avoid paying an estimated $200 million on shoring up the piers there.

Still, with the condo development now off the table — the 12-acre site will be barely enough for an arena — Lacob and Guber are now looking at building a roughly $1 billion arena entirely on their own dime, something remarkable enough that the San Francisco Chronicle felt it necessary to note it as “a rare instance of a modern sports venue that would use no taxpayer funds or public land.” The Warriors organization didn’t reveal how much it paid for the new site, but given it’s part of a 14-acre site that the land’s previous owners paid $250 million for four years ago, you have to figure the NBA team paid something close to that. So we’re talking $1.2 billion that needs to be repaid entirely from profits on running an arena — meaning the building will need to run something like $100 million a year in the black just for Lacob and Guber to break even.

That seems crazy, given that most arenas have trouble turning an operating profit at all. San Francisco, though, is a special market: Not only is it chock-full of wealthy people who can buy top-priced tickets (and whose eyeballs advertisers will pay a pretty penny for), but it’s the only major city in the nation that I can think of that lacks anything like a modern sports and concert arena: The Cow Palace is undersized and across the city line in Daly City, leaving Oakland’s Oracle Arena as the only real option for touring acts requiring a 20,000-seat indoor space. This means a Mission Bay arena stands a good chance of being full for the 200+ days a year needed to run a successful business — and also may avoid the fate of Brooklyn’s Barclays Center, which thanks to the presence of Madison Square Garden across town has had to offer cut-rate deals to artists to woo them away from Manhattan. And, of course, the Warriors stand to appreciate in value significantly from a move across the bay to a more fashionable address.

It still sounds like an awfully risky gamble to me, but fortunately it’s not my money at stake. And — at least if the Warriors owners live up to their promises, which isn’t always the case — it won’t be San Francisco residents’ money either, since a privately owned arena on privately owned land should even pay its fair share of property taxes. There are a lot of details still to be divulged — actually, pretty much all the details are still to be divulged — but so far, knock wood, this may actually be the rare case of a new sports facility that’s a win-win for both the team owners and the city. Maybe San Francisco’s penchant for voting down development projects that it doesn’t like isn’t such a bad thing after all.


16 comments on “Warriors buy land in Mission Bay, now plan all-privately-funded arena

  1. Neil

    We touched on this in a previous Warriors SF thread and I think it holds true all the more. There must be a killer naming rights deal bubbling under the surface and I can imagine that it’s going to pay for a good chunk of this arena.

    Another benefit to this arena is that if there are no height restrictions, the Warriors should be able to build a larger arena. It never made sense that a team that has sold out a 19,600 seat arena for a long time now would be moving to something that barely holds 18,000. That was the estimate for the waterfront arena.

    Also, with no more bay bridge in the background, it means they can actually add seating. The waterfront had that view from the seating area towards the bay and the bridge itself. That eliminates a lot of seats. My guess is that the new arena will hold a lot more than 18,000 as a result plus have more space for suites and whatever other revenue generating stuff they can come up with. That will help pay off the arena quicker than the waterfront one as well.

    As for losing the condos, this one is tricky. If there are no condos and hotels involved, wouldn’t the Warriors just be better off staying at the waterfront? I have to think that there is room for something extra at the new site or else they would be better off staying put on the waterfront.

  2. There are still height restrictions on the new site:

    “The arena will remain about the same height, 125 feet in the center – well below the 160-foot height limit for the property.”

    As for the rest, I agree that a naming rights deal will have to be a big piece of it, and possibly PSLs as well. As for the condos, I can see why they might want to move to a less restrictive site once the extra development was off the table, though this does put a bit of the lie to Lacob and Guber’s claims that the deal was unworkable without the condo development.

  3. Ok, I just read a couple articles and noticed that. Not sure why they wouldn’t want to maximize the full 160. I guess it’s just a way of cutting costs on an already expensive project but still, they could use as much seating as possible. Still, you should be able to add at least 1,000 seats by not having that view opening. Not sure why they keep coming up with 18,000 or if that’s just a number that bay area journalists have settled on.

    I did notice that they think they can build retail in the area around the arena aimed at “arena patrons” which would seem to suggest that the hotels and condos are out. Again, I would think that a hotel up to 160 feet is still better than nothing at all. Of course, it’s tougher to turn a profit on a smaller hotel so if you can’t get yourself into the black, it’s obviously not worth it but one would think that an SF based hotel could be profitable.

  4. The difference between 18k and 20k seats isn’t actually all that great — the last 2,000 seats cost pretty much the same as the first 2,000 to build, yet you can charge the least for them. Add in that you can raise prices overall if you have fewer seats (the artificial scarcity effect), and it’s not entirely surprising to see buildings like these sometimes come in slightly smaller.

  5. Wouldn’t the $1B include the land acquisition costs? Well, since this is a private deal, there’s a chance we’ll never know. But I agree with your assertion that SF is a special market; I think they’ll be turning 200+ nights/year while turning business down. I think about weekends like Outside Lands, and the numbers just start adding up.

    The reason they’re going with all-private funding is that they’re sure it’ll work. And Trueblood is right, there has to be a huge naming-rights deal out there.

    Eat your hearts out, Kings fans, the Warriors made a far better deal for them AND their respective city than the Kings did. That’s part of the reason I really won’t feel about about moving out of Sacramento one day, once Sac’s new arena is called Paul Brown Stadium-West.

  6. MikeM

    What are you hearing regarding naming rights on the King’s arena? Last I heard was that Vivek was looking for $120 million. Just not sure if that’s legit or overly optimistic though. Regardless, I’m guessing the Warriors will most likely double or triple what the Kings get from naming rights.

  7. I haven’t heard a thing about the Kings naming-rights deal. Not a word.

    That’s their money, though. If it turns out the critics are right and $120M was a high guess, well, that hits the Kings, not Sacramento.

  8. Can’t compare the Kings to the Dubs. Dubs have a good owner; Kings have the league’s worst.

  9. Ben, Vivek is the league’s worst owner? I think you’re mistaking him with the now gone Maloof family.

  10. Maloofs were the league’s worst. Ranadive strikes me as… I have no idea. Insufficient sample size. He seems better than the Maloofs, but the Maloofs also seemed a lot better than Thomas.

    Anyway, it is very fair to compare the Kings and Warriors. There’s the obvious geographical relationship; it rarely takes me 2 hours to get to downtown SF from downtown Sac. The owners are closely linked. And now there’s this arena-funding issue.

    A lot of us old-timers are turning from being aware the Warriors exist to being outright fans, and the relative arena deals just pushed a few more people in that direction. Sacramento’s general fund will now be exposed; SF’s will not.

  11. Looks like the Warriors have clarified that their arena will not be NHL capable which should end any thoughts of using it as a lure for the Sharks come time for them to be asking for upgrades to the San Jose Arena. Not that anyone would have taken such threats seriously anyway with the sweetheart management and financial situation the Sharks have in San Jose, to say nothing of the hoards of rich Silicon Valley season ticket holders.

    In general help to San Francisco too it also appears to have already put a significant damper on the SF Board of Supervisors long term idiotic plan to demolish Interstate 280 in that area. With 2 major sports venues off that freeway stub now it would be insane to do so now. The Warriors have quite literally saved the city from their own insane leadership.

  12. Mike; I would agree that if any arena has a chance of earning back it’s private investment, it would be one in NY/LA/SF…

    But don’t you think it’s still a big chunk of change to recoup?

    The naming rights deal should be huge… what do the Giants get for their oft renamed stadium? Even if the building is busy 200 nights a year, it still needs to earn a half million A NIGHT for the owners net just to cover their construction debt. That’s the equivalent of a $25 ticket surcharge for a 20,000 seat building.

    I’d never say that is impossible given the market, but the kinds of touring acts that have the ability to drive that sort of price adder tend to expect to keep it themselves. I’ve heard several arena managers (generally the primary tenant sports team) claim that after a 3 night stint with a major act, they are lucky to clear $200k in total from the effort. Not nothing, but not enough to pay a decent backup center either.

  13. Well, it is a big chunk of change to recoup, but at this point, it’ll be someone else’s problem. I’m sure SF will throw in money for infrastructure; that always happens. We threw in a LOT of money for infrastructure at Sleep Train Arena, and now Sac is throwing that away, too.

    The capitalists are providing the capital here. If the Warriors are now unable to pursue free agents, that’s their problem.

    These things have a way of later becoming public, though. Rose Garden in Portland comes to mind. That started out being privately funded, and eventually became publicly owned. That could happen in SF, too. But at least this isn’t starting out being like Indy.

  14. Looks like the Warriors telling Oakland good-bye, likely for good this time given that they’re not going to run into much opposition at their new arena site with the location and private financing, has spurred a lease offer to the A’s for 10 years which was promptly rejected. Reportedly Wolff wanted 5 years with a renewal for 5 more and an escape clause should the Raiders decide to start demolishing the current Coliseum to build a football stadium. The city countered with 10 years plus a guarantee Wolff would build in Oakland. And at the same time the Raiders did not commit this week to the Coliseum City project as the city was hoping putting their commitment to the project into serious doubt. The wheels really do appear to be coming off for Oakland sports with one team already out the door and the other two fighting each other to get out.

    http://www.mercurynews.com/athletics/ci_25617153/oakland-warriors-gone-coliseum-city-faces-new-hurdles
    http://www.sfgate.com/athletics/article/A-s-shoot-down-10-year-O-co-Coliseum-lease-offer-5422864.php

  15. Dan, where are you getting that information about Wolff wanting a five-year out clause? It’s not in any of the reporting I’ve seen.

  16. Just to clarify, the Muni line (T Third) that connects to Mission Bay is currently fully operational as a surface-level line that follows King Street up to the waterfront before connecting with Market Street at the Embarcadero stop.

    The 2019 subway extension is well north of Mission Bay, but will give the T Third line a more direct route to Market Street and Chinatown.