Kings to Seattle: the final push begins

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by CHRIS DANIELS / KING 5 News

Bio | Email | Follow: @ChrisDaniels5

KING5.com

Posted on April 14, 2013 at 12:08 PM

Updated Monday, Apr 15 at 7:44 AM

SEATTLE – The final seconds are potentially ticking away in the contest between two cities, and two ownership groups.

On Friday, the NBA Board of Governors may vote on the signed purchase, and relocation of the Kings franchise to Seattle.  Investor Chris Hansen, along with Microsoft CEO Steve Ballmer, and Pete and Erik Nordstrom, have a deal to buy 65 percent of the franchise from the Maloof family at a price tag of $341 million.  The valuation of the franchise, under the purchase agreement, put the team at $525 million.

Yet, Hansen has now upped the ante by raising his bid another $25 million, to put the valuation at $550 million.  That means 65 percent of the franchise would be $357.5 million.  King County Executive Dow Constantine took a subtle shot at Sacramento Mayor Kevin Johnson after the news: “Chris Hansen and his investment group have just reaffirmed that they are playing to win.”  Johnson often talks about his “playing to win” strategy.

A source says a Sacramento group will also not match Hansen’s purchase of 7 percent of the franchise, which has been tied up in California Bankruptcy Court.  Hansen agreed to purchase that share for $15.1 million, to give him potentially 72 percent of the franchise for $372.6 million.  Hansen has already submitted a $30 million non-refundable payment to the Maloof family.

A friend of Hansen’s describes him as “exhausted” trying to finish the deal.

A Sacramento group says it still plans to submit a competing, matching ‘back-up bid’ for the franchise, although sources say there has been nothing formally submitted to the Maloofs or NBA.  A source close to the group discounted Hansen’s new bid, telling the Sacramento Bee “
isn't that much money in the grand scheme of things.”

Hansen’s team has now spent well north of $100 million in its attempt to bring NBA basketball back to Seattle.  A source says the group has an option to buy one more piece in Seattle’s SoDo neighborhood, and the final tally for real estate acquisition may be closer to $80 million. 

Hansen told owners he has an agreement, as of last month, with the City of Seattle Central Staff to operate KeyArena.  That deal would have to be approved by the city council if league owners sign off on Hansen’s purchase of the Kings.  Hansen also said he would have a Master Use Permit in place by next week, according to sources.

It all could mean Hansen and Ballmer will spend nearly half a billion dollars before construction of an arena begins.  That’s not counting a potential relocation fee, near $75 million, or paying off the existing loan at Sacramento’s Sleep Train Arena.  That would be a prerequisite to move the team from California’s Capital City.

This was a point made during a final presentation to owners in New York City earlier this month, and has been reiterated since.
 
Sources say Hansen put a price tag on potential Regional Television Network revenues in Seattle – More than $40 million a year, or 84 percent more than what was estimated for Sacramento.  The number was used to illustrate the support for an NBA franchise and potential to pay down debt associated with construction of a new arena.
 
Sources with knowledge of the presentation said Hansen’s team also cited declining television ratings in Sacramento as a reason to relocate.  A former NBA league office official said the Kings are the fourth-highest rated sports team in Sacramento, behind the San Francisco 49ers, Oakland Raiders and San Francisco Giants.
 
The former NBA official pointed to 2012 Sacramento market Nielsen numbers showing the 49ers with a 24.4 rating. The Raiders had an 11.4 rating, the Giants were third at 4.8, and the Kings had a 2.2. The Oakland A's followed with a 1.1, and San Jose Sharks of the NHL had a 0.4. 
 
The report also suggested the Sacramento Market is responsible for 5-10 percent of all ticket revenue for the Bay Area franchises.
 
Hansen’s team also told owners the economic base in Seattle is in better shape than Sacramento's, according to sources.  He cited an “Economic Strength Comparison” by the POLICOM Corporation, which analyzed 366 metropolitan statistical areas.  Seattle is 5th in 2013.  It was the 3rd highest rated in 2012 and 2011, and No. 1 in the survey for 2010.
 
POLICOM’s website says its analysis “addresses the condition of an economy from the viewpoint of its impact upon the “standard of living” of the people who live and work in an area.”

Sacramento peaked in the survey at 5th in 2010. It was 19th in 2011, 45th in 2012, and it is now in 55th place. 
 
Hansen’s team also cited unemployment rates in Sacramento’s neighboring cities of Stockton, Fresno, and Modesto, which are all near 15 percent.  Those numbers are near the bottom dozen of 372 cities rated by the Bureau of Labor Statistics.
 
Hansen’s team stressed the economic development by Amazon.com in particular.  Sources said they made the argument that Amazon.com would increase the wage base in Seattle by as much as 11 percent in the coming years, and highlighted the company's rapid rise to the top tier of the Fortune 1000.
 
Thirteen Seattle-based companies are in the Fortune 1000: Costco, Microsoft, Amazon, Paccar, Starbucks, Nordstrom, Weyerhaeuser, Expeditors, Alaska Air, Expedia, Puget Sound Energy, Symetra Financial and Coinstar. 
 
The issue was driven home as well, sources said, because of the involvement of Microsoft’s Ballmer and the Nordstroms.
 
Hansen’s team told NBA owners that is believes construction of a new arena in Seattle is further along than Sacramento's, and that there are still many unanswered questions with the Sacramento plan, according to sources. Constantine has said this was a key point in the presentation.  Hansen told owners he believed a new Seattle arena could open in September 2015, according to those people with knowledge of the presentation.

Details of the Sacramento presentation have not be revealed, although Johnson has said his group put their best foot forward and made a compelling case to keep the team in Sacramento.

A simple majority is needed to approve the relocation, but at least 23 owners need to vote to purchase agreement.

The NBA says a press conference will be held in New York City on Friday, the 19th, and will address the Kings situation.

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