Clippers to Seattle? Sorry Emerald City

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by CHRIS DANIELS / KING 5 News

Bio | Email | Follow: @ChrisDaniels5

KING5.com

Posted on April 30, 2014 at 2:23 PM

Updated Wednesday, Apr 30 at 9:19 PM

That happened quickly.

Chris Hansen declines comment through a spokesperson.

Steve Ballmer is spotted at the Clippers game.

That must mean the group is going to make a run at buying the Clippers franchise and moving them to Seattle, right?

Sorry, Emerald City.

The unprecedented fall of Clippers Owner Donald Sterling hit a crescendo on Tuesday with the ruling by NBA Commissioner Adam Silver. The NBA’s new top dog banned the Clips owner for life for his racially charged comments and said his league would try to force Sterling to sell the franchise.

Hopeful Seattle basketball fans took to Twitter, immediately venting that the NBA should solve another problem by moving the Clippers to Seattle. The #SeattleClippers hashtag started trending in Seattle within minutes of the announcement.

It is a hashtag that is not grounded in #reality.

“It was a sweeping ruling that went beyond what many expected,” says Michael McCann, law professor, and director, at the University of New Hampshire’s Sports and Entertainment Law institute. “It was a move that many of us thought the NBA wouldn’t do because of litigation.”

McCann said there are still legal issues that need to be sorted out. Silver, a trained and experience lawyer, believes he has the legal right to punish Sterling, based on league bylaws and regulations. But Sterling may be reluctant to give up so easily.

“His much stronger claim could be in the forfeiture of the team, and there he could have a case,” said McCann. “There are some antitrust lawyers, who believe that if the NBA and its teams conspire to kick him out and force him to sell his team, he would lose money as a result.”

McCann, who serves as a legal analyst for Sports Illustrated and NBA TV, also said the financial penalties could also prompt Sterling to fight.

“He has an incentive to fight because of capital gains tax, and specifically, if he sells the team, he’ll have to pay an enormous tax because he bought the team for 12 and half million and it would likely sell for seven, eight, 900 million dollars. He would pay a 33 percent tax on the difference,” said McCann, who notes that if Sterling were to hang onto the franchise, his family could inherit the team, and not have to pay capital gains taxes.

It may explain Sterling’s reluctance in the past to part with the franchise, despite many overtures.

It is widely believed that Hansen and Ballmer will, in the very least, inquire about the team. But sources close to the H-B camp know, this is not a “Sacramento situation.”

The Clippers are financially viable. They play in one of the NBA’s premier arenas, in Los Angeles Staples Center. They are in the second largest market, and were seventh in the NBA this year in attendance at 19,212 fans a game. That’s 100 percent of capacity.

Their market value has shot up 34 percent in just a year. The Clippers were valued at $324 million in 2012 and are $575 million this season, according to Forbes magazine. Team revenue was $128 million in 2014.

In other words: very strong.

Contrast that with the five teams at the bottom of the current revenue chart: the Milwaukee Bucks, Sacramento Kings, Charlotte Bobcats, Minnesota Timberwolves, and New Orleans Pelicans. All have been mentioned as potential relocation candidates over the last several years.

Hansen and Ballmer made a play for the Kings franchise, and signed a purchase agreement in 2013 to buy the team and move it to Seattle. The NBA ultimately rejected the deal last May and the team stayed in the California capital.

A source with knowledge of the group’s thinking says they inquired about the Bucks franchise months ago, but owner Herb Kohl was adamant the team would not be sold to a group which intended to move the franchise from Milwaukee. Hansen and Ballmer, as a result, did not make a formal bid.

New York based hedge fund managers Wesley Edens and Marc Lasry signed a deal earlier this month to buy the franchise from Kohl for $550 million and say they intend to keep the team in Milwaukee. ESPN has since reported the NBA has the right to buy back the team, “if a deal to bring a new arena to the city is not in place by November 2017.” The Milwaukee Journal Sentinel quoted Lasry as saying, “I think getting something designed, financed and ready to come out of the ground in the next 12 months is a very aggressive but a very realistic time line.” The NBA has still not approved that deal.

Within 24 hours, several interested people with Southern California ties have publicly stated their interest in purchasing the Clippers. Entertainment mogul David Geffen told ESPN he is teaming up with Oprah Winfrey and Larry Ellison to make a bid for their Clippers. It would be pocket change for the trio who have a combined net worth of $49.8 billion dollars. There is no shortage of other interested wealthy parties in Southern California, including Anaheim Ducks owner Henry Samueli, Magic Johnson, and LA Lakers minority owner Patrick Soon-Shiong, who bought his minority stake from Johnson and is worth a reported $9.8 billion

If recent history is any indication, interested local buyers are key to keeping an NBA franchise.

In 2013, the city of Sacramento found local and state investors to buy the team.

In 2012, the Nets moved across the New York/New Jersey market to Brooklyn. The Grizzlies, born once upon a time in Vancouver, were sold the same year only after Robert Pera agreed to include Memphis based investors.

In 2006, Howard Schultz claimed he could not find local buyers for the Sonics and instead sold them to Oklahoma City investors.  After a protracted legal fight in Seattle, that franchise is now in Oklahoma City, financed by locally based owners.

The risk for the Hansen/Ballmer group in the Clippers situation is that any purchase price could inflate values once again and put the cost of a franchise, relocated or expansion, at a previously unheard of level. ESPN quoted Mavericks owner Mark Cuban as saying the Bucks deal was “a bargain” and that the true value of franchises was north of $1 billion dollars.

What does that mean for Hansen’s Seattle arena plan? Sources close to the project suggest the environmental review, on their end, will be done in mid-summer. Those same sources say there is currently no interest in modifying the already approved Memorandum of Understanding and there is hope that the City and King County Councils will approve the final documents by this fall. Construction, however, would not begin until Hansen and Ballmer acquire an NBA franchise.

That leads to natural speculation about whether the NHL would award an expansion franchise to Seattle if the city was willing to modify the MOU. Seattle City Council President Tim Burgess said there is not an appetite to do so.

However, civic government sources and others connected to prospective NHL ownership groups say King County Executive Dow Constantine has met privately with interested parties, in hopes of spurring some kind of movement.

NHL Commissioner Gary Bettman told a group of reporters last week at a summit for the Associated Press Sports Editors Association, "Key Arena isn't ideal or close to ideal for NHL in Seattle.” He added that “expansion there is held up by building uncertainty."

Prospective NHL Owner Ray Bartoszek told KING5 this week he’s still interested in bringing a hockey team to the Pacific Northwest, although he said speculation that he’s focused now on bringing a team to a remodeled Key Arena is off base. “I haven’t even studied it,” he said by phone, “I have no idea if it would work.” Bartoszek has several business, and family ties to the Seattle area and was close to bringing the Phoenix Coyotes to Seattle last year.

The Glendale (Ariz.) City Council approved a modified lease deal for the franchise by a single vote July 2, 2013.

Multiple, well connected, NHL sources have since confirmed the Bartoszek group had trucks lined up to start moving the hockey franchise from Arizona to Seattle the next day. A press conference was tentatively planned in Seattle for the following Monday or Tuesday.

Bartoszek is leading one of three groups now researching and trying to put together financing for an NHL team.  It would likely have to happen fast and in time for the NHL Board of Governors meeting which convenes next month.

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