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Seattle won't allow KeyArena demolition until NHL team awarded to city

Construction on the new arena at Seattle Center will not begin until an NHL expansion team is awarded to the City of Seattle, final transaction documents on the deal revealed Friday.

Construction on the new arena at Seattle Center will not begin until an NHL expansion team is awarded to the City of Seattle.

That was the substantial and surprise change to the final transaction and integration documents reviewed Friday by the Seattle City Council. Marshall Foster, who is leading the city's negotiations on the deal, said it was a change made after negotiations between the city and the Oak View Group (OVG) and the approval of a Memorandum of Understanding (MOU).

Foster told KING 5 it was important to include that clause as a way of verifying the financial wherewithal and backing of OVG, which the city would be in business with for the next four decades at least.

Foster says OVG was amenable to the change and it wasn't a substantial hangup in the negotiations.

Simply put, as it reads in the black and white of the "development agreement":

"The NHL Board of Governors shall have approved the application for and awarded the thirty-second (32nd) NHL expansion franchise to Seattle Hockey Partners LLC to be located in the City of Seattle, and delivered notice of same to the City, and Seattle Hockey Partners LLC and the NHL shall have executed the expansion franchise agreement." It also says that construction can't begin until that clause, and others are met with "satisfaction or waiver in writing."

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Two years ago, city leaders had asked for a development that would not hinge on the acquisition of a team, so it is a change, but it's unclear how big.

The entire process this year has been coordinated around the Seattle Hockey Partners bid to bring an NHL team to the new building. The city is now projecting construction would not begin, if the legislation is approved, until December. City documents say, with December demolition, the new building would still open in October of 2020.

On Thursday, NHL Deputy Commissioner Bill Daly told KING 5 that a final vote of the Board of Governors may not happen until that month at the earliest.

The Seattle City Council Select Committee on Civic Arenas met Friday to go over the hundreds of documents, forwarded this week by the mayor, as the $700 million project enters the home stretch.

Other than the team acquisition clause, the privately financed deal remains similar to the Memorandum of Understanding between the Oak View Group and City of Seattle last December. But it does include even more detail about other money that will be spent from OVG and what happens if something happens to the David Bonderman-led Seattle Hockey Partners group during the course of the 39-year-lease.

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That includes $2.5 million for affordable housing and how much money will be spent on upkeep after construction of the 750,000 square foot facility, which will seat 17,300 for hockey, 18,350 for basketball, and nearly 19,000 for concerts.

OVG will pay $1 million annually for capital improvements over the first 10 years and $2 million a year after that. OVG will also spend $10 million as promised last year on YouthCare over 20 years, $3.5 million on public art and provide 14 free use days to the City of Seattle for community events.

OVG has also pledged $40 million towards transportation mitigation over the life of the lease. The city is also guaranteed at least $5 million a year in revenue in guaranteed base rent and 25% of "upside revenue" in the first 10 years.

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The deal also signals that a new team headquarters and practice facility will likely be within the Seattle City limits, with a clause that "Sports Teams will maintain corporate headquarters in Seattle." Bonderman signaled earlier this week that his group is close to finalizing a deal for that facility.

The timing of the final work is key to attracting an NHL team, with Bonderman's group scheduled to make a formal presentation to league owners on October 2nd.

The deal presented Friday also includes a non-relocation agreement for the NHL franchise over the course of the 39-year lease. There also seem to be some protections in case the NHL ownership team was to change, according to the city. Documents, signed by Council Central Staff Director Kirsted Arestad, suggest "the NHL will sign an industry standard consent letter approving the contractual documents between the Team and ArenaCo. It also allows the NHL to assume the Team’s obligations should ArenaCo is unable to satisfy them."

Arestad also suggests that Bonderman is taking a majority of the burden on the building and the team in documents, writing, "David Bonderman will wholly own FW-Puck, parent to Slap-Shot LLC., which will own at least 55% of Slapshot and appoint the Managing Partner of Slapshot (initially Mr. Bonderman)."

The city also hints that there has been discussion about the NHL team starting play in 2021. Arestad wrote in briefing materials, "OVG continues to follow the direction of the NHL and at this time the League is committed to the 32nd franchise being awarded for the 2020 season. In the event the team is unable to play until 2021 (without any guarantees or acknowledgment by OVG that the NHL will in fact allow that)

ArenaCo will program other-events, primarily music, in-lieu of NHL games during Fall 2020 and Winter/Spring 2021. As an equity investor in the Arena, Live Nation although not exclusive, will be a major factor in OVG’s ability to direct non-NHL content to the building in the event the NHL

team does not play. Other events ArenaCo would program include concerts, sporting events, corporate events, and family shows. OVG does not expect a negative cash flow impact to the arena in the event NHL games are unable to be played during the 2020/2021 season given the above-outlined ability to program more events of which ArenaCo receives all net revenues, unlike NHL game per the negotiated (standard and common sports practice) Team Lease."

The Council Committee is expected to vote on the legislation next Friday, September 14, sending it to full council for a final vote on September 24. The Seattle Hockey Partners, along with Seattle Mayor Jenny Durkan, are expected to make their pitch the following week. KeyArena Demolition would begin potentially in December according to Arestad, around the time the league's full ownership could vote to approve Seattle's bid. If all goes according to schedule, the new arena at Seattle Center would open in October of 2020. OVG has targeted opening the building, with a new NHL Team playing in it, in 2020; however, Daly says the league is also considered a 2021 start date.

OVG President Tim Leiweke told KING5 on Thursday, “We are focused on and expect to be ready for the 2020-2021 season should approval be given for us to join as the 32nd franchise, per the request of the NHL. Should that direction from the NHL change, we are prepared to move to 2021-2022. The actual start year is also dependent on the timeline for approval and EIS process in Seattle, as well as the construction process. We know there are other considerations that the NHL will weigh as it makes its decision.”

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