Hector Amezcua / hamezcua@sacbee.com

Plenty of empty seats are evident at a Sacramento Kings game in November at Sleep Train Arena. The team is foundering and attendance has fallen to the bottom of the NBA, averging 13,177 a game.

Virginia Beach drops pursuit of Kings

Published: Wednesday, Jan. 9, 2013 - 12:00 am | Page 1B
Last Modified: Thursday, Apr. 4, 2013 - 12:36 pm

The Sacramento Kings have ended their flirtation with Virginia Beach, Va., but the uncertainty over their future continues.

Virginia Beach halted its long-shot bid Tuesday to lure the Kings. But other cities, namely Seattle, remain interested in the troubled franchise.

Deeply in debt, the Kings play in a badly outdated arena before the NBA's smallest crowds – and are locked in a stalemate with Sacramento over how to remedy that.

"Just because they're done with Virginia Beach doesn't mean they're done with that mating dance," said David Carter, a sports-business expert at the University of Southern California.

Carter said talk of relocation damages the Kings' brand with fans and sponsors. But the team's owners, the Maloof family, refuse to dampen speculation of a move.

Family spokesman Eric Rose wouldn't comment on the Virginia Beach situation Tuesday but noted "we have been contacted by several cities and parties interested in the Sacramento Kings."

None of the parties ever confirmed it was the Kings who were being recruited by Virginia Beach, but the Maloofs' interest has been widely reported. Co-owner George Maloof reportedly met with Virginia Gov. Bob McDonnell last fall, before the city unveiled a $426 million package that was almost completely taxpayer-funded.

Mayor Will Sessoms pulled the plug after arena developer Comcast-Spectacor told him it was unable to clinch a deal with the team.

"This just ain't gonna work at this point in time," he told The Bee. "The city will not be chasing this deal." He said he wasn't sure what the sticking points were.

Sessoms said he needed a deal done this week so he could ask the Virginia Legislature for a $150 million subsidy. A package needed to be finalized by March 1, the Kings' deadline for seeking league permission to relocate.

The collapse of the Virginia proposal brought cheers from the Kings' most important fan: Dale Carlsen, chief executive of Sleep Train Mattress Centers, the team's arena naming-rights sponsor.

"I was glad to hear that all the hype about the Kings moving to Virginia Beach was just that – hype," he said by email.

But the team's iffy future hasn't helped sell tickets. With the team en route to its seventh straight losing season, attendance has slipped to an NBA-worst 13,177, down from 14,508 last year.

"They either continue digging a hole for themselves on the business side by looking at the next alternative outside the city of Sacramento, or they roll up their sleeves and go back to work with Mayor Johnson," said Andy Dolich, a Bay Area sports consultant.

All parties agree the team needs to replace antiquated Sleep Train Arena. But relations with city officials deteriorated after the Maloofs abandoned a tentative deal for a downtown arena last spring – a project personally negotiated by Mayor Kevin Johnson and NBA Commissioner David Stern.

Johnson said Tuesday he's willing to talk to the Maloofs – long as they'll accept the deal that was on the table last spring.

"I reach out to the Maloofs on a regular basis," he said. "The dialogue is open. We're here, we have an arena deal downtown that is ready to be signed if they want to do it."

He added that he'd renegotiate terms if "they wanted to tweak something that made sense with our core values."

The Maloofs last spring said the deal didn't pencil out – and was based on wildly optimistic revenue projections.

The Maloofs were wounded mightily during the recession, and sources say the team is $205 million in debt. Stern said the Maloofs' wariness of borrowing the $67 million needed for their share of the Sacramento project contributed to their decision to scuttle that deal.

With the door closing in Virginia, one possible alternative is a move to Seattle, where hedge-fund manager Chris Hansen, backed by Nordstrom and Microsoft money, has a tentative deal to build a $400 million arena.

A potential sticking point: Hansen wants to buy a team. A source close to the Maloofs say they won't sell the Kings, notwithstanding a recent USA Today report suggesting they'd listen to offers starting at $500 million.

Another issue is the cost of relocation, which could easily top $100 million. The Kings would have to pay the league at least $35 million for permission to move, Dolich said.

They'd also have to immediately pay $77 million to the city of Sacramento to retire an old loan arranged by the team's previous owners, said City Treasurer Russ Fehr. The sum includes a pre-payment penalty imposed by bondholders who financed the loan.

The Virginia Beach package included $80 million in relocation expenses: $30 million for the league's fee, $8 million in physical moving costs, and $42 million to compensate the team for playing in a tiny arena while a new building was being constructed.

It's unclear how serious the Maloofs – who've lived and worked their entire lives in the West – were about Virginia Beach. The city is the 44th largest TV market, while Sacramento is No. 20.

"From what I heard, it was not all that realistic," said Sacramento businessman Richard Benvenuti, whose family is a 15 percent minority partner in the Kings.

As for the team's future, he said he believes George Maloof is interested in relocation but his brothers Joe and Gavin "want the Kings here."

A source close to the organization said the Maloofs never briefed the Kings' minority owners, who control 47 percent of the team, about Virginia Beach. By contrast, the Maloofs did give the minority owners updates about their negotiations with Anaheim in 2011.

The Maloofs scuttled the Anaheim move after the league persuaded them to give Sacramento another shot at building a new arena.

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