Tycoons line up for shot at Sacramento Kings
02/20/2012 12:00 AM
04/18/2013 7:45 PM
Sacramento was reminded once again last week that its beloved Kings are a small-market, low-budget operation – a team that might be pried away by big money.
The challenge this time comes from Seattle, where a successful hedge fund executive told city officials he could line up $290 million in private investments to build an NBA arena, a sum that seems inconceivably large here. The public would kick in $200 million.
Another possibility is Anaheim, where the billionaire who runs the Honda Center is eager to make another run at the Kings after nearly landing the team last year. He's making $20 million in improvements to the arena to improve his chances.
"Sacramento lacks what Anaheim might have, what Seattle might have," said David Carter, a sports-business expert at the University of Southern California. "Lacking a billionaire isn't always a problem, but having one can be an asset."
Sacramento is rushing to complete a financing plan on a $387 million arena that would keep the Kings from leaving. Compared to Seattle and Anaheim, it seems to be more of a "patchwork job," Carter said – largely financed by a still-evolving plan to privatize the city's parking operations.
The Kings' contribution isn't yet clear. By NBA standards, the team's owners, the Maloofs, have fallen on hard times, and it's not known if they're willing or able to pony up the $85 million the city is expected to demand as the team's share of the arena project.
"There's always a David-and-Goliath component to this when it comes to Sacramento," said Chris Lehane, leader of Mayor Kevin Johnson's arena task force.
Notwithstanding the Seattle and Anaheim threats, Johnson and Lehane believe Sacramento can keep the Kings as long as it executes on a new arena. The city faces an NBA-imposed March 1 deadline to deliver a financing plan.
If the NBA thinks the new arena would make economic sense for the team, the league says the Kings will stay.
"Sacramento does control its own destiny," Lehane said.
Sacramento has its own big-money guy: Southern California billionaire Ron Burkle, who has been interested in buying the Kings for a year or longer. City officials say Burkle, or someone like him, could step into the picture if the Maloofs don't like the arena proposal but the NBA approves it.
Anaheim and Seattle face other hurdles.
Seattle won't build an arena until hedge fund executive Chris Hansen acquires a team. The Maloofs insist the Kings aren't for sale. Hansen could go after another struggling franchise.
Hansen "has had conversations with the NBA" about getting a team, Seattle Mayor Mike McGinn told reporters in his city last week.
In Anaheim, the Maloofs would go in as tenants and wouldn't have to sell the team. But Anaheim would surely face intense opposition from the Los Angeles Lakers and Clippers – as it did last year – if the city tries again to import the Kings.
Yet if Sacramento falters, and its arena deal falls apart, Anaheim or Seattle could become tempting new homes.
They are bigger and wealthier than Sacramento, with more big corporations capable of leasing luxury suites and putting up the kind of financial support required by the modern NBA. They are more lucrative media markets than Sacramento, where the Kings have one of the NBA's least-generous TV deals.
Seattle's arena man knows how to find investors. Hansen's hedge fund, based in San Francisco, has raised more than $3 billion since it was founded in 2008, according to a company biography.
Anaheim's big gun is Henry Samueli, who made billions from semiconductors, owns hockey's Anaheim Ducks and runs the city's arena. He personally offered the Maloofs a $75 million loan to relocate the Kings last year.
"It's a lot easier if you've got a 'whale' who can come in and say, 'I can take care of this,' " said USC's Carter.
A decade ago, the Kings swam with the big fishes.
The Maloofs' fortune was estimated at $1 billion by Forbes in 2003. Despite an outdated arena and a small market, the Kings had one of the NBA's highest player payrolls. Their revenues were in line with the league average.
When the economy collapsed, small-market teams were hit especially hard. They had less wiggle room than teams like the Lakers – less TV money, fewer sponsors.
The NBA's structure didn't help. Until recently, the league did little to share the wealth with its weaker franchises. Plus, a new generation of billionaire owners moved in, creating a league of haves and have-nots.
The Maloofs ran into other problems. They sold the family's successful beer distributorship in part to raise money for their struggling Palms Casino in Las Vegas. They lost control of the Palms anyway and have just a 2 percent stake in the resort.
For the second year in a row, the Kings have the league's lowest player payroll – $46.5 million, according to hoopshype.com. Orlando, home to the league's newest arena, has the highest payroll at $85.2 million.
Even the new five-year naming rights deal that the Maloofs signed to replace the Arco name on their existing arena has turned sour. Wristband maker Power Balance filed for bankruptcy protection last fall. The sponsorship deal is in limbo, and the Kings said last week that the company owes them $8.3 million.
Despite Sacramento's limitations as a market, the Kings would likely get millions in additional revenue from a new arena, thanks to luxury suites and other amenities.
Also, the new NBA revenue-sharing formula could provide the Kings with another $10 million a year when it takes full effect in about two years, said Matt Parlow, a sports-business expert at Marquette University.
The Kings' TV revenue – currently pegged by experts at around $12 million a year – could similarly grow. Comcast SportsNet has said it might renegotiate the contract if the Kings make a long-term commitment to Sacramento. Parlow said the deal could increase by $10 million a year.
"The finances now may look bleak, but they may get a lot better in a couple of years," Parlow said.
Join the Discussion
The Sacramento Bee is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.