Both Downtown Plaza and Sacramento Kings might benefit from arena at mall

02/03/2013 12:00 AM

04/08/2013 2:30 PM

Downtown Plaza has been in Sacramento longer than the Kings – and is facing many of the same questions about its viability.

Maybe the two are made for each other.

The 42-year-old mall, humbled by a decadelong exodus of shoppers and tenants, is suddenly gaining favor as a possible home for the troubled sports franchise.

Ron Burkle, the billionaire contemplating a bid that could keep the team from moving to Seattle, promoted the Downtown Plaza site in a recent closed-door meeting with NBA Commissioner David Stern.

City Manager John Shirey is preparing to study how an arena could fit at the mall. JMA Ventures, the mall's new owner, commissioned its own study and was "pleasantly surprised by the results," JMA president Todd Chapman said last week.

City officials said they haven't abandoned the railyard site at the northern edge of downtown – home to the arena proposal that was blessed by the NBA but abandoned last spring by the Kings' owners, the Maloofs. Mayor Kevin Johnson said last week he hasn't settled on an arena site, as long as it's downtown.

But Burkle's enthusiasm for Downtown Plaza has altered the arena landscape. Unlike the railyard, the mall is in the heart of the central city and provides greater opportunity for spinoff commercial development by those involved in the project.

"It really is in kind of a sweet spot, an optimal location," said Bill Crockett of the architectural engineering firm AECOM, which conducted the study for JMA.

Burkle is talking with Bay Area investor Mark Mastrov about making a bid for the Kings in hopes of upending the Maloofs' sale to a Seattle group. The Sacramento counteroffer would be presented directly to the NBA board of governors, which must approve any sale or relocation.

In a new twist, Burkle emerged Friday as a bidder for arena operator AEG, which already has pledged its support for a new NBA building in Sacramento. If he does buy AEG, which operates eight NBA arenas, that could strengthen's Sacramento's hand in the tug-of-war over the Kings.

The arena question is vital in the competition between two cities. The Seattle group has a tentative agreement with city officials there on a new $490 million arena, and any credible purchase offer from the Burkle-Mastrov group would have to include a solid financing plan for a new facility here.

Sacramento officials say they expect the City Council would make a financial commitment to Burkle-Mastrov similar to what was offered to the railyard development last spring: a $255 million public subsidy.

A majority of the council gave its initial blessing to the idea last spring, but would need to vote again on the new plan. The size and nature of the subsidy – to be funded from the city's parking revenues – would surely raise some controversy.

The Burkle-Mastrov group will likely pitch its plan to the NBA sometime in March, leaving city officials about a month to work up a plan for Downtown Plaza. Assistant City Manager John Dangberg said the city could meet the ambitious timeline.

"We feel pretty confident that both sites (the railyard and Downtown Plaza) have pretty equal delivery dates," Dangberg said. "I'm encouraged and feel pretty strongly we could catch up quickly."

A dramatic solution

Despite the late start in planning, Downtown Plaza offers some advantages in terms of bringing a project to fruition quickly. Because it's private property, a mall conversion would be spared much of the red tape involved at the city-owned arena site in the railyard. Building at the railyard would require various approvals from Amtrak, Union Pacific and the U.S. government, which has earmarked millions of dollars for a future transportation hub.

One potential hitch to the mall site is parking. Crockett said AECOM's study envisions building the arena partly below ground, eliminating many of the 3,700 parking spots beneath the mall.

City officials, however, say there are still thousands of parking spaces within walking distance that would be freed up for evening events.

Chapman said JMA hasn't yet committed to building an arena on the shopping mall. In fact, the company has reached out to tenants in recent weeks to assure them that retailing is still in the mall's future. Even if an arena does get built there, it would consume only a portion of the retail space, he said.

There's no question something dramatic is needed at Downtown Plaza, which limps along with a single anchor tenant – Macy's – and is riddled with vacant storefronts. In taking over last August, JMA said it would work with city officials on a new vision for the property.

For now, Chapman said he sees a reborn "urban retail/ restaurant venue" for Downtown Plaza.

"Until we understand more about what's happening with the Kings, that's going to keep our focus on retail as much as anything else," Chapman said.

Crockett said he thinks JMA is very interested in an arena. "They're being very objective about it, but they're passionately interested in seeing if this can be realized," he said.

City officials are thrilled not just by the prospect of redefining the mall, but by the positive impact an arena could have on the surrounding area. The city has poured millions in public subsidies into adjacent K Street and owns several vacant lots nearby, waiting to be developed.

"It plays at a whole other level for the city of what we're trying to accomplish downtown," said Councilman Jay Schenirer, who sits on a council subcommittee exploring the arena issue. "(An arena in) the railyards would be a catalyst for the future, but if you look at what we need to do today, the impact of the plaza site is very immediate."

Half a house

Chapman declined to go into details, but a source briefed on JMA's plans said the company has discussed building office, retail, residential and entertainment space in conjunction with the arena.

The model has been followed elsewhere. In 2007, Burkle crafted an arena plan for his hockey team, the Pittsburgh Penguins, that granted the team the right to develop 28 acres immediately adjacent to the new arena. A luxury hotel just opened, and plans are afoot for housing, retail and more.

Downtown Plaza was identified as an arena site by a city task force in 2004. The idea went nowhere in part because of the hefty estimated price tag: $528 million to $658 million.

A big impediment then was that Downtown Plaza was still doing reasonably well as a shopping center, and its owner at the time, Australia's Westfield Corp., wasn't eager to sell part of it for an arena.

"If you take half a house, you pay for the whole house," Westfield vice chairman Richard Green told the City Council in July 2004. He said the mall was worth "probably $200-plus million."

With Westfield out of the picture and JMA buying Downtown Plaza for a fraction of that price, an arena becomes more practical.

"The whole project becomes incredibly more feasible," said developer Tony Giannoni, who consulted with the city on the 2004 proposal.

The mall opened in 1971 and underwent a $157 million face-lift in 1993. Westfield bought the property in 1998 for an undisclosed price.

The Australians arrived just as Downtown Plaza was about to begin its long slide. Sales peaked at $218 million in 2000 and would slip to $112 million by 2011.

City officials grumbled that Westfield treated Downtown Plaza as a poor stepchild while it focused money and time on its newer mall in Roseville, and were incensed when the company proposed bringing a Walmart to the downtown site after the arena concept died in 2004.

JMA, based in San Francisco, bought the mall for just $22 million last summer and embarked on a search for a new vision. It had AECOM perform an arena study as just one possibility, Chapman said.

"We kind of put that in our file cabinet," he said.

When news broke in January that the Maloofs were selling the team, JMA dusted off the feasibility study.

"We're trying to make sure that we're not doing anything too disruptive to our business plan and our tenants and the people whose lives are at Downtown Plaza," Chapman said, "and at the same time, we want to make sure we're a force for positive (steps and) support any efforts to keep the Kings in town."

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