February 28, 2013

Mayor Johnson may reveal Kings investors tonight

Do the whales finally surface tonight?

Do the whales finally surface tonight?

If all goes according to plan, Mayor Kevin Johnson could reveal the identities of his "whales" – the investors he's recruited to bid for the Sacramento Kings – at his State of the City address.

It's widely believed the investors are financiers Ron Burkle and Mark Mastrov, who've been talking privately to the mayor for weeks about a plan to keep the Kings from moving to Seattle.

Separately, another potential Kings suitor emerged this week: John Kehriotis, who already owns 12 percent of the team. It wasn't clear, however, if Kehriotis could pull together all the funding he needs.

Time is running short for anyone trying to buy the Kings. The Maloof family, which controls 65 percent of the team, has already made a deal to sell to a Seattle group. NBA Commissioner David Stern has said Sacramento's competing offer must be submitted to the league by Friday.

And, in the weeks to come, the city and the Burkle-Mastrov group must send the NBA a financing plan for a new arena – a critical element to convincing the league the Kings should stay.

Johnson adviser Kunal Merchant said earlier this week the announcement of the investors could come at the State of the City speech. As of Wednesday, however, mayoral spokesman Ben Sosenko wouldn't confirm that.

The speech would be an apt setting for a big announcement. Normally a staid luncheon affair, this year's State of the City address has been transformed by Johnson into a public gala at Memorial Auditorium, with corporate sponsorship and live music.

Stern has said the NBA board of governors will make a decision in mid-April on the Maloofs' plan to sell the Kings to a Seattle group led by hedge fund manager Chris Hansen and Microsoft executive Steve Ballmer. That group needs a three-quarters supermajority approval from the board.

If the NBA rejects the Seattle deal, city officials are hoping the Maloofs will accept a counteroffer from Burkle and Mastrov.

A source close to the situation confirmed Wednesday the Maloofs would accept "backup offers" if the Seattle deal falls through.

This source said the Maloofs have an exclusive agreement with Hansen prohibiting them from negotiating with anyone else. Any new offer "would have to be a backup offer to the definitive agreement between the Hansen-Ballmer group and the Maloofs," the source said.

Hansen and Ballmer agreed to buy the Maloofs' controlling interest in a deal that values the total franchise at $525 million, according to Seattle city officials. That implies a $341 million payout to the Maloofs and their business partner Bob Hernreich for their controlling share.

Kings co-owner Joe Maloof confirmed Wednesday that the family received a $30 million down payment on the team from the Hansen group. His comment came in response to an Orlando, Fla., radio report that the deposit had not been paid.

Working separately from Burkle and Mastrov, Kehriotis has told two city councilmen he is developing his own purchase offer and arena plan.

According to Councilmen Steve Cohn and Kevin McCarty, Kehriotis says he has lined up $350 million to buy out the Maloofs but needs another $400 million for a new arena. A real estate developer, Kehriotis would build the new facility next to Sleep Train Arena in Natomas.

Unlike Burkle and Mastrov, he wouldn't seek a public subsidy, other than the donation of 100 acres of city-owned land at the Natomas site.

Kehriotis declined to comment on the issue.

Cohn said he was "skeptical" Kehriotis could assemble all the financing, but he nonetheless finds the idea intriguing.

"I have no idea whether there is meat to his plan," Cohn said. "If he can pull that off, we can save ourselves a lot of money."

McCarty said he asked City Manager John Shirey to speak with Kehriotis. "I feel this is a path we ought to consider, because it does not include a huge public subsidy," McCarty said.

Burkle and Mastrov have talked with the city about a subsidy for an arena at Downtown Plaza or the downtown railyard. On Tuesday, the City Council voted 7-2 – with McCarty one of the "no" votes – to launch formal negotiations.

City officials indicate they would provide the investors with up to $255 million – the amount provided for a proposed railyard arena last spring. The Maloofs abandoned that deal.

Kehriotis told the councilmen that, as a limited partner, he believes he has the right to buy the team by matching the Seattle offer.

Similarly, the bankruptcy trustee auctioning off a 7 percent share of the Kings has said he, too, believes the team's limited partners have the right to match the Seattle offer.

But so far the trustee hasn't pressed that claim in court. Stern said recently he doesn't think this is a "defining issue" in determining what happens to the Kings.

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