Sacramento Kings close deal to buy Downtown Plaza
01/23/2014 3:40 PM
02/12/2014 9:03 AM
After months of talks, the Sacramento Kings on Thursday bought Downtown Plaza, the site of a planned $448 million arena.
The Kings finalized the deal to buy the fading mall from JMA, the San Francisco-based development firm that acquired the property from Westfield in 2012.
The exact purchase price was not available, but a deed of trust document filed with the Sacramento County recorder’s office shows the Kings borrowed $35 million from Goldman Sachs Bank last week in connection with the Downtown Plaza transaction. The document says the NBA approved the borrowing.
JMA bought the mall from Westfield for $21.7 million.
JMA will continue the management of Downtown Plaza and will partner with the Kings on the “design and development of a lifestyle mixed-use project” around the proposed new arena that is slated to include office towers, a hotel, housing and retail, according to a company news release. JMA and the Kings have submitted entitlement applications with the city for that work.
“We are thrilled to close this transaction as it is another important step in the process of building a world-class arena in the heart of downtown with a vibrant, active development surrounding it,” Sacramento Kings President Chris Granger said in a statement released by JMA.
Todd Chapman, president and CEO of JMA, said, “With the sale now final, we’re excited to move ahead with the planning for the mixed-use development of the surrounding site.”
Granger said in an interview that it is likely some of the ancillary development will be built at the same time as the arena. He said the Kings’ owners and JMA will work closely together on the development of the portions of the mall not devoted to the arena itself. “We need to figure out how we can generate the most activity as quickly as possible,” he said.
Kings officials have said they would focus on the construction of a 250-room hotel, restaurants and retail in the early stages of the development. The plans also call for 550 residential units.
The deal closed about seven months after it was first announced. “It’s just a complicated deal,” Granger said when asked about the lengthy closing process.
If $258 million in city financing for the project is approved by the City Council in April, city officials have said demolition work at Downtown Plaza could begin as early as this summer. The arena is scheduled to be completed in 2016.
The public financing is the subject of a proposed June ballot measure that is seeking to require voter approval of subsidies for professional sports facilities. The supporters of that measure have collected the required number of signatures to qualify the initiative for the June ballot and the city clerk is expected to rule as early as today on whether discrepancies in the language of the petitions signed by voters are serious enough to disqualify the measure.
While the sale of Downtown Plaza is a vital step forward for the Kings’ plan to build an arena at the mall site, there are roadblocks remaining.
The city of Sacramento has filed an eminent domain lawsuit to seize control of the former Macy’s furniture and men’s clothing store. The vacant building – controlled by a complicated consortium of financial interests, including the California Public Employees’ Retirement System – takes up most of the footprint for the arena, along with an adjacent practice facility and offices for the Kings.
The Kings are taking control of a Downtown Plaza that has been in steady decline.
According to a draft environmental review of the planned arena’s impact on downtown, small retail and restaurant occupancy rates at the mall have plummeted from 96 percent in 2004 to 51 percent in 2012. Those figures do not include either of the Macy’s stores at the site.
Office occupancy rates at the mall have fared even worse. The environmental review showed 53 percent of office space at the mall was full in 2004. By 2012, that rate had fallen to 38 percent.
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