Arena: Maloofs explore payment options as negotiations with Sacramento reach critical stage
ORLANDO – The clock continues to tick as Sacramento and the NBA have yet to agree on how to fund a new entertainment and sports complex.
Negotiations between the two sides continue Sunday in Orlando. Only these meetings will include the Maloofs, who have been noticeably absent from the arena discussions thus far.
“It is an opportunity to meet face to face,” Sacramento Mayor Kevin Johnson said Saturday evening from the Amway Center.
“This will be the first time since last May,” Johnson added that he and the Maloofs will sit down to discuss a new arena for the Kings.
For more than three hours Saturday, representatives from the city and league attempted to hammer out the contribution the team would make toward constructing an arena at the downtown railyards.
Johnson and the city remain confident “progress” has been made, though Stern expressed caution during his annual NBA All-Star Weekend press conference.
“We have several remaining points that will not necessarily be guaranteed to be bridged,” the commissioner said. “But we’re going to give it our best shot.”
Johnson admitted there are a “few issues to be resolved”. But according to sources close to negotiations, the main sticking point is how the Kings’ owners can make good on the $85 million the city is seeking.
Sources say that roughly $25 million of their contribution will come from selling the Power Balance Pavilion site in Natomas. The remaining $60 million is the sticking point.
A person with knowledge of the talks said the Maloofs don’t appear to have enough money to contribute to the upfront costs. The interest on a traditional bank loan is likely too high for the Kings’ owners to stomach.
This is why both sides are looking to get creative.
The possibilities include borrowing from the NBA, but that would require the approval from the remaining 28 league owners. Another option involves refinancing the Maloofs current $75 million loan from the city, so that the Kings’ owners lower their payments.
NBA Executive Council for Business and Finance Harvey Benjamin, who is the point man for the Kings, declined to comment on the options after the Saturday meetings.
The mayor believes it is in the hands of the NBA if the league wants to remain in Sacramento.
“The city has done its part,” said Johnson. “We said a year ago we would do X,Y and Z over the course of the last ten months and we have delivered.”
The city’s portion is roughly $200 million from the lease of public parking garages and spaces.
When asked how far the gap is between the city and NBA, Johnson responded, “I don’t think it is smart to negotiate publicly.”
Behind closed doors, Sacramento’s financial conversations have been led by consultant Dan Barrett of Barrett Sports Group as well as City Manager John Shirey.
From what I have been told, the city has made it clear there is not much more Sacramento can offer. That is why a “substantial contribution”, as Stern stated, is needed by the Kings’ owners.
However, that means the Maloofs will have to demand the team earns enough in future profits.
An issue that plays into what the Maloofs will pay upfront is how much revenue the Kings will receive once the arena is up and running. Mayor Johnson said those talks will occur between potential operator AEG and the Kings.
If the Maloofs make a large upfront payment, they will need the guarantee of cash flow to make good.
The clock for all parties is ticking, and with the March 1 deadline looming, Sunday may be the most important day in the effort to build a new arena in downtown Sacramento.
“We’re gonna see whether we can bridge that gap” Stern said. “I think both sides deserve it, particularly the city of Sacramento.”
Weekly contributor/columnist Rob McAllister is in Orlando for the 2012 NBA All-Star festivities. Follow him on Twitter for updates from the Sunshine State.