Can Kevin Johnson find the right buyer to place a bid on the Sacramento Kings?
Sacramento Mayor Kevin Johnson took the podium yesterday afternoon with a somewhat unorthodox approach to the latest Kings relocation rumors. It was polite, effective and it almost sounded like a thank you.
“Today is a significant day for our community, because it is the first time it appears the Sacramento Kings are for sale,” Johnson said in his opening statement.
While Seattle is a real threat, Johnson continued to preach the same three options that he has so many times before.
“Same team, same owner – that was our preferred scenario,” Johnson said. “Scenario two: same team, different owner. The Maloofs have never said they want to sell the team. And the third scenario was new team, new owner, if they did relocate and go some place else. Right now, what appears to be in play is scenario two.”
Scenario two has been the hope for some time with many Sacramentans. When the Maloofs threw a monkey-wrench in the plan to build a new entertainment and sports complex in the downtown rail yards, the relationship between the city and the Kings’ owners was over. Chris Lehane, the man directing traffic for the mayor’s office at the time, insured it was over when he compared dealing with the Maloofs to dealing with North Korea.
It’s pretty safe to say that the city has been been preparing for this moment for a while. Sure, they had put some things in moth balls, but Johnson and his team have always been ready to grab their guitars and get the band back together. They learned a few things the first time around and they still have a perfectly good arena plan in place, waiting for the right owner to take advantage.
“We need to put ourselves in a position to find an ownership group and buyers that would be willing to keep the team here in Sacramento,” Johnson said.
While the three-time NBA All-Star would not divulge names of potential buyers that might be interested, he said he received plenty of phone calls when this saga began almost two years ago to the day. There are players waiting to get in the NBA game and they see Sacramento as the opportunity that the Maloofs have never seen.
When asked if Ron Burkle was a possibility, Johnson calmly added that he is “in constant contact with Burkle.”
Burkle may not be the answer this time around, but you never know. The city of Sacramento has plenty of things going for it that could attract the kind of dollars that Johnson needs to make a bid for the Kings.
Like $255 million of local government money, just waiting to revitalize the project. Another $60 million is waiting in the form of heavy hitter AEG, who Johnson made sure to mention in his press conference yesterday. All Johnson needs is a chance to match or at least come up with a deal that makes more sense than burning another NBA fanbase to the ground.
The rumored $500 million offer from Seattle appears insurmountable, but after relocation fees and debt owed to both the city of Sacramento and the NBA, there might be some wiggle room here.
“We’ve exceeded expectations in a down economy,” a confident Johnson said of the city’s performance last spring when they put an arena project together that got the stamp of approval from the NBA.
“We’ve been here before,” Johnson added.
Johnson was adamant that while a large portion of investment money could come from outside the Sacramento region, there would be a local presence on the ground.
“If the team is for sale, we don’t want to be in a position where we have absentee owners,” he said.
There is another little tidbit hiding in the current breakdown of Kings ownership that might come into play. According to our research, the Maloofs own 43 percent of the Kings and another 10-percent is controlled by their friend Bob Hernreich. They have a 53-percent voting block, which is strong enough to block any attempt by minority owners to seize control.
But the minority owners that make up the other 47 percent are locals, some of which have owned a stake in the club since the beginning. So does Kevin Johnson need to come up with $500 million or more to match/beat the Seattle offer? Or can the majority interest in the Kings be bought by itself?
The team carries a ton of debt. $77 million is still owed to bond holders for the 1997 loan that saved the Kings from leaving for Nashville. There are also loans with the NBA that have to be accounted for and the numbers on them vary from between $100 million and $150 million. So the Maloofs take of this prize really isn’t $500 million. It is 43-percent of the remaining money once the bills have been paid.
That makes the figure to purchase the Maloofs portion of the Kings somewhere between $117-$139 million upfront and another $75-$100 million in long-term, but low-interest debt. Add in another $50 million for Hernreich’s portion or even less for Bob Cook’s 7 percent sitting in bankruptcy and you own yourself controlling interest in the Sacramento Kings. Now I don’t have that kind of cash hiding under my pillow, but for a billionaire trying to get into the high-stakes game of the NBA, it’s not a huge pull.
I think that is where the mayor will start his search. Can he find someone for the Maloofs to sell to and will that someone look at this with the long-term investment that it is?
And what about Hansen? He has the finances and property in place to bring the Seattle SuperSonics back to life. He can wait for the NBA to break open the expansion bank and rebuild a fanbase with a fresh team and zero guilt.