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Maloofs pledge to contribute $75 million upfront for new downtown arena
Published: Monday, Feb. 27, 2012 - 10:36 am
Last Modified: Monday, Feb. 27, 2012 - 3:56 pm
ORLANDO, Fla --The city of Sacramento and the Kings announced a tentative deal today to build a new arena in the downtown railyard. More than half the money would come from leasing the city's parking to a private operator, but the team's owners say they've also agreed to pay $75 million upfront.
George Maloof, the family member who pushed the hardest to move to Anaheim last year, said he believes the deal with Sacramento will allow the team to sustain itself financially for years in Sacramento, a small-market city. "We're going to have a new building, we'll be able to attract players. It will be much easier."
"My family is making a major commitment. I think it is a fair deal. We gave a lot. Everybody had to give. Sometimes you have to take chances and we think this is worth taking."
Details of the agreement are expected to be included in a term sheet released by the city Thursday. The City Council is expected to vote on the deal at its March 6 meeting.
A source briefed on negotiations, who declined to be identified because he was not authorized to speak, said the city will contribute $200 million to $250 million to the deal, primarily from leasing its parking garages to a private operator.
Other small pots of money include revenue from cell phone tower leases and electronic billboards. The deal does not include a hotel tax.
The city will collect a 3 percent to 5 percent surcharge on every ticket for every event at the arena, both sports and nonsports. That revenue will go directly into the city's general fund. That figure is expected to be in the millions of dollars annually, and will cover a portion of the $9 million in lost revenues from the city's planned lease of its downtown garages.
The Maloofs will pay $75 million up front, which includes proceeds from the eventual sale of Power Balance Pavilion and the land around it.
The city also will collect all parking revenue from arena events at its downtown parking garages, even those it plans to lease to a private operator, the source said. The city will split those revenues with the Kings during Kings games.
The Maloofs will pay off their current $67 million loan with the city. They will obtain a new, longer term loan, using the team and arena-related revenue as collateral. The lender is not known at this time.
Entertainment conglomerate AEG has agreed to pay nearly $60 million for the right to operate the city-owned facility, up from its orginal offer of $50 million, the source said.
This morning's announcement of the framework followed a hard day of negotiations Sunday. Representatives of the NBA and the city met again with the Maloofs this morning. Sacramento has struggled for a decade to cobble together a financing plan for a new arena.
Last year, with the team poised to leave for Anaheim, Mayor Kevin Johnson persuaded the league to give Sacramento another year, so it could make another push for an arena.
The NBA then set a deadline of March 1 for a deal to be done.
Team co-owner Gavin Maloof came out of negotiations Monday morning in tears to announce that the team has made a long-term commitment to the capital.
"I'm still emotional," he said. "It's been a long time."
His brother George Maloof said Monday morning that his family would put in "close to $75 million upfront, probably another $75 million over the term of the agreement."
"We got something worked out, tentative. We're all very excited about it. We were skeptical about whether or not something could happen."
Asked about the family's ability to afford such a deal, he said, "We can finance that."
He said that in this morning's negotations, "We kind of bridged the gap of where we needed to be."
George Maloof said the $75 million in additional payments, to be made over the course of the deal, will come partially from surcharges on arena tickets.
He said the rest will come "definitely from us."
The NBA will contribute to the project, but that contribution is not clear yet.
"(The owners) have authorized me to be as supportive as we could possibly be in this process so we could cement the future of the NBA in Sacramento," league commissioner David Stern said.
Joe Maloof expressed satisfaction that the owners and the city were able to agree.
"I'm excited; (I'm) sure the fans are excited," he said. "We aways said we wanted to stay. It worked out."
Sacramento Mayor Kevin Johnson, who participated in negotiations, said the team has made a long-term commitment to Sacramento.
"It's game over," he said.
Sacramento City Councilwoman Angelique Ashby said the mayor called her and told her to announce the news at her State of Natomas address today.
Her comment: "Excited to hear the details, proud of our delegation in Orlando. This is what we've been waiting to hear, glad we are getting the chance."
While the Maloofs wouldn't own the new arena, it could produce more money for them through concessions, money from a more lucrative arena naming rights deal with arena operator AEG, luxury box revenue, corporate sponsorships, and opportunities for more high-profile corporate advertising inside the arena.
AEG will operate the arena under an arrangement similar to the one it has in Kansas City. When AEG operations profits reach a certain threshold, further profits will be split with the city of Sacramento.
NBA Commissioner David Stern and league relocation committee head Clay Bennett were instrumental last year in persuaded the Maloofs not to move to Anaheim. Both were in the room at key moments during negotiations Sunday and Monday. George Maloof said the commissioner and Bennett did not pressure the Kings.
"No pressure at all from either of them," Maloof said. "David served as a nice mediator. He represented the Kings first as well as the city."
Maloof said he was impressed with how hard Johnson has worked in the last year to put a deal together. "The mayor put his heart and soul into it."
City Councilman Rob Fong declined to guess what the vote will be when the term sheet comes before the city's elected leaders. "We haven't got any of the details yet," he said. But, he added, "It's definitely a milestone."
While many challenges lie ahead, Monday was a celebratory day for Mayor Johnson and other arena supporters. Even Anaheim, the city that almost took the team, sent good wishes.
"Congratulations to the city of Sacramento and the Maloof family," said Michael Schulman, chairman of the company that runs Anaheim's Honda Center arena, in a prepared statement. "Today's news does not change our commitment to bring an NBA franchise to Anaheim."
George Maloof, the family member who pushed the hardest to move to Anaheim last year, said he believes the deal with Sacramento will allow the team to sustain itself financially for years in Sacramento, a small-market city. "We're going to have a new building, we'll be able to attract players. It will be much easier."
"My family is making a major commitment. I think it is a fair deal. We gave a lot. Everybody had to give. Sometimes you have to take chances and we think this is worth taking."
Details of the agreement are expected to be included in a term sheet released by the city Thursday. The City Council is expected to vote on the deal at its March 6 meeting.
A source briefed on negotiations, who declined to be identified because he was not authorized to speak, said the city will contribute $200 million to $250 million to the deal, primarily from leasing its parking garages to a private operator.
Other small pots of money include revenue from cell phone tower leases and electronic billboards. The deal does not include a hotel tax.
The city will collect a 3 percent to 5 percent surcharge on every ticket for every event at the arena, both sports and nonsports. That revenue will go directly into the city's general fund. That figure is expected to be in the millions of dollars annually, and will cover a portion of the $9 million in lost revenues from the city's planned lease of its downtown garages.
The Maloofs will pay $75 million up front, which includes proceeds from the eventual sale of Power Balance Pavilion and the land around it.
The city also will collect all parking revenue from arena events at its downtown parking garages, even those it plans to lease to a private operator, the source said. The city will split those revenues with the Kings during Kings games.
The Maloofs will pay off their current $67 million loan with the city. They will obtain a new, longer term loan, using the team and arena-related revenue as collateral. The lender is not known at this time.
Entertainment conglomerate AEG has agreed to pay nearly $60 million for the right to operate the city-owned facility, up from its orginal offer of $50 million, the source said.
This morning's announcement of the framework followed a hard day of negotiations Sunday. Representatives of the NBA and the city met again with the Maloofs this morning. Sacramento has struggled for a decade to cobble together a financing plan for a new arena.
Last year, with the team poised to leave for Anaheim, Mayor Kevin Johnson persuaded the league to give Sacramento another year, so it could make another push for an arena.
The NBA then set a deadline of March 1 for a deal to be done.
Team co-owner Gavin Maloof came out of negotiations Monday morning in tears to announce that the team has made a long-term commitment to the capital.
"I'm still emotional," he said. "It's been a long time."
His brother George Maloof said Monday morning that his family would put in "close to $75 million upfront, probably another $75 million over the term of the agreement."
"We got something worked out, tentative. We're all very excited about it. We were skeptical about whether or not something could happen."
Asked about the family's ability to afford such a deal, he said, "We can finance that."
He said that in this morning's negotations, "We kind of bridged the gap of where we needed to be."
George Maloof said the $75 million in additional payments, to be made over the course of the deal, will come partially from surcharges on arena tickets.
He said the rest will come "definitely from us."
The NBA will contribute to the project, but that contribution is not clear yet.
"(The owners) have authorized me to be as supportive as we could possibly be in this process so we could cement the future of the NBA in Sacramento," league commissioner David Stern said.
Joe Maloof expressed satisfaction that the owners and the city were able to agree.
"I'm excited; (I'm) sure the fans are excited," he said. "We aways said we wanted to stay. It worked out."
Sacramento Mayor Kevin Johnson, who participated in negotiations, said the team has made a long-term commitment to Sacramento.
"It's game over," he said.
Sacramento City Councilwoman Angelique Ashby said the mayor called her and told her to announce the news at her State of Natomas address today.
Her comment: "Excited to hear the details, proud of our delegation in Orlando. This is what we've been waiting to hear, glad we are getting the chance."
While the Maloofs wouldn't own the new arena, it could produce more money for them through concessions, money from a more lucrative arena naming rights deal with arena operator AEG, luxury box revenue, corporate sponsorships, and opportunities for more high-profile corporate advertising inside the arena.
AEG will operate the arena under an arrangement similar to the one it has in Kansas City. When AEG operations profits reach a certain threshold, further profits will be split with the city of Sacramento.
NBA Commissioner David Stern and league relocation committee head Clay Bennett were instrumental last year in persuaded the Maloofs not to move to Anaheim. Both were in the room at key moments during negotiations Sunday and Monday. George Maloof said the commissioner and Bennett did not pressure the Kings.
"No pressure at all from either of them," Maloof said. "David served as a nice mediator. He represented the Kings first as well as the city."
Maloof said he was impressed with how hard Johnson has worked in the last year to put a deal together. "The mayor put his heart and soul into it."
City Councilman Rob Fong declined to guess what the vote will be when the term sheet comes before the city's elected leaders. "We haven't got any of the details yet," he said. But, he added, "It's definitely a milestone."
While many challenges lie ahead, Monday was a celebratory day for Mayor Johnson and other arena supporters. Even Anaheim, the city that almost took the team, sent good wishes.
"Congratulations to the city of Sacramento and the Maloof family," said Michael Schulman, chairman of the company that runs Anaheim's Honda Center arena, in a prepared statement. "Today's news does not change our commitment to bring an NBA franchise to Anaheim."
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