DA's Morning Tip
Seattle still has solid shot at NBA return, but don't expect it to happen anytime soon
Recent growth of NBA revenue pie doesn't mean expansion is natural next step
Don’t tease me, Adam Silver.
The NBA Commissioner granted Portland Trail Blazers guard C.J. McCollum an audience last week for their annual interview in The Players’ Tribune. This year, McCollum asked Silver about the notion of the NBA putting a team in Seattle, which lost the SuperSonics to Oklahoma City in 2008. Silver told McCollum that while the NBA was not in any particular hurry, expansion will be addressed.
“I don’t want to put a precise timeline on it,” Silver said. “But it’s inevitable at some point we’ll start looking at growth of franchises. That’s always been the case in this league, and Seattle will no doubt be on a short list of cities we’ll look at.”
That was only slightly different from what Silver has said multiple times, most recently in June at his annual NBA Finals news conference. Some may see a distinction without a difference, but when you’ve been thirsty for the return of the NBA for almost a decade, every drop of intel matters.
“Expansion is not something we’re looking at right now,” Silver said then. “It is less a function of labor peace, it more goes to the strength of a 30-team league. The initial question today was what do you feel about the competitive balance when two teams blew through the Playoffs? From my standpoint, for the league, you want ultimately a league where 30 teams are in a position where they can ultimately compete for championships and also be economically viable. From an economic standpoint, we are doing better than we did historically, but we’re still not at a point where we have 30 teams that are profitable … at least in my last discussions with our owners on this, most of them said let’s keep focusing on the health of these 30 teams and the quality of the competition.”
While there is no timetable for expansion, and while many in Seattle have been hardened by the numerous false starts and hopes of possible movement back toward them in the last decade, the word “inevitable” from Silver did generate a little energy among those who’ve worked hardest to bring basketball back since the departure of the Sonics for Oklahoma City in 2008. But the hammer is still held by the NBA’s 30 owners, who remain the only ones with a vote on when the league adds teams 31 and/or 32.
Are they, in any way, moving toward expansion?
I believe Seattle should have the first shot. I think a move is more likely than expansion, but right now, neither looks likely.
Anonymous NBA owner, on expansion talk
Not really, at least not quickly. But, when and if the NBA does expand, many of them continue to strongly support Seattle.
“I believe Seattle should have the first shot,” one owner said, on condition of anonymity. “I think a move is more likely than expansion, but right now, neither looks likely.”
A second owner said Seattle “ is a great market, especially for the NBA,” but echoed Silver’s sentiments.
“I agree with you there are some markets that would be great addition to the NBA but in terms of expansion, I think we need 30 solid teams first,” the second owner said. “If there are teams that are repeatedly losing money every year even after revenue sharing, we must consider moving existing teams to those markets first. Then, once all teams are healthy and making a profit, we can perhaps discuss expansion — but not until then.”
Immediacy is not on Seattle’s side. The NBA business is currently booming. It’s hard to see much appetite for owners to split the $24 billion they’re getting from the TV networks through 2025 with one or two more new groups, not to mention the leaguewide revenues that will come on line as new buildings in Detroit (2017), Milwaukee (2018), and Golden State (est. 2019) open in the next few years.
But at some point, money still talks. Things are going great in the NBA now, but a downturn in the national or in local economies over the next few years could make the potential of expansion fee cash more intriguing.
With the LA Clippers’ sale to Steve Ballmer in 2014 for $2 billion as a benchmark, franchise values are through the roof (just last season, Forbes said the average NBA franchise was worth $1.36 billion). As such, there doesn’t seem to be a shortage of rich folks lining up to be the next to buy in.
A third NBA owner said the $2 billion price for the Clippers should be “the starting point” for any expansion team’s entrance fee, whether in Seattle or the handful of other cities considered potential candidates for expansion — Las Vegas, Mexico City, Louisville, Kansas City or even Vancouver, which lost the Grizzlies to Memphis in 2001.
“It may sound like a crazy high number now, but so did the Dodgers (who sold for $2 billion in 2012), Clippers and other team sales prices,” the third owner said. “If you can revitalize part of a city or create a world-class arena that draws a new level of cultural events or anchors downtown, then the economics for the real estate dwarf what happens with the team. For someone who has the wealth and wants to leave his or her imprint on a city and state, an NBA team makes perfect sense.”
But a fourth owner cautioned: “… I would never think the money part should override what is best for the long-term viability of the league.”
There are now two competing groups vying for an expansion team in Seattle. And the political winds for future support for a new team may be impacted by this Tuesday’s mayoral primary election, which currently has 21 candidates. The top two candidates will face each other in the general election in November to succeed incumbent Mayor Ed Murray, who is not seeking re-election.
There remains Chris Hansen, who almost completed a purchase of the Sacramento Kings in 2013, with the intention of moving the Kings to Seattle. He was stymied by a group led by billionaire Vivek Ranadive, who had the support of then-Commissioner David Stern; that group was picked to buy the Kings and keep them in Sacramento, committing to build the new Golden 1 Center, which opened last year to rave reviews, downtown.
Hansen, though, has continued to buy land in what is known as the South Downtown (SoDo) area of Seattle, near Safeco Field, where the Mariners play, and CenturyLink Field, where the Seahawks play.
Last October, Hansen said he would pay for the proposed $500 million arena he wants to build there entirely by himself instead of the city contributing $200 million in repayable bonds toward construction, as long as the city vacates a block that is crucial to the current design for the new arena.
“A lot of things have changed,” Hansen said on the Seattle Growth Podcast in April. “If you look back at 2012 we were two and a half years removed from the worst financial crisis this country had seen since the Great Depression. And it’s not like lenders were lining up at the door to completely finance a private arena. Now, that’s changed. Infrastructure projects around the country and around the world are being financed a lot easier.”
Hanson’s original plan for the SoDo arena was derailed when the Seattle City Council voted 5-4 in May, 2016 not to vacate a street that was key for his plans to start building his arena in time to gain the $200 million in public funding. Hansen and other investors would have funded the rest of the estimated $500 million arena, but also had to get assurances from the NBA that a team would play there. That Memorandum of Understanding expires in November of this year.
Once the first SoDo plan fell apart, Hansen offered to build the entire arena with private dollars — as long as the city approved vacating the street he needed cleared to begin building. But by then, Murray had reached out to the Anschutz Entertainment Group, which owns teams like the NHL’s Los Angeles Kings. The group also operates Staples Center as well as dozens of other venues around the world, and which has partnered with the city to help run Key Arena. AEG proposed a $500 million renovation of Key Arena, where the Sonics played in separate stretches from their first season in Seattle, 1967, until they left town.
Soon after, however, a third entity emerged making a pitch to be the city’s ownership group: the Oak Valley Group (OVG), founded by AEG’s former CEO and the former president/CEO of Maple Leaf Sports and Entertainment Tim Leiweke, and entertainment manager Irving Azoff, who is very close to New York Knicks chairman James Dolan and who was a significant force in getting New York to hire Phil Jackson for what turned out to be an ill-fated turn as Knicks president. OVG also proposed a Key Arena renovation, which it says will cost $564 million.
In early June, AEG pulled out of the bidding, leaving OVG and the Hansen Group as the two bidders for a new team. Each has strengths and weaknesses, and has been publicly wary of the other’s budgeting and promises.
Leiweke has relationships with most every power broker in the NHL and NBA, through his time both with AEG and MLSE. His brother, Tod, ran the Seattle Seahawks as they became a championship contender in the NFL (while serving as Seahawks president, Tod Leiweke hired Pete Carroll as the Seahawks’ coach) and ran the successful Seattle Sounders of Major League Soccer — is now the NFL’s Chief Operating Officer.
OVG has money on top of money — filmmaker Jerry Bruckheimer is part of the group. Billionaire David Bonderman, a Boston Celtics minority owner, is also a partner, and is expected to be the key money that would buy a potential NHL team, though Bonderman has had his own PR problems of late.
Seattle Center, in which Key Arena lies, has already undergone a significant transformation, including the Chihuly Garden and Glass exhibit that opened in 2012. With their vast tentacles, OVG “can change the entertainment industry in the city, bring tons of bands here,” said a supporter of the group.
Hansen has spent, by his own estimate, between $125 million and $130 million buying up more than 12 acres of land in SoDo for the proposed arena. He continues to have the support of some of Seattle’s biggest movers and shakers, including brothers Pete and Erik Nordstrom of the retail giant of the same name. Late last year, Hansen added another prominent Seattle face to his group: Seahawks star quarterback Russell Wilson.
Each questions whether the other can do what they say. OVG supporters point to the years and years Hansen has been the frontrunner with nothing to show for it, to the ugly misogyny after last year’s City Council vote, with arena supporters sending vile Tweets and e-mails to the female Council members that opposed the arena vacation (Hansen quickly publicly condemned the online attacks), to the continued opposition of union members at the Port of Seattle, near the proposed site of the Hansen arena, who’ve said the new building will adversely impact existing jobs.
Hansen supporters say that Key Arena, in the city”s Queen Anne neighborhood, cannot possibly support the vehicular traffic that would come before and after NBA and NHL games — OVG has already scrapped a plan for an 800-space garage above ground in favor of a smaller 400-space subterranean facility.
In addition, with OVG running the proposed arena as a third party, as the venue management company SMG ran the old Mellon Arena and PPG Paints Arena through 2012, potential revenues from a new Seattle arena will be split with OVG rather than kept solely by the hockey and/or basketball team owners.
“The SoDo deal is so much better for the non-sports fans,” said Wally Walker, the former Sonics executive who has partnered with Hansen on the arena plan, on Sunday. “There’s so much revenue generated from a private facility. A private facility pays private taxes … and in Washington, property taxes go to our schools. We expect to generate $130, $140 million in revenue to our schools that you can’t generate from Seattle Center.”
The financials of the city are skyrocketing. Already home to several of the world’s richest people, including Microsoft co-founder and Blazers and Seahawks owner Paul Allen and Amazon CEO Jeff Bezos, Seattle continues to be a beacon for young professionals and high-tech companies.
Amazon has hired 48,000 employees in the area in the last seven years. The travel company Expedia has plans to hire 28,000 employees in the next two years. Real estate companies Redfin and Zillow both have a strong presence there. Microsoft is still a local behemoth, with its Cloud application among other innovations still evolving and creating jobs. A Hurun Research survey last week ranked Seattle just behind Los Angeles as the favorite city to live for Chinese millionaires.
OVG’s notion is that most of those millennials live car-less lives, and wouldn’t drive to a new Key Arena anyway, coming via Uber, Rideshare or public transportation via improved subway and monorail connections.
Both OVG and Hansen have been wooing the NHL, which has long been rumored to covet the 425/206 as a potential new market via expansion, and is expected to get to Seattle before the NBA does. (NHL officials declined to discuss “hypotheticals” with regard to expansion.) And both believe they’re close to getting approval from the City Council on their respective plans.
Nobody in Seattle knows if the NBA supports either group. No one knows what specs the league would want in a new building. Nobody knows if any of this will ever bring the NBA back, or when. Nobody knows if the league will be swayed in any way even if there’s a letter from the city by the end of the year saying it is, finally, ready to let someone build.
But they will be ready when the call comes, one way or the other.
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