To summarize, by using a tortured old expression, the consequences to the proposed SoDo arena a day after the earth under the sports world moved: The baby has not been thrown out with the Ballmer, but there is a nasty welt on its head.
After reading arena developer Chris Hansen’s website post Friday and talking with several people with knowledge of the project, all of them too fearful to go on the record, here’s what is apparent to me at this turning point:
- Hansen absolutely did not want Steve Ballmer to leave his investor group, but remains confident and committed to seeking other investors
- Ballmer’s $2 billion offer to buy and keep the Clippers in Los Angeles has sufficient megatonnage across all sports that is hard to foresee its long-term ripple effects, so be wary of any instant analysis that contains conclusions
- The NHL is serious about coming to Seattle, and Hansen has talked to prospective team owners. But the arena outcome and the NBA’s TV contract negotiations will have greater influence than simple NHL eagerness to be the first tenant in the proposed arena.
As to how all this plays out . . . well, it’s complicated. Let’s try to explain.
Keep in mind that the expiration date on the project’s key document, the memorandum of understanding between Hansen and his public partners, the city and King County, is November 2017. At once, the date seems suddenly much closer, yet is far enough away that much can happen in the incredibly fast-changing world of sports business.
Many fans eager to see the return of the Sonics were floored by Ballmer’s abrupt abandonment of the Seattle project in favor of being an NBA owner in Los Angeles. Those who know Ballmer were not.
His longtime passion to be an NBA owner has not wavered. He wanted to be an owner years before he heard of Hansen, and is likely to be an aggressive supporter of Seattle’s pursuit of a team, although restrictions soon upon him as an owner will keep him from butting into the business of a Seattle bid.
Simply, he wanted to be an NBA owner more than he wanted to be an NBA owner in Seattle. To put his outsized passion in a soon-to-be-immortal phrase by the Seahawks’ Marshawn Lynch that has become a regional and national catchphrase for deeds over words: “I’m all ’bout that action, boss.”
At 58 and retired from Microsoft, Ballmer does not want to mess around with the infamous Seattle process that will drag out the arena project even after the final environmental impact statement is released in September. The arena outcome remains uncertain, as does the availability of a team by relocation (almost no chance) or expansion (improving).
When Donald Sterling soiled himself and sent the stink throughout the NBA, Ballmer knew that opportunity was upon him because his cash, cred and relationships would provide the quickest solution to a monumental embarrassment. And he would get to run a franchise in a glamor capital that has a significant chance to succeed right in the face of the NBA’s most celebrated franchise: The Lakers. That is so Ballmer.
He didn’t have to get an OK from partners, banks or the NBA. The timing, so off with Seattle, was perfect for him and the NBA.
As one person acquainted with Ballmer said, “He had a lot of money, and was impatient and bored.” After a pause to laugh, he said, “That’s what gets a lot of NBA players in trouble.”
As for the Seattle project, Hansen has a huge void to fill, but the cash is less of a consideration than credibility. There’s lots of wealthy, sports-minded people sitting on big piles of cash, most of it in the tech community. Some stayed away because the big dog, Ballmer, always eats first.
Hansen knows he and his remaining partners, led by the Nordstrom brothers, have more vetting to do, as would the NBA if and when the time comes. Hardly impossible, but another complication.
Which brings us to the NHL, and a potential partnership.
A source in in city government said that Hansen has talked with the parties interested in making hockey the first tenant, and he is open to the idea. But at least two things must happen: The prospective team owners must be willing to be equity partners in the building, and they have to be as willing as Hansen to assume the risk that the public debt (up to $120 million for a one-team scenario) is protected by an unusual, if not unprecedented, requirement in pro sports leases: A virtual lien in on the value of the franchise.
When Hansen signed the MOU rewritten to satisfy the city council, he agreed to the council’s insistence on using the franchise as collateral in case the building ceased to function, by natural, man-made or economic causes. While that chance is small, the council is mandated to account for worst-case scenarios in a public-private partnership.
Since the value of NHL franchises are less than half the value of NBA franchises (and thanks to Ballmer, WAY less than half in the last 24 hours), the city’s risk, while still relatively low, is greater with the NHL than the NBA as first tenant.
From a risk-management perspective, that is the city’s biggest issue with rewriting the MOU to favor hockey, not the threat of less attendance or revenues from a marketplace unproven for hockey, as council member Tim Burgess suggested to me in a March column linked here.
A city employee who has worked on the MOU explained it this way: “If the whole thing goes bad, the franchise owner is obligated to pay us off first. The risk profile for the NHL is worse for us than the NBA.”
So in order for the NHL to induce a rewrite of the MOU, it must offer the city financial guarantees that zero out the difference between the leagues, a difference that became theoretically greater Thursday because Ballmer’s valuation will float higher every other NBA team.
Hansen’s passion for basketball and Seattle made him willing to offer the franchise as collateral. He doesn’t feel the same way about hockey, nor is it likely that the NHL will feel the same way he does about Seattle. Nevertheless, a deal is not out of the question.
It comes down to how much the NHL believes in Seattle and the Hansen proposal: Will they match Hansen’s risk acceptance, and join him as an equity partner in the building?
That’s why Commissioner Gary Bettman and an NHL entourage, including potential franchise owners, flew to Seattle May 6 to meet with Mayor Ed Murray and county executive Dow Constantine. The NHL needs to get specifics in order to have an informed discussion about potential expansion to Seattle before the league’s annual meetings in June.
Even if the NHL decides Seattle is worth it, there is another consideration. Hansen would have to receive some indication from the NBA that having hockey first would not create an impediment to an NBA expansion team. The NBA is used to being the older brother in markets shared with the NHL, and will need assurance that there will be enough ticket sales, sponsors and advertisers in Seattle to support two winter teams.
History provides no answer, and Seattle remains the only city in North America where soccer is on a nearly equal footing. If Hansen goes to the trouble of the heavy lift in attempting to rewrite the MOU in the face of mayoral and council skepticism, he needs to know at some point he will realize his Sonics dream.
That’s the bad news for NBA fans. The good news is that Ballmer was given a preliminary read on negotiations for new deals that will replace the NBA’s current TV contracts that expire after the 2015-16 season. One NBA source said Ballmer was happy.
If TV revenues are substantially greater starting in 2016, that will help make expansion to 32 teams more plausible — the pie will have grown so much that sharing two more slices will be acceptable. Particularly after Ballmer’s wealth, impatience and boredom increased the likely expansion fee per team from $600 million to $800 million or, hell, $1 billion. Divide $2 billion among 30 existing franchises in a one-time payment, and you have many happy owners.
A year ago, I thought Ballmer/Hansen offering $625 million for the Kings to move from Sacramento was the acme of foolishness. And six weeks ago, I thought being a racist was a dead-end proposition.
Referencing No. 2 above: Regarding pro sports, business and crazy people with crazy wealth, assume nothing about outcomes.