Vexed by skyrocketing costs, the builders of the Seattle Center Arena switched horses Tuesday. The $800 million-plus project by Los Angeles-based Oak View Group has a new general contractor, Minneapolis-based Mortensen, replacing the joint venture Skanska-Hunt, which was described as willing to “step away.”
The switch came amid reports of friction over the price escalation in a project that OVG CEO Tim Leiweke called “the most complicated” in his considerable history as sports-venue developer.
Apparently the change came about when Skanska-Hunt and OVG, whose winning bid was announced July 31, could not agree on a guaranteed maximum price contract, a document common for large projects.
OVG’s original estimate of the cost in 2017 was $600 million. At the time of a partnership agreement with the city, the cost was $650 million. Now the estimates are north of $800 million, not including a separate expense for the training facility at Northgate Mall, estimated at $70 million.
Also new Tuesday was hire of a premier New York architecture firm, Rockwell Group, to design the arena’s suite and club levels.
All of the funding for the project is from private OVG sources and bank loans. City taxpayers are not at risk.
Also an issue was the two-headed operation, a joint venture of global construction company Skanska and AECOM Hunt, according to OVG senior construction executive Ken Johnsen.
“Skanska Hunt needed (the guaranteed price) earlier than when we wanted,” said Johnson in a phone interview. “And any time you have a joint venture, there tends to be a second step in the process. A one-stop shop is a big help for quick decisions, and we have that with Mortensen, which has an an extremely strong office in Kirkland.
“Looking at Skanska-Hunt’s construction priorities elsewhere, both sides came to a mutual conclusion about this. We’re parting with Skanska-Hunt on good terms.”
Johnsen, who said he anticipated no litigation between OVG and Skansa-Hunt, said Mortensen, which has done more than $4 billion worth of projects in the Northwest over 34 years, had done five months of pre-construction assessments on the arena plans in 2017 and put in a bid to be the project’s original general contractor.
The familiarity with the project and the area, Johnsen said, has resulted in almost no slowdown during the transition.
“Mortensen is accepting the project as is,” he said. “We’re looking forward to a good transition, with the drawings almost 100 percent done. The building will be built to the high standards that were set out.”
Kevin McCain, executive vice president and general manager of Skanska’s building operations in Seattle, said in a statement:
“Our Skanska Hunt joint venture is proud to have provided valuable pre-construction services for the new Seattle Center Arena. Given the market challenges and shift in timing, it did not make sense for our joint venture to move forward to the next phase of the project, so we recently came to a mutually agreed upon decision to end our joint venture’s involvement with the arena project. We are excited about the NHL coming to Seattle and we will provide full support to Oak View Group during this transition.”
In 2016, Skanska-Hunt was fired from the $1.44 billion Washington State Convention Center expansion project and was paid $7.8 million to walk away.
The arena project had a setback when the NHL, after accepting Seattle’s $650 million fee for an expansion franchise last week, pushed back the arena opening from October 2020 to October 2021. That actually is only a small delay, since the revised plan calls for opening by spring of 2021 to accommodate the Seattle Storm season. It also would be open for top-end music concerts, a far more lucrative revenue stream per event than sports dates.
Johnsen, hired by OVG Nov. 1, is a well-regarded construction industry figure and Seattle native, having helped direct the construction of Safeco Field, as well as renovation projects for King Street Station, Pike Place Market and the Seattle seawall. He understood the NHL’s caution.
“We agreed with them about taking the pressure off dropping the puck in 2020,” he said. “You only get a chance to open a building once.
“But we want to keep at the pace we set for the original opening.”