Comparing and contrasting the city’s three arena proposals is no easy task. To begin with, they aren’t on an even footing.
Inside sports business
Comparing and contrasting the city’s three arena proposals is no easy task.
For one, they aren’t on an even footing. Two proposals, by the Oak View Group and Seattle Partners, are to renovate KeyArena “on spec” for NBA and NHL use. The third proposal, in which entrepreneur Chris Hansen would build a new arena in the Sodo District, does not involve immediate construction.
And that, right away, makes for apples-to-oranges comparisons on most major issues.
For instance, on financing arena construction, we now know — via interviews and the executive summaries of the KeyArena plans — OVG plans a $564 million renovation. It will put up roughly $414 million as equity cash supplied mostly by its Madison Square Garden company financial backer. The remainder will come via a $150 million loan from Goldman Sachs.
On the Seattle Partners front, its two main companies, Anschutz Entertainment Group (AEG) and Hudson Pacific Properties, are putting up $270 million of their money toward a $520 million renovation. The remainder is to be financed via the city issuing public bonds worth $250 million on various revenue streams expected to flow from the completed project.
On the face of it, this appears to give Hansen’s all-private funding offer in Sodo an edge over at least one of the KeyArena groups seeking public dollars for the construction phase.
But it doesn’t necessarily.
That’s because Hansen has yet to make his funding mechanisms known. In fact, Hansen has no plans to secure additional needed financing until after the city approves his proposal to vacate a street so he can complete his arena land acquisitions.
And that leaves his project in the “incomplete” stage compared with the two others. We know Hansen and his partners — Erik and Peter Nordstrom, Wally Walker and Russell Wilson — are not billionaires. Even pooling 100 percent of their money might not cover an arena and the NBA team they have suggested owning.
Just on the Sodo arena alone — with a final price tag that should inflate well beyond its initial $490 million estimate — the group almost certainly needs additional partners or financing. Hansen has indicated as much.
But he has made it clear he can’t secure those partners or loans without having sports teams commit to playing there first. The two KeyArena groups devised their models around the notion they would build immediately, without needing teams.
That’s a more costly, and riskier, prospect, which explains why OVG is partnering with LiveNation on music acts to keep revenues flowing until teams arrive. It explains why AEG, which might not have as extensive a music connection, is seeking public bonds for construction.
Hansen may be going all-private on construction, but his risk isn’t the same. Nor is he likely to get construction started as quickly as the other groups would, unless leagues reverse course and help him out.
As for attracting teams, Hansen has former Sonics executive Walker in his corner. But they have failed to secure an NBA franchise long sought and aren’t partnered with any NHL entity, though they reportedly have had discussions with some groups.
Meanwhile, OVG has New York Rangers owner James Dolan as its main financial backer, Florida Panthers executive chairman Peter Luukko as its co-chairman and a company owned by Boston Bruins owner Jeremy Jacobs as its arena concessionaire. OVG CEO Tim Leiweke has sat on the NHL and NBA board of governors.
The Seattle Partners group is comprised of Los Angeles Kings owner and Los Angeles Lakers part-owner AEG, and Hudson Pacific Properties is owned by Victor Coleman — who previously tried to become owner of an NHL team that would have played in Hansen’s arena.
So on team and league fronts, the KeyArena groups have deeper connections.
On the contentious issue of traffic, the KeyArena groups are required to formulate mitigation plans in the Uptown neighborhood and Mercer corridor. Partially released details show both KeyArena groups would incorporate the Monorail into plans.
OVG would take a car-centric approach that includes an 850-stall parking garage.
The Seattle Partners would be less car-centric, building a “multimodal” transportation hub with drop-off points for buses, Uber and Lyft rides and cyclists. It also would provide $5 million in funding to jump-start city traffic programs.
Hansen’s group in Sodo would help fund completion of the Lander Street overpass, build a pedestrian bridge over railway tracks and add its own parking garage.
Hansen has a nearby light-rail station and less traffic in his site’s vicinity.
But he also has greater tensions with local stakeholders.
Beyond Port of Seattle opposition, Hansen must contend with the Seahawks, Mariners, Sounders and others now claiming an event-scheduling deal between the proposed arena and local stadiums must be improved and made binding. Some stakeholders also complain the city’s environmental-impact study of Sodo traffic was incomplete.
Even Hansen ultimately proving his site is better for traffic might not be enough. The city has determined KeyArena would need at least $100 million in upgrades regardless of whether it stays smaller scale.
In other words, if the Sodo arena gets built and the current KeyArena developers move on, taxpayers would be paying that $100 million. That raises the question: How much better does Sodo traffic have to be than KeyArena’s to make it worth a $100 million price tag?
That’s why the city is hiring consultants and financial experts to make this arena decision. Some apples will need to be compared with oranges, and the best equation for all — as just demonstrated — might not be the one that initially seems obvious.