Leaders of the Seattle Partners group said in a statement that the city’s process has “eroded our confidence in the ultimate execution of this project, no matter which group is selected.”

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In a surprising move Sunday, the Seattle Partners group withdrew its $521 million offer to renovate KeyArena for NBA and NHL use.

The pullout comes on the eve of an expected announcement this week that rival bidder Oak View Group (OVG) and its $564 million proposal will be selected by Mayor Ed Murray. Any recommendation by Murray will be forwarded to the Seattle City Council, which would choose between renovating KeyArena or having entrepreneur Chris Hansen build a new arena in the city’s Sodo District.

Sources close to the bid process have indicated for several weeks that city staffers exploring the offers had reservations about the financing and design of the Seattle Partners (SP) project. The SP group — consisting of Anschutz Entertainment Group and Hudson Pacific Properties — said in a letter to Murray and the council that it never got a fair shake from the city.

“We fear the City is driving toward an unrealistic financing structure,’’ states the letter, signed by AEG president Bob Newman, “and we believe the City has failed to conduct a sufficiently thorough, objective and transparent process to properly evaluate the respective strengths and weaknesses of the two proposals and, most significantly, to identify the proposal best positioned to deliver a project consistent with the community’s interests.’’

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But the stance by Newman is opposite of one he took two weeks ago in a May 19 letter sent to potential supporters asking for their help in rallying around the SP proposal. In that letter, signed by Newman and Hudson Pacific Properties executive Alex Vouvalides — and obtained Sunday by The Seattle Times — Newman wrote: “We applaud the city for executing a thoughtful public process. Engaging with teams from the city and the public as strengthened our proposal and crystalized our approach.”

What happened in the two weeks between that letter and SP reversing its view of the process Sunday is unclear. SP spokesman Aaron Pickus said he could not comment beyond what was in Sunday’s letter.

Murray issued a statement Sunday:

“We appreciate Seattle Partners’ interest in investing in KeyArena and our ongoing partnership with AEG on major events, such as Bumbershoot. Over the last few months, the City and the Community Advisory Panel have undertaken a careful review of the two proposals to redevelop KeyArena into a world class entertainment facility that will bring the NHL to Seattle and the Sonics back home.

“There are strengths and weaknesses in each proposal and the City fully expects a robust negotiation upon choosing a preferred alternative, to ensure the final plan meets the needs of the surrounding neighborhoods, the city, Seattle Center and those who will use the building for years to come.

“It is unfortunate Seattle Partners chose to pull their proposal. As recently as May 19th, Seattle Partners stated in a mass email: ‘We applaud the City for executing a thoughtful public process. Engaging with teams from the City and the public has strengthened our proposal and crystalized our approach.’ We hope to continue our current relationship with AEG and look forward to addressing our path forward on KeyArena, as well as our commitment to engage the community, in the coming days.”

Newman’s letter Sunday also questioned the city’s decision to redact portions of OVG’s financial plan when proposals were made public. City spokesman Joe Mirabella said last month the redactions were made to protect the private information of third parties within the financial documents and was a standard practice for this stage of the review.

OVG CEO Tim Leiweke issued a statement in response to SP’s letter: “Our project is 100% privately financed and built with 100% private proceeds. With our partners MSG and Live Nation, we have assembled the best team in the sports and entertainment industry.”

Leiweke and OVG project director Lance Lopes had told The Seattle Times they wanted the city to release all of its financial details from the start. They’ve said their project is financed entirely with private equity from the company and its partners and a $150 million loan from Goldman Sachs already approved.

Also, they’ve said they can borrow an additional $200 million to $250 million from Goldman Sachs if the NHL and NBA agree to put teams in Seattle.

The SP proposal was controversial from the start, given it involved $250 million in public-bond funding. SP said the bonds were fully guaranteed and the city could make a surplus of up to $144 million off the funding mechanism, but city staffers and consultants apparently had reservations.

Their prime concern, according to sources, was some of the math behind the proposal. In some cases, there was a feeling the surplus projections were too generous and the guarantees to cover shortfalls were too thin.

Also, there was concern that the group’s proposed “stretched” roof redesign would not meet historical preservation standards and would cause aesthetic problems inside the venue. For one thing, a “stretched” roof on the south side — which would be used to fit more seating inside — meant the center-court scoreboard would not have hung down from the arena’s interior peak.

One solution the SP designers came up with was potentially building a flat “false ceiling” to make it appear the scoreboard was centered properly.

Whether that option was considered by the city is not clear. The SP letter states that “the City declined to seek improved terms, refusing requests from us and others to call for a “best and final” offer from both bidders.’’

One of the members of a city-advisory panel — the Uptown Alliance community group — wrote a letter to Murray on Thursday asking for a similar opportunity for second bids by both groups. The Uptown Alliance, via its KeyArena Subcommittee Chairwoman Deborah Frausto, wrote that it found “both proposals lacking in different but fundamental ways and cannot favor one proposal over the other at this time.”

Frausto wrote that her group’s concerns about SP centered around “a bonding mechanism that seems politically challenging for this City to accept and a design that does not respect the criteria for this building destined for landmark approval.”

On the OVG shortcomings, she wrote that it gives “little attention to its integration within Seattle Center” and ignores the community at large. She also wrote that the group had provided “sparse details” on its newly formed company and values.”

The advisory committee met with Murray and city executive advisers Friday. Just two days later, the SP group pulled out.

SP has long been questioning the OVG financing of its project and made references that it had kept the full numbers from the public.

The SP letter from Newman on Sunday said “the City’s decision to withhold critical financial portions of Oak View Group’s proposal from the public, while releasing the financial details of our proposal with our full support, raises serious questions about the integrity of the decision-making process and the ability of the public to make a fair and equitable comparison.”

AEG president and CEO Dan Beckerman raised concerns about OVG’s ability to adequately fund the project during a Seattle stopover in which he met with media members last month. Beckerman’s visit is said to have infuriated city officials, who viewed it as a desperate ploy by a bidder that sensed its offer was not making the headway it had hoped and was trying to disparage a more favorable bid.

Beckerman is now in the role that OVG chief Leiweke held with AEG. In his release Sunday, Leiweke said he’d have no further comment on the city’s decision until a winner is announced.

Leiweke added: “Our chief objective is this: provide the best financial deal for the city, an exemplary public-private partnership, and build Seattle a showcase venue for professional sports, music, and entertainment.”