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Seattle Center Arena MOU submitted to City Council

The Memorandum of Understanding (MOU) for the redevelopment of a fully compliant NBA/NHL and music events arena was submitted to the Seattle City Council today which should be viewed as a huge step toward attracting an NHL team. Both Chris Daniels  and Geoff Baker did a great job covering the story, but I will highlight some of the major items.

  • Construction is anticipated to start in October 2018 and opening in October 2020. October 2020….let that sink in. We could see an NHL game in Seattle as early as outsideOctober 2020! Personally, I have been mentally preparing myself for 2022, so I’m ecstatic for 2020. Assuming no major snags on the way, 2020 would be outstanding. Start prepping those mock expansion drafts!
  • Total cost of the new arena will be close to $600M. $600M isn’t a remodel, it’s a completely new building under the old roof, which had to be kept for its historical landmark designation.
  • The arena will nearly double the size of the current KeyArena.
  • Arena development will be completely privately funded and OVG will also assume risk on all overruns.
  • Term of the agreement is 39 years with 2 eight-year renewals.
    • In order to exercise those 2 renewal options, OVG must invest $168M back into the arena for capital improvements.
  • $3.5M will be reimbursed to the city for developer costs for MOU. (Legal, Finance Consultants etc.) OVG will pay for all SEPA mitigations and contribute an additional $40M to a transportation fund that the city will administer.
  • OVG is also setting up a community fund worth $20M, of which $10M is already earmarked for YouthCare.

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Next steps

Over the next several months, the Seattle City Council will evaluate the terms of the MOU and conduct their due diligence to make sure the city is protected. In December, the MOU is expected to be voted on for execution.

As most of you know, I try not to get too excited about any news these days, since it often feels like a rollercoaster. It hasn’t stopped some of the hockey beat writers from talking about it….
(Two tweets and articles about NHL to Seattle)

Hansen’s ‘Hail Mary’

Yesterday the Hansen Group threw up a ‘Hail Mary’ by sending a letter to the Seattle City Council on a possible redevelopment plan of their own for KeyArena. As I’ve said in KeyArena_SoDoGroupprevious posts, the three main challenges for SoDo is the lack of money, no NHL partner, and political support inside and outside city hall. His potential plan for KeyArena is interesting, but does nothing to address those challenges.

The proposal

The proposal would subdivide KeyArena into 3 separate venues: a 500-seat theater, 3000-seat covered amphitheater and 6200-seat indoor concert venue. If there wasn’t already a viable redevelopment plan to accommodate NHL and NBA team, i.e. OVG’s proposal, I think this would be an interesting proposal. The Hansen Group would not start this Amp_KeyArena_Hansenproject until after a SoDo arena would be completed. Based on the information posted on Hansen’s website, the SoDo arena would still not begin until an NBA or NHL team is procured. Based on a Steve Ballmer interview last spring, he estimates the NBA in Seattle is closer to 10 years away than 5. You add it all up and we would be looking at about 2027 for SoDo to be open at which time I would not expect the NHL to wait for Seattle. The Hansen Group has mentioned they would be willing to work with an NHL partner, but their track record so far tells a different story. Each of the known prospective NHL Seattle partners, Don Levin, Ray Bartozek, and Victor Coleman, have been unable to reach terms with the Hansen Group. By adding this KeyArena component, he just increased the cost of business for any prospective partners.

What does Hansen have to lose?

In short, nothing. Worst case for Hansen is that the situation remains status quo and the city rejects/ignores his proposal and continues to go down the path with an NHL/NBA arena in Seattle Center with OVG. Best case for him is that the city rejects the OVG NHL/NBA solution and gives Hansen 5 more years to wait for the NBA to either expand or relocate a team to Seattle. He will also need to acquire a whale of an NBA partner and if he can’t strike a deal with the economic proposal of both SoDo and KeyArena, he can go back to the City to request a more appealing deal to lure the NBA. By that time, the NHL will have probably expanded to 32 teams somewhere else.

SoDo is Dead

I know there are a lot of folks that wanted to see the SoDo site be the location of Seattle’s arena to host NHL and NBA teams, but the door seems to have been closed indefinitely as the City of Seattle shared that they will not be re-voting on the Occidental Street Vacation that the Hansen would need to build their arena in SoDo.SeattleArena

I have said SoDo is dead before and nothing has really changed my mind since I originally posted in May of 2016. That post was before KeyArena was brought up as an option. It was clear to me that the current City Council decided that SoDo is not where they wanted another sports facility to be built. Since that post, nothing has materially changed. Hansen offered to forego his $130M in public financing for the street vacation, but that was much ado about nothing. It didn’t go over well, but I chalked this up as “no news” news. The financing has always been tied to Hansen procuring an NBA team and since the NBA has made it clear that they were not expanding before the MOU was set to expire, the financing was a non-issue.

The reasons for the unwillingness for the city to revisit the street vacation could be any combination of the following reasons:

  1. No money. When Ballmer left the group that eliminated Hansen’s majority owner/partner. Hansen could have addressed this, but, for whatever reason, hasn’t added any investors to his group. Now it is relatively impossible to replace a significant partner, like Ballmer, with over a billion in net worth. As far as I can tell, the City doesn’t grant street vacation on speculation that a company, organization or individual can attract more investors. The city expects to see all the financing in order before a street is vacated.
  2. No NHL partner. It’s no secret that the NHL is ready to expand before the NBA. Many sources have made that clear. Over a year ago, Hansen’s partner, Wally Walker confirmed that the Hansen group has continued to talk to prospective NHL owners but in 6+ years, they have not been able to bring any of them on board.
  3. Politics. Yep, flat out politics. It is easy to blame the Port of Seattle, since they were the most vocal opponent over the last 5 years. The Mariners & Seahawks were also quiet opponents of the SoDo arena plans. Those are 3 powerful groups that are difficult to overcome.
  4. Relationship with the NBA. For years there have been rumors & reports that Hansen’s relationship with the NBA has some challenges. The city has acknowledged that they have been in communication with both the NBA and NHL during the KeyArena RFP process to make sure it is viable. If this relationship issue did exist, it is certainly conceivable that the NBA would have confirmed it to the City of Seattle during these conversations.
  5. KeyArena has become viable. At the time of the Occidental Street Vacation vote, KeyArena was not really talked about as a viable option to host the NBA and NHL. outsideSince then, the City issued an RFP and got two responses to redevelop KeyArena from two power houses in the industry that have deep ties to the NBA and NHL, AEG and OVG. Both RFP responses confirmed that KeyArena could be redeveloped into a building to support NHL and NBA. The city confirmed that the Mayor’s Office were in communication with both leagues on the viability of the proposals.

KeyArena or Bust

The demise of SoDo leaves only one option for an NHL/NBA arena, a revamped KeyArena. NBA aside and focusing on the NHL, with the addition of Vegas this year, the NHL is set at 31 teams with 15 teams in the west and 16 in the east. This would imply 1 additional opening for an expansion franchise. The league will not wait for Seattle forever, especially with interest starting to percolate in Houston and Kansas City, both of which could plug and play fairly easily in the western conference and already have existing arenas. With no other options in the Seattle area, it looks like KeyArena is our only hope to see the NHL here anytime soon. There are certainly other scenarios that could play out, but it feels like our window of opportunity is now, otherwise we might be waiting a long time for an NHL team.

inside-Hockey

Primary Election: Seattle Mayoral Candidates Guide

Your priorities for selecting a Seattle Mayor will more than likely be different than mine. Which is why I am not in the business of telling people how they should and should not vote. That said, over the last week I’ve received several emails asking about which Seattle Mayoral candidates support bringing the NHL to Seattle. The goal of this post is to provide my perspective on candidates’ position on bringing the NHL to Seattle, so you can weigh it accordingly. As far as I can tell, no candidate has been directly asked their position on bringing an NHL team to Seattle. Most questions to Mayoral candidates are in regards to arena issues and bringing the Sonics back to Seattle.

Without further ado, here is your Seattle Mayoral Candidate voter guide

Jenny Durkin : I just want a team

If you just want an NHL team in Seattle, Jenny Durkin does not have a preference to SoDo or KeyArena. When asked about which arena she preferred, she responds with ‘whatever gets us a team’. From my perspective, being open to either location is a good presser-2approach since it isn’t as simple as one site over another. The city has been in contact with both the NBA and NHL on both locations and if either of them had major issues with either site, I am sure the City (Council and Office of Economic Development) will take that into account. Funding of either location will still need to be vetted and that type of information is done behind the scenes. I appreciate the nuances and know that things are not black and white, which is why Durkin’s approach works best for folks who just want a team, regardless of site.

Cary Moon: Let’s try to make KeyArena work and if not, try SoDo

Cary Moon wants to take a hard look at KeyArena first:

“If we can do the Seattle Center arena proposal with minimal public money, secure the public’s fair share of the profit stream, figure out sufficient transit service to the venue and not build another parking garage, guarantee the venue will be operated in the public interest (i.e. local festivals, and the Storm and the Sonics have priority use over corporate mega-concerts), and if we can protect KEXP and Vera Project and other awesome civic facilities and activities already there, then I am in favor of this proposal .”

Nikkita Oliver: KeyArena is the only option

Nikkita Oliver has issued statements supporting KeyArena. She does not support SoDoNikkita-2 because she wants it to be kept an industrial area that preserves maritime jobs.

“I do not support the current plan to build a new arena in SODO because keeping SODO an industrial area supports a long-term sustainable vision for Seattle. It preserves maritime jobs and supports environmental and ecological restoration already happening in this area.”

If you want to see full context of Nikkita Oliver’s response, you can read it here at the Sonicsgate Voter Guide.

Mike McGinn or Jessyn Farrell: SoDo or bust

If you are a SoDo or bust person, McGinn, or maybe Jessyn Farrell, is probably your bestmcginnnba-600x423 bet. The SoDo deal is McGinn’s baby. He aligned with Hansen over 6 years ago before the plan became public. McGinn’s priorities are certainly basketball; however, his commitment to hockey has not been clear over the 6 years I’ve been following the issues.

Jessyn Farrell has also pledged support for SoDo; although, she was also one of the state legislators that signed a letter back in 2016 opposing the street vacation for SoDo. She has explained her flip flopping several times, but I don’t care for this convenient flip flop, which says more about her character than her stance on the arena. A SoDo or bust approach could mean waiting 10 years for an NBA team, since it appears Hansen has not been able to strike a deal with a hockey group. Of course, this could all change if Hansen were to announce a partnership with a potential NHL ownership group.

USA Hockey Memberships in Washington State

Happy 4th of July everyone. As a fun little holiday tie in, I figured I would like to share some insights on USA Hockey growth in Washington State.

Total Growth

As you should be able to see, we had a 2.6% increase in USA hockey memberships last year which coincides with our steady growth since 2002-2003.

When you break it down by age groups, you can see that a lot of the growth is coming from our lower age groups with a combined 6% increase for age groups 9 to 10 and younger.

all memberships WA State

Breaking it down further by isolating female USA hockey memberships, you can see huge growth percentages as more and more girls view hockey as a viable sport to play growing up.

female memberships.png

 

Stacking up the potential arenas

A lot has happened over the last couple weeks. In an effort to bring us all up to speed, I created this summary comparison and analysis on the current situation of our Arena options. Below is a table of everything that is known about the two options the City of Seattle has on the table. I want to preface that there are many unknowns on the SoDo Arena side of the equation. This analysis isn’t intended to be a knock against the Hansen Group. They have not formally revealed many details about their plans and intended proposal to the City; therefore I can only share what I know. Note that there are several components that I am selectively excluding because I feel they are minor to the bigger picture. I anticipate updating this table over the next several months as we hear more about both proposals.

arena matrix.png

Financing

Goldman Sachs has revealed that they feel comfortable financing up to $200M of the ~$500M to remodel KeyArena with MSG and other partners supplying the difference. I haven’t been able to confirm this, but LiveNation and the potential NHL Owners might be contributing to the KeyArena project, as well. I believe it was mentioned, but I can’t find any details which is why I’ve kept it off the table. For the SoDo project, JP Morgan published a letter of support for financing the SoDo project.

Potential NHL Owners

One of the biggest announcements over the last weeks was the announcement of David Bonderman and Jerry Bruckheimer. It is estimated that they are worth a collective $3.5 Billion. David Bonderman is a University of Washington grad. Jerry Bruckheimer is an JerryBruckheimer.2jpg.jpgicon in Hollywood and is known for producing TV hits like CSI, Amazing Race and wide range of movies from the Pirates of the Caribbean franchise to Top Gun. He is also passionate about hockey. Maybe we can get him up here for the Ronald McDonald House Hockey Challenge this year. On the SoDo side, Hansen has not announced a potential NHL owner. The consensus is that he will need to announce a potential NHL partner to have a chance at evening the scales for SoDo.

Potential NBA Owners

OVG’s Tim Leiweke has made it very clear that the NBA is not expanding anytime soon. This was confirmed by Adam Silver and Steve Ballmer. If this is accurate, and I have no reason to not believe Leiweke, Silver, or Ballmer, then there really should be no reason to announce an NBA partner this far in advance. In SoDo, Hansen’s purpose is to be part of the NBA ownership group in his building. Most people I talk to in the sports business, estimate that an NBA team could cost close to $1.2Billion. The Hansen Group does not have that kind of money to be the majority owner and will need to bring in some big money to pay for a potential NBA franchise down the road.

Estimated Open Date

OVG and the City of Seattle have stated that a realistic timeframe to open the remodeled KeyArena would be October 2021. SoDo could be built on a quicker timeline, but acinside-Hockeycording to the Hansen Group, they won’t build until an NBA team is obtained. As stated above, there are no plans for NBA expansion; therefore this creates some uncertainty on when this project could be completed.

Strategic Partnerships

As part of the RFP response and the press conference, OVG identified several powerhouse partners in the global Arena Management space. The Hansen Group has not announced any strategic partnerships for his arena, primary because they haven’t needed to just yet. It’s also conceivable that some of these strategic partners could align with Hansen should the SoDo project emerge as the winner.

Key Local Support

It has been well documented that the Mariners and to a lesser extent, the Seahawks and Sounders, have not welcomed the SoDo arena proposal to their neighborhood. Therefore, it is no surprise that these teams have aligned to the KeyArena plan outside of their neighborhood. OVG has also worked with the Seattle Storm to make sure their needs and concerns are met should the KeyArena project be approved.

Summary

For all components in my assessment above, the scales seem to tip in favor of KeyArena. This might seem rather one sided, but only because we have the most information from the KeyArena proposal. The Hansen Group may or may not start filling in the blanks to help their chance of success.

Seattle Partners pull out of KeyArena bid process

Seattle Partners, a partnership between AEG and Hudson Pacific, announced in a formal letter to the City of Seattle that they would be pulling out of the KeyArena remodel process. On the surface, it appeared to be a surprise, but to those of us that have been following the story for a while know that AEG was on the cusp of losing the bid anyway. They could have bowed out gracefully, but they decided to take a scorched earth approach to announcing their exit.

The mayor responded to the letter with a statement of his own:

Ed Murray

Seattle Mayor Ed Murray

“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 crystallized 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.”

 

And then there was one…at KeyArena

That leaves OVG as the remaining bidder on the KeyArena remodel. It has been rumored that we were going to hear an announcement as early as this week. John Shannon from Sportsnet tweeted that OVG would be in town on Monday (the 5th).

Sodo and KeyArena

Assuming OVG can strike a deal with the City, this will now set the stage for a SoDo/KeyArena showdown that should really be interesting. There are so many differentoutside dynamics at play here; it is impossible to predict. Ultimately, I believe it will come down to the following questions:

Who has the money to build the arena? As part of the KeyArena RFP process, OVG needed to demonstrate the financial means to deliver on the project. Meanwhile, the Hansen group has not revealed how they are financially structured since Ballmer left the group.

Which arena group has support of the leagues? There has been a lot of speculation that Hansen does not have the support of the NBA, but that has never been confirmed by the NBA. Time heals all wounds, so if this really is an issue, it could be fixed. OVG’s CEO, Tim Leiweke has deep ties to both the NBA and NHL, so his relationships seem solid. That said, I expect the City of Seattle to be in contact with both leagues to confirm either or both potential arena partners have the support from both leagues.

Who has a potential NHL ownership group? Both groups have acknowledged that they are talking to potential NHL ownership groups and for all we know, they could be talking to the same groups. Maybe a bigger question is how much this needs to be solidified to decide SoDo vs. KeyArena.SeattleArena

Has Hansen done enough to alter the vote on a street vacation? Since the street vacation vote was denied by the city council last year, Hansen has announced his intent to pull the need for public financing. In my eyes, that is a moot point since the public financing was always tied to procuring an NBA franchise, which was not going to happen before the MOU expires in December.

How this all plays out is anyone’s guess, but it certainly feels like we are closer to getting a viable arena plan that can support an NBA and NHL team. Take that last sentence with a grain of salt, since I’ve said that before.