Coliseum City’s Mystery Investors Revealed

Earlier in the year, Oakland Mayor Jean Quan talked up foreign investment in Coliseum City, which had the potential to fill in funding gaps for one or more venues planned for the project. The Trib’s Matthew Artz reports tonight, on the eve of a Tuesday City Council closed session, that those investors are a partnership between real estate powerhouse Colony Capital and Dubai financier Rashid Al Malik. The closed session would presumably lead to a public discussion item on October 8, which should include some basic terms for the price of the land, a development timeline, and other critical information.

Colony/Al Malik are no strangers to bidding on expensive properties. In the spring they jumped to the lead in bidding for arena/stadium giant AEG. Eventually they balked as AEG honcho Phil Anschutz refused to budge from his asking price, purportedly up to $10 billion. That led to the departure of Farmers Field champion Tim Leiweke, leaving the football stadium project in limbo.

Coliseum City, which could cost $2 billion just for a replacement arena and separate baseball and football stadia, is expected to have billions more in development costs associated with offices, retail, and additional infrastructure. It has the potential to be the biggest single redevelopment project in California history.

The main problem is that redevelopment is yesterday’s plan. Tax increment is off limits thanks to Governor Brown’s dismantling of redevelopment agencies all over the state. While TIF couldn’t finance a lion’s share of the project, it could’ve helped take care of the infrastructure work, which no developer wants to take on if he can help it. The closed session talks are centered around land sales, so Oakland (and Alameda County) could conceivably sell Coliseum land or other nearby properties to help raise the public share. It’s not much of a departure from Lew Wolff’s Pacific Commons plan, which involved a fairly simple purchase option of privately owned, not publicly owned, land. While the Bay Area’s real estate market is experiencing a rebound, chances are that Oakland would name a price favorable for Colony/Al Malik in order to get them to play ball.

If you’re Colony/Al Malik, you want to be able to get in with as little equity or borrowing as possible. At the same time, we’re hearing that the project could work with only one or two venues as opposed to three. That works in Colony/Al Malik’s favor, since there would presumably be less money going towards stadia that would otherwise go to their shareholders. Not having to build a new ballpark or arena would also free up 10-15 acres of “prime” development land near the Raiders stadium. Of course, that has to be balanced with the recognition that more venues equals more events and event days, which would make the project more attractive to prospective tenants. There’s the possibility that no teams remain, which would result in no new venues. There’s also a remaining disconnect regarding the different players’ respective visions. Raiders owner Mark Davis continues to focus on a smallish outdoor stadium with less than 60,000 seats. Planning consultant JRDV (and previously Mayor Quan) want something larger – and perhaps retractably domed – that could attract big events such as the Super Bowl.

There’s one other angle to play here. In 2010, Colony bought the construction firm Tutor-Saliba, the contractor responsible for rebuilding the Coliseum Arena, Mt. Davis (no, they weren’t the architects), and several transit projects including the planned California High Speed Rail and the BART-to-SFO extension. Colony could see some additional opportunities associated with having Tutor-Saliba control the construction process for much of the project. Not sure how that might conflict with an open bidding process often required when using public funds.

Besides the failed AEG bid, Colony and Al Malik have had their share of hits and misses. Colony invested heavily in Station Casinos just as the recession was starting, and Station eventually declared bankruptcy. Al Malik was head of Dubai Aerospace and launched an aggressive strategy to buy (and lease out) a bunch of jumbo jets in 2006. He quit the company in 2008 as DAE floundered. Colony once co-owned the French football club Paris St.-Germain, then flipped it to investors from Qatar two years ago.

There’s a great sense of irony in that much of the criticism of A’s managing partner Lew Wolff is that he’s a “greedy developer” who only wants to make money. Yet who is Oakland bringing in to give Coliseum City a whiff of viability? One of the richest developer/hedge fund groups in the world, Colony Capital. The master developer for Coliseum City appears to be Forest City, the company Brown favored for Uptown condos and apartments instead of a ballpark. When you need big money and expertise, there are only so many places to find it. What are the chances that this group isn’t “greedy”? Slim and none.

Update 12:25 PM – Got a copy of today’s agenda (thanks Matt Artz). The resolution calls for a 12-month extension of the ENA (Exclusive Negotiating Agreement) to figure out the terms of the deal. This comes on the heels of the the original ENA expiring October 21. In addition to the 12 months there would be another 6-month administrative extension option. No additional money would be needed to complete all of the project deliverables, a concern going back from the early summer.

What I have to wonder is what Mark Davis thinks of all of this. While it’s good to have the potential for additional investment to help defray the stadium cost, here’s another case of the JPA/Oakland/Alameda County pushing a deadline out. This time it could go into early 2015 before things are finalized. This doesn’t seem like the kind of urgency that Davis is looking for:

Whether there’s a sense of urgency or not? I know there is on our side. We have to find out how urgent on their side. The picture that’s been drawn is there. We know what needs to get done. It’s just whether it’s going to be able to be done.

It’s Davis, after all, who’s pushing for a long-term lease extension tied to a new stadium development deal. How does this news affect that? Another 2-3 year lease to stay in the game?

Governor Brown signs streamlining bills for Sacramento, SF arena projects

You can’t say Jerry Brown doesn’t like sports now, folks. No sir.

The Governor signed two bills to help with environmental review for separate arena projects championed by the Kings and Warriors. SB 743 (Steinberg, D-Sacramento), for the Kings, made incremental changes to how traffic and parking studies will be done, but fell short of the sort of sweeping CEQA changes desired by Republicans and the Governor. Much of the streamlining in SB 743 benefits the Kings arena specifically by creating a time limit for lawsuits and allowing for eminent domain proceedings while the project goes through the EIR process.

AB 1273 (Ting, D-San Francisco) sought to bypass the State Lands Commission so that approval of the project rested with the City/County of San Francisco. That provision was stricken, neutering the bill rather severely. However, the EIR process now inserts SF and the BCDC to manage the process, allowing them to head off any red flag issues that the SLC could use to deny approval of the project. One key win for the Warriors was the granting of a development permit at Piers 30/32 to the BCDC, which should help advance to process of determining the proper (read: low) amount of parking to be built in concurrence with the arena.

The W’s arena should also benefit from some of the new provisions in SB 743. Piers 30/32 most certainly qualifies most certainly qualifies as an urban infill project, considering its near-transit location and dilapidated state.

Now that the legislative endaround has been successfully executed for both arenas, it’s only a matter of time to get their EIRs completed and approved. Sure, all sorts of challenges will occur in the meantime, but these actions are big if they’re to have any hope of being open by 2016 (Sacramento), or more likely, 2017 (SF). It’s just too bad that the legislature couldn’t properly fix CEQA for everyone.

Bending rules instead of fixing them

As the legislative session ended late Thursday night in Sacramento, the assembled pols found themselves at yet another crossroads regarding CEQA. They were getting ready to prove another project’s sidestepping of existing CEQA law, all in the name of making the state more competitive, or jobs, or keeping a team from moving to another state. While Democrats were generally in lockstep about the prospects of the project, Republicans complained about how granting exceptions like this one doesn’t fix the core problem.

Just about everyone including Governor Brown agrees that CEQA makes the procedural environment too difficult to get things built. It’s all too easy to create year-plus delays because of often frivolous CEQA challenges. Don’t get me wrong, many CEQA challenges have real merit. If a contaminated site needs to be cleaned and an applicant isn’t thorough about mitigation steps, CEQA provides the method to keep such abuse in check. But uses of CEQA can themselves be abusive, such when homeowners object to a project simply because it will affect their property values.

CEQA was designed to protect the environment. While it needs to be overhauled to prevent abuse, whatever programmatic changes need to be made must keep the spirit of the law intact. Judging from the debate on the Assembly floor on Thursday, it’s not clear exactly how that will happen.

State Senate President Pro Tem Darrell Steinberg (D-Sacramento) did a victory lap Thursday afternoon as SB 743, the bill designed to help streamline CEQA for the Kings’ downtown Sacramento arena, was easily approved in both houses. Previous bills provided similar exemptions for other big projects. Farmers Field received an exemption because it was thought that streamlining CEQA would help bring a NFL franchise to LA. It didn’t. SF Assemblyman drafted similar legislation for the Warriors’ arena (AB 1273). And if Howard Terminal got off the ground for any kind of major project including a ballpark, it’s likely that another bill would be written to benefit that project. Given the amount of cleanup that would be required, bypass legislation is practically a given.

During the debate over AB 852, a last minute gut-and-redraft meant to impose union-backed CEQA protections over certain projects, Assemblyman Paul Fong (D-Cupertino) asked the bill’s author, Roger Dickinson (D-Sacramento), if the bill and AB 743 could help a project Fong champions in his backyard, Apple’s spaceship campus headquarters. Dickinson indicated that this was the case.

The problem with providing exceptions for big, high profile projects like stadia and convention centers (or corporate headquarters) is that they chiefly benefit the big money team owners and associated businesses who run such facilities. If we’re going to be serious about real, substantial CEQA reform, we need real legislation to get to the core problems regarding abuse and delay. That way every kind of applicant can benefit, not just incredibly wealthy business interests. Steinberg made some headway by reshaping how some areas of concern are measured, but only after he shelved SB 731, the bill he wrote as a broader approach towards real CEQA reform. Chief among the issues addressed in SB 743 are parking and traffic, both of which will now have a potentially more flexible way to define mitigations. Aesthetics are also deemphasized for certain projects. All in all, these are small but necessary steps that should modernize CEQA. Steinberg did what he needed to do to help the Kings arena, just as he promised to David Stern and the NBA’s Board of Governors. As for properly reforming CEQA? That’s for the next legislative session, I suppose.

On Subsidies and Votes

If you’ve been reading this blog for a while, you’re probably already familiar with my stance on public subsidies for sports teams. It has perhaps become more hardline over the years, as civic coffers have dried up and redevelopment died out. The ideas are pretty simple, and I don’t expect everyone to think the same way I do:

  1. Public money for stadia in the form of cash, loans, or bonds – whether or not secured by upfront taxes or fees – should never happen in this day and age.
  2. All new or renovated venues that do not require public money are generally good, as long as they don’t come with significant kickbacks for the team and developers.
  3. Any public assistance that goes beyond processing permits or planning work (providing land, money, or other benefits) should require a public vote over the terms of the deal.

Note that I haven’t specified dollar values for anything. That means that it doesn’t matter if a municipality provides $1 million or $1 billion in assistance – any assistance merits a referendum. There is no gray area at work.

As currently structured right now the Sacramento Kings’ new arena will not go to the ballot box. The City Council and Mayor Kevin Johnson have argued that a referendum isn’t necessary isn’t because no new general taxes are being levied. Councilman Steve Hansen (no relation to Seattle investor Chris Hansen – we’ll get to that in a bit) even argued in a forum earlier this week that because Sacramento’s airport received $1 billion in publicly-funded improvements without a vote, the arena shouldn’t either. That is utterly absurd. First of all, an airport in a major city is a pretty important piece of public infrastructure, incomparable to an arena, which is a luxury. Secondly, it’s foolish to use third grade-level reasoning to justify a political move such as this (“My friend’s parents let him stay out late, why can’t I?”). Not voting on airport improvements was arguably a bad move in the first place. Not voting on an arena would only compound that error.

An anti-arena group, STOP, emerged as the only entity with enough cash to fund a petition drive that would’ve put the arena on a ballot. STOP’s origins were murky, as it was connected to Loeb & Loeb, a Southern California law firm associated with the Maloof family (former Kings owners). Initially that led to accusations that the Maloofs funded STOP. It turns out that the aforementioned Chris Hansen had actually funded STOP to the tune of $100,000. The non-disclosure and solicitation of the contribution(s) were all state campaign-reporting violations. Hansen eventually admitted his part in the subterfuge and apologized, explaining that he wouldn’t fund the campaign further. Arena advocates are rightly incensed and not satisfied with Hansen’s apology, going as far as asking the hedge fund manager to pull back all gathered signatures. In addition, STOP pulled some shady tactics in misrepresenting aspects of the arena plan, which has caused several thousand petition signers to request their names be removed.

Messy, right? This brouhaha didn’t start with Hansen or pro-arena forces. It started with the need for a referendum. Since the City decided the arena didn’t need one, the anti-arena political machine geared up to get enough signatures to force one. That got another group going in defense of the plan, trying to head off the petition drive at the pass. All of it, and I mean all of it, is unsavory. There’s a very simple, easy way to resolve this once and for all: just allow the referendum to take place. Even if the delay counts for several months it shouldn’t materially impact the construction plan, which has numerous pieces to work out including a potential eminent domain land acquisition. If the pro-arena forces are as confident as they say they are about the plan, there’s no reason to skip this crucial civic step. Mayor KJ has called the arena the biggest project in the City’s history. Shouldn’t the biggest project in the City’s history be confirmed by plebiscite? Forget the dirty politics, the real and phony outrage. Let it all air out in a real campaign. Sacramento voters at least deserve that amount of respect.

Plus, let’s not forget that one famous Sacramentan was caught on the other side of this divide. Last year I wrote about Gregg Lukenbill’s plot to kill the original China Basin ballpark in 1989 with mailers targeting San Francisco voters, all part of a plan to coax the team northeast along I-80 to land next to ARCO (Sleep Train) Arena. (An even more revealing account can be found at The California Fix.) Why no outrage? Because that’s part of the game. It’s also part of the past. After all, Oakland Mayor Jean Quan certainly picked up a few votes after the revelation that Lew Wolff donated $25k to presumed frontrunner Dom Perata’s campaign in 2010. How’d that work out in the end for Oakland?

Eventually, San Francisco got new ownership in that were willing to spend their own money on a ballpark, with minimal city assistance (land, infrastructure). Even that plan ended up in a referendum, one that won in a landslide. Santa Clara’s 49ers stadium plans received legitimacy thanks to their victory at the ballot box, as did San Jose’s arena plans. Meanwhile, Oakland pushed Mt. Davis (and arena renovations) through without a city or county vote to disastrous effects, and pols are hinting at even more stadium plans that won’t require referenda. Are these people nuts? Have some respect for your citizens, politicians. Allow for campaigns. Allow the citizens and fans to be fully educated on the issues. You owe them that much. Sure, campaigns are expensive. The billionaires and millionaires who want these projects can afford campaign costs, they’ve seen and done it before. Chances are that they’ll outspend opponents 10:1. They have the resources. That’s fine. That’s the way the process works. The track record, at least in this state, is that allowing proper vetting of stadium projects is good for all concerned. If stadium and arena proponents aren’t willing to accede to a referendum request, it’s worth wondering what they’re hiding.

Warriors backing away from 2017 SF arena opening date

On June 20 the California Assembly easily passed AB 1273, a bill from San Francisco’s Phil Ting that aimed to speed up the CEQA process by bypassing the Bay Conservation and Development Commission (BCDC). That hope faded on the 25th, when a Senate committee refused to take action on the bill, citing the importance of the BCDC and the State Lands Commission. The bill was withdrawn from committee shortly thereafter.

The Snøhetta/AECOM-designed Warriors arena on San Francisco’s Piers 30/32

The BCDC is the first and largest regulatory body that approves any and all development along the bay. The Warriors and SF pols hoped that by not involving the BCDC they’d be able to hit their target opening date of fall 2017. For now the 2017 date looks shaky, as involvement with the BCDC and contingent agencies could add a 1-2 years (or more) to a normal CEQA process.

Tim Kawakami saw the other shoe drop when he interviewed Warriors co-owner Joe Lacob this week.

LACOB: I do know there’s a possibility, certainly, that (the arena) could be delayed. It’s not a probability at this point. The probability is that we achieve our goal.

Not exactly a rallying cry, rather a more tempered response than Lacob has previously exhibited. Lacob has shown no signs of giving up on the project, as he and Peter Guber most certainly see the revenue advantages it would bring even the arena were delayed 1-2 years. Lacob also said that he’d consider Lot A across McCovey Cove/Mission Creek from AT&T Park, but not Pier 50 next door (which would bring up the BCDC threat all over again). Chances are that the W’s would only build on Lot A if they received exclusive development rights, which have already been given to the Giants with plans drawn up. Not that they couldn’t be changed if the right deal were struck. The Giants are refinancing their remaining debt on AT&T Park to help finance the Lot A project, so you have to think it’s already pretty far along in the process for them.

Interestingly, the apparent defeat of AB 1273 marks the fourth instance of large political effort to fast-track a project that has either backfired or failed to help the effort. A letter from the Pacific Merchant Shipping Association (among others) made note of previous instances:

  • AB 900 in 2011 was legislation for a Portside San Diego Chargers stadium. Eventually the plan fizzled as no one could figure out how to bridge the funding gap.
  • A fast track bill for Farmers Field was passed in 2012, but became moot as Phil Anschutz wavered when confronted with the high price the NFL was going to make him pay to bring one or two teams downtown.
  • Seattle interests also bumped up against their own working Port to ram through a SoDo Sonics arena.

The first two instances of demise were purely financial as no one could make the deal terms pencil out. Bills or other measures may have helped in the end, we’ll never know. The brief list doesn’t include Carole Migden’s failed attempt to block the 49ers’ move to Santa Clara. Seems like the memo to any teams trying these shenanigans should be to simply let the process work itself out, no matter how painful it is.

In the letter link above is also Oakland Mayor Jean Quan’s opposition to the bill, framed in terms of economic impact to Oakland. Quan has also mentioned the BCDC in interviews, but she was smart to not include that argument in the letter. After all, she’s advocating for a ballpark at Howard Terminal, a piece of land that, like Piers 30/32 in SF, is subject to BCDC and SLC review. The BCDC website’s FAQ barely scratches the surface of the regulatory work required to build anything on the Bay (bold are my emphasis):

What types of activity require a permit?

A BCDC permit must be obtained before you do any of the following things within the Commission’s jurisdiction:

Place solid material, build or repair docks, pile-supported or cantilevered structures, dispose of material or moor a vessel for a long period in San Francisco Bay or in certain tributaries that flow into the Bay.

Dredge or extract material from the Bay bottom.

Substantially change the use of any structure or area.

Construct, remodel or repair a structure.

Subdivide property or grade land.

Shouldn’t be a problem for a Howard Terminal ballpark, right? Easy peasy.

—–

In the Kawakami interview, Lacob also referenced the departure of AECOM from the project. According to Lacob, the AECOM had already finished its task of completing design work for the inside of the arena. That means that design work is largely complete, barring CEQA-mandated changes to the project. That should show you how serious the W’s are about getting this thing built.

Sacramento 22, Seattle 8. Now Oakland’s turn.

As the MLB owner meetings were held this week in New York, the owners may have spent a lunch or two observing the proceedings in Dallas, where the NBA’s Board of Governors was deciding the fate of the Sacramento Kings and Seattle. If they paid attention, they probably noticed that there was a commissioner in David Stern who encouraged independent thought, debate, and consensus via democratic vote instead of decree (the vote was 22-8, not a bogus “unanimous” decision). By having a transparent, well laid out process for arriving at a decision with the Kings/Sonics, the matter was decided in four months. Compare that to what’s happening to the A’s, who have been in limbo for four years.

As usual, the A’s were not on the agenda at the meetings, with no reports issued or recommendations made. With the A’s continuing to get their annual revenue sharing check and keeping their expenses in check, the A’s are effectively a model franchise for MLB from an operational standpoint. Status quo it is, fans be damned.

I heaped praise on Sacramento Mayor Kevin Johnson on March 1st for his handling of the Kings’ situation. With no support from the Maloofs, KJ put together a big money ownership group, assembled an arena deal with public funding, and rallied the vast majority of other NBA owners to his side. The feat was positively Herculean, and will serve KJ well in his future political or business endeavors, whatever way he wants to go. More importantly, KJ created a blueprint (one based on the efforts to keep the Giants in SF) for any city to keep a team in danger of moving.

Which brings us to Oakland. At present, the City and Alameda County are at loggerheads with the A’s over the future lease, even as baseball is encouraging the City to loosen up on some negotiating points. As the months progress, chances are that the A’s and baseball will be more desperate to get a deal made since there is no other ballpark solution immediately available. It’s a calculated risk that could pay off big for the revenue-short public agencies. On the flip side, MLB won’t take kindly to the A’s being gouged by the Coliseum JPA.

Long term, Oakland is doing some of the things KJ did – for the Raiders, that is. They’re trying to build business support within the community, with the two sides holding events to determine the economic potential in the East Bay. They have a program level EIR started for Coliseum City and have worked with the Raiders and the NFL on stadium concepts. For the A’s, Oakland has trotted out three stadium sites and little else. Community groups such as Save Oakland Sports and the new Oakland Fan Pledge (which has gotten 1,179 pledges worth $2.87 million so far) have tried to fill the gap for fans. If we’re judging by the level of effort, the City wants to keep the Raiders in town a lot more than they want to retain the A’s.

City officials and others will point to the A’s ownership group’s lack of cooperation as a motivating factor. Given the hell that Sacramento fans and pols had to go through, that’s not a good excuse. Oakland should be presenting its best vision for the A’s – whatever it is – and it should be doing all of the necessary background work so that if a decision comes down in favor of Oakland or Wolff/Fisher actually decide to sell the team, the ballpark effort can use some procedural and political momentum to secure a deal and get the park built. (San Jose got an EIR certified without any promises, why not Oakland?) Without a sincere and honest effort, what are the owners supposed to think? What are fans supposed to think? At least one owner, Jerry Reinsdorf, has both MLB and NBA franchises, and there’s no doubt the others at The Lodge were picking his brain to see how the boys in Dallas arrived at their decision. They can point to a commissioner who properly guided the discussion, a mayor who cared enough to fight, and a fanbase that was small but vocal. There’s still a ways to go before Sacramento has a shiny new arena, but they’ve already crawled through the proverbial river of shit. Congrats Cowtown. Don’t go spending all $258 million in one place! (er…)

Ranadive-Mastrov group to pay dearly to keep Kings in Sacramento

No one to date has ever confused Sacramento for a big market. Thanks to a promise made by potential Kings buyer Vivek Ranadive, Sacramento may be treated like one.

The Sacramento Bee’s Dale Kasler wrote today that Ranadive pledged to take the Kings off the NBA’s revenue sharing plan if he and his group were allowed to buy the franchise. It’s no small amount, thanks to terms negotiated as part of the NBA’s 2012 collective bargaining agreement. According to a 2012 Sports Business Daily article, the revenue sharing receipt for a small market team such as the Kings or Milwaukee Bucks was worth as much as $16 million per year. The scheme is similar to MLB’s plan, except that teams in the NBA share 50% of local revenues (as opposed to baseball’s roughly 40%). A ramp-up period was imposed so that the scheme won’t fully take effect until the 2013-14 season, the same time extremely punitive repeat luxury tax penalties will also start being levied.

The Kings will face their own transition to being net payers, as Ranadive has even agreed to receive reduced revenue sharing for the remaining years at Sleep Train Pavilion. The exact amount isn’t known, but even if it were 50% of $16 million, the Kings would be hard pressed to make up the rest of that revenue solely by selling out the arena for the next two NBA seasons (my estimate of increased revenue: $8.8 million). While Sacramento is a top 20 media market, the Kings don’t get TV revenue from Comcast as a bigger market should. Either Ranadive will have to negotiate seriously lucrative increases (2X at least) or the Kings will be a very revenue-limited team.

Ranadive will have one other constraint that doesn’t hamper poor baseball teams – a salary floor. In the NBA, teams have to spend at least 85% of the salary cap. For the 2012-13 season that translated to more than $49 million. The Maloof-owned Kings spent $54 million on payroll during that period. Revenues should be a good deal higher with a new arena and increased goodwill from the community, but the fact remains that Sacramento simply isn’t a big market. It’s not going to surpass Phoenix or the Twin Cities because the population is simply not big enough, and teams like the Orlando and Cleveland will continue to get the competitive benefit of revenue sharing, plus a ton of upcoming draft picks to help their rebuilding efforts. Even Oklahoma City and Memphis, playoff teams with no need for help, will benefit at the expense of Sacramento because they’re small markets.

The Kings’ roster is made up of players without the talent or leadership ability to deserve max contracts, so for the next few years this shouldn’t be a big deal. If the team can make the right moves to have a competitive team built and timed to coincide with a new arena, all will be well. If not, even the solid ticket-buying support by Kings fans will be tested. Ticket prices are sure to be a good deal higher at the new arena, and with that comes higher expectations for success. Even if the team is successful and has multiple max-deserving players, they could be more quickly stuck in a situation like the Thunder and Grizzlies, who had to give up critical players in order to keep their payroll in line.

Sacramento backers framed their argument to keep the team in the Capitol with the idea that unlike Seattle’s competitive multi-sport market, the Kings are the only game in town. By virtue of last week’s relocation rejection, the owners are taking that to heart. Sacramento asked to be treated like a bigger market, and by golly they will be, whether they like it or not.