Saturday, February 18, 2012

Arena deal just doesn't pencil out with Maloofs as owners

Do the Maloofs have any money left?

That's the $387 million question as the all-important arena vote looms.

With the team struggling to fill the arena, their Power Balance naming rights deal in tatters, their casino interests drained almost to zero, and no other seeming revenue streams, how do these guys come up with any cash?

It's almost comical to think they will be able to pony up with anything close to the $85 million that Sacramento is demanding to build the arena.

And would the NBA lend them the money when Anaheim is willing and able to welcome them without a penny out of pocket?

This is looking bleak.  And sadly, it's not going to be on the City of Sacramento this time.  Because unless the Brothers Maloof finally relent and sell the team, I can't see how this deal works.

Does commissioner David Stern have the juice to force a sale? Doubtful.  Especially after the lockout fiasco that proved small-market teams have begun to erode his once enormous power.

Let's look at some harsh numbers:

--In 2009-10, a total of 23 of the NBA's team worked at an operating loss.  Eleven teams had net losses of more than $20 million.  With the economy in the tank and Sacramento hurting, you can bet the Kings are one of the league's least profitable teams.

--The Kings already owe the city the balance of a $70 million loan.  Combine that with a $60 million loan from the NBA and Maloofs would be sitting on $130 million in debt with no positive cash flow.

--The Kings would be simply tenants in the new building, meaning they would get no cash flow from parking or other events beyond basketball.

Now, nobody has yet explained why the Kings need to come up with this huge block of cash upfront.  It doesn't really make sense.  Yearly leasing fees would be much easier for the team to handle.

But that's the game of chicken being played right now.

From this vantage point, only new owners with very deep pockets make this deal in Sacramento work.

I could be wrong.  I hope I am.

But the Kings could not be in worse shape.  On the court, the team is a mismatched assemblage of ill-fitting parts.  Off the court, the owners have become financial zombies, former millionaires who just stumble through life with the desperate aura of lost wealth.

I just can't see how the Kings remain in Sacramento with the Maloofs as owners.

Zombie Arena is just not going to cut it.


1 comment:

Philip said...

My understanding is the last big chunk of money the Maloofs have is in the form of Wells Fargo stock. Which I've heard they have a substantial amount of. Selling that could raise the money. Still, they want to own the team for the same reason all NBA owners want to own their team--it's fun. The problem is, with nothing but stock dividends or sales to profit from, these shamefully incompetent business men are counting on this NBA team to do what almost none do--make money. They won't make money in Sacramento. They won't make money in LA Metro either. Really, they have no choice but to sell, the problem is, they will be players in no one's circles and I'm not sure these trust fund babies can handle that.