Say Hello To NBA's Relocation Committee

I’m emailing them all right now. Thanks TZ!

Also, has there been any comment/reasoning as to why Buss was replaced with Bennett? I’d kinda get it if Buss was replaced with a more impartial owner, but yeah…obviously not the case.

I might change “tens of thousands” to “hundreds of thousands” as I believe that’s likely factual for the entire market.

Because I got an auto reply from a Michael Preston…which is what the email address looks like. He appears to be from the 76ers…

Can someone please explain how much power has this committee over BOG? Do their views influence more or is it just typical for their bureaucratic procedures?

Basketball John (editor of SLC Dunk, the Jazz blog) just sent us an e-mail clarifying Greg Miller’s contact info.

New e-mail is gmiller@lhm.com . Updated in original post. Thanks for the support guys.

There are five “large” market teams with possible threats of other teams to move into their areas (LAL, LAC, CHI, NYK, NJN, roughly one-sixth of the league.

And yet, there are two teams on the committee that are consistent move threats (IND, MIN), one who just moved and is in charge of the committee (OKC), and a couple of teams who are buddies with Joe and Gavin (UTA, SA), with no representation by the large market teams?

This is face-saving and schwanze-covering on the part of David Stern.

I appreciate the letter, and it is extremely well-written, but this committee as currently constituted is specifically designed to achieve a designated outcome. It will allow Joe and Gavin to do whatever the hell they want.

Our best bet is to send the letter above to all 30 owners, and to let them all know what’s what out here.

The BOG has already been surprised by us in the last two days. Let’s see what we can do in two weeks.

thanks for coming up with the contact info and a draft email for us TZ!

What did I miss?

Why is everybody so convinced that this committee’s main task is checking the Sacramento pitch and numbers? When I read TZ’s article at SBN, it says the following:
Stern said that the relocation committee headed by (…) Oklahoma City Thunder owner Clay Bennett (…) will further investigate Anaheim’s proposal to host the Kings at the Honda Center.

So the focus seems to be on an incomplete or unconvincing Anaheim pitch. That is an important nuance, I think.

But maybe I’ve missed other news on this?

…fingers crossed.

Thanks as always for the hard work.

we’ll just have to call it a tie, and then Joe Maloof and KJ will play a game of H-O-R-S-E to decide the winner. oh, and dunking is allowed.

I never really followed the Sonics move to OKC but after watching Sonicsgate: Requiem for a Team, i have developed a great hatred towards this Clay Bennett douchebag. Hopefully the decision dosent come down to him because if it does, we all know how his fat ugly ass will vote.

I was wondering, is it a good or bad thing that the committee is filled with small market owners? Will they try to help the Malloofs just because they are both small market or not?

(is that good?)

“if we had the team you did, we’d be selling out without question. How those south beach faithful doing?”

But then I thought that was too nice, so I just attached a picture of LeBron choking.

They’re sending letters to the committee also.

That is so incredibly valuable as it shows the league that they wouldn’t just be hurting the fans in Sac, but NBA fans across the country. I’d like to send out a huge thank you to everyone out there fighting for the SACRAMENTO Kings! THANK YOU!

Maloof Money
By all accounts, the Monarch weren’t making the Maloofs money but the team wasn’t losing much either. In November, the Maloofs abruptly folded the Monarchs claming they needed more time to focus on the Kings. A few weeks later, the Maloofs decided to sell their family beer distributorship – which was a reliable profit center for decades. Once again, the family insisted the move was solely about focusing their energy on Sacramento and Las Vegas. Looking at the facts below, while the Maloofs overall wealth remains substantial, it appears they might be experiencing cash flow issues. This shouldn’t come as a huge surprise as both the Kings and Palms require huge operating costs and rely on discretionary income during an economic crisis.
In 2002, the Maloofs opened up their books to the Sacramento Bee. (Footnote (FN) 1.) The family’s assets were estimated at approximately one billion dollars with four main components: the Kings, the Palms, the New Mexico Beer Distributorship, and Wells Fargo stock. (FN1.) Seven years later, the values of the Palms and stock have fallen sharply. Some fans focus on the Kings losses, but those figures are merely a fraction of the losses the Maloofs have suffered recently.

Now, the family is selling the business that was both the cornerstone and backbone of their empire for many years. Therefore, it appears that sale – and to a much lesser degree the closing of the Monarchs – have more to do with freeing up cash than prioritizing their businesses.

A. Background
The family has been in the beer business forever. Based upon the need to move beer from Colorado to New Mexico, the family also operated a successful trucking business. George Maloof bought the Rockets in 1979. After his death, the family sold the team in 1982. (FN1) In 1994, the family built the Fiesta Casino in Las Vegas for $30 million dollars. After successfully managing the small casino, they sold it for $170 million in 2000. (Id.)

B. Wells Fargo & Co. Stock
1976, the Maloofs paid $10 million for a 77 percent stake in First National Bank in Albuquerque. (FN1.) In 1994, the bank merged with Salt Lake City-based First Security Corp. in a $200 million stock swap. In 2000, Wells Fargo & Co. acquires First Security in a stock swap, with the Maloofs receiving nearly 4.87 million shares of Wells Fargo stock. (Id.)
In 2002, when the price was trading at almost $50 a share, their Wells Fargo stock was worth $248 million. (Id.) Friday, the stock was trading just above $25. However, that price is up significantly from its low of $7.80 in March 2009.

C. Beer Distributorship
As a preliminary matter, beer distributorships are profitable, extremely hard to get, and almost recession proof. You get the exclusive right to sell a product with a decent margin.
The family the family obtained a Coors distributor ship in 1937, with the exclusive right to supply the state of New Mexico. In 2002, the company was valued at 45 million dollars. (FN1.) The next year, the company expanded. In 2003, the Maloofs bought the third largest distributorship in the state and merged the companies. At which point, the supplied 42 percent of the states’ beer, with exclusive rights to all Coors, Miller, Corona, and Heineken sales as well as 40 other products. (FN2.)
Since the expansion, the business has remained profitable. In May 2009, George Maloof, Jr. described 2008 as a "huge successes" for the distributorship. (FN3.) Michael Bellas, chief executive of the New York consulting firm Beverage Marketing Corp recently estimated the annual revenue is "likely well more than $100 million." (FN4.)

D. Palms
The Palms opened in 2001. In 2005, the Maloofs opened the "fantasy tower" at a cost of approximately $600 million. In 2008, the Maloofs opened a third tower called Palms Place, which includes a hotel, spa, and 600 condo units.
Station Casino Inc. owns 6.7 of the Palms. Station is currently in Chapter 11 bankruptcy. The Maloofs aren’t providing any specifics about the value of their casino, but Station’s filings with the SEC indicate the value of the Palms continues to fall sharply. (FN3.) In March of 2009, Station filed papers with the SEC that claimed their share of the Palms fell from 25.9 million in January 2008 to 3.3 million. (Id.)
Station’s filings also address the overall value of the Palms. It was reported that in early 2008, the casino had a value of $386 million. In March 2009, Station reported the value was only $50 million and cash flow had fallen 19% from the previous year. (Id.) On September 30, 2009, Station indicated the value of the Palms was $20 million. (FN4.)
Here are a couple of things to consider. Because they are in a bankruptcy proceeding, Station has an incentive to emphasize liabilities and minimize assets whenever possible. At the same time, perjury – particularly to the SEC – has significant consequences and a $366 million loss isn’t exactly "fudging" a number on a balance sheet. Moreover, no one disputes that most Las Vegas casinos are in serious economic trouble. MGM Mirage, which owns 10 casinos, the most on the Strip, posted a $750.4 million net loss. And Harrah’s Entertainment Inc., which owns eight casinos in Las Vegas, had more than a $1 billion net loss. (FN5.)
While the Palms remains world renowned and a popular tourist destination, like the Fiesta, it is located off the Strip in order to attract to local customers. Because Las Vegas is among the cities hit the hardest by the collapse of the United States housing market that money has dried up significantly.
Because reports indicate a combined $900 million was spent on the Palms this decade, it is hard to comprehend the value could be only $20 million. However, the fact accountants can even make that claim, under the threat of SEC fines and jail time, is staggering. We know that Station is reporting their share of the Palms has fallen 87% over the last two years. (FN3.) If you apply that figure to 900 million, the value of the Palms would be 108 million. While that’s significantly higher than 20, it would still reflect a three quarter of a billion dollar loss. When you consider at least some of the $600 million investment was borrowed, it’s entirely possible the Palms is worth only $20 million.
Other than vaguely claiming the casino is "holding its own" the Maloofs aren’t talking about the status of the new family flagship. Kings fans pouring over the Forbes franchise values, but these are the numbers that are truly frightening for the Maloof family.

E. Kings
In 2008, it was reported that the Kings were on track to lose between $25 and $28 million dollars last season. After making several trades in early 2009, the team trimmed the loss to $2.8 million but the overall value of the franchise fell 13%. (FN6.)The Maloofs still have lot of equity in the Kings – which is where a significant portion of the profits in professions sports are derived.
In the off season, the team trimmed overhead significantly, with employees and pre and post game shows falling by the wayside. With the salary of Kings’ players exceeding $55 million, everyone recognizes that running an NBA team requires massive operating costs. But many fans fail to recognize the overhead associated with day-to-day operations like the Kings telecasts. Unlike some other teams, Comcast doesn’t pay team for the right to broadcast games. Instead, the Kings buy airtime from Comcast, produce the telecasts, and sell ads during the broadcast. Therefore, like ticket sales, the Kings television revenue is based upon a model where the Kings spend large sums of money before the season and try to make it back during the season based upon fan support. The structure of the deal causes one to question the amount of revenue derived from the numerous ads for concerts and events at ARCO Arena.
However, it is unclear whether the overhead that was trimmed last summer will be enough to avoid further losses this season. While the Kings continue to report crowds above 10,000 fans, paid attendance has fallen to 7,606 fans a game, down 21.1 percent from this time last year. (FN 7.)
Finally, it should be noted that some of the team’s best years and their recent failures at the box office were caused by the same event – the fracturing of the season ticket base. In the 90s, most of the season tickets were held by either one person or a pair of partners that had owned the tickets for many years. In 2002, the Kings captured the hearts and minds of Sacramento during a time when the housing market and interest rates led many to believe they were wealthy and massive debt was not a problem. Ticket prices rose sharply. Many fans compensated by taking on additional partners and selling tickets on a thriving secondary market. But when the demand fell off, those options were no longer available and many long time customers reluctantly left the season ticket rolls along with the bandwagon fans. Consequently, the season ticket base is now at an all time low. The Maloofs could not have collected huge ticket revenues earlier this decade without fracturing the season ticket base, but for the first time ever the franchise relies primarily upon walk up tickets to fill most of the arena. Which leads to things like 10,000 people showing up to watch the Pacers.

F. Conclusion.

When you step back, an overall picture starts to emerge. For many years, the Maloofs were family that built its fortune on key local businesses – the beer distributorship, banking, a small local hotel and stores in New Mexico. When the sale of distributorship is completed, all of those businesses will be gone.
In 1994, the Maloofs parlayed their banking success into the Fiesta, which was also a smashing success. In 2000, the Well Fargo transaction dwarfs all prior achievements. Around that time, the Maloof family lays out a ton of money to become the primary share holder in two businesses with large operating costs. (They spent 247 million on the Kings; the Palms cost 265 million to open as was expanded to the tune of 600 million.)
Right now it looks like it could have been too much at the wrong time. You can justify both moves. After running the small Fiesta, the family wanted to try their hand with a large casino. The Maloofs also wanted to get back into professional sports and there was at least some reason to believe the Kings could become profitable. Although the Kings were chronically mismanaged prior the Maloofs talking over, the team generally didn’t have problems selling tickets – even during down years. When the team became wildly successful during the Maloofs tenure, the history of the NBA (although not California) suggested the public might finance most of a new arena –which would provide the franchise with both new revenues and a drawing card for several seasons. Then, Webber’s knee popped, the city didn’t make a deal, and the voters said no.
At the same time, Wells Fargo went into the tank and Las Vegas started to experience its leanest years. Soon, the Maloofs will have most of their assets invested in two businesses with uncertain futures. Both rely upon discretionary income during a period of time when the country is in an economic crisis. Based upon the facts above, it appears the assumptions of some fans that the Kings are awash in red ink are overstated, or at the very least premature. But at the same time, the condition of the Palms and the overall holding of the Maloofs are underreported.
The Maloofs have claimed the sale of the distributorship is about "prioritizing their businesses" and "a good deal" but they don’t spend much time in the 47th state and by all accounts the distributorship was the most consistent business over the years and recently the most profitable. Therefore, it appears the former backbone of the family’s fortune will be liquidated to provide operating capital for the other businesses – particularly the Palms.

1. (Bee story. April 14, 2002; Bee: Maloofs losing money now but they’re investing for the long haul; http://www.kingsfans.com/forums/archive/index.php/t-16321.html)
2. http://sacramento.bizjournals.com/sacramento/stories/2003/07/14/daily8.html
3. http://www.sacbee.com/business/story/1883492.html
4. http://www.sacbee.com/topstories/story/2378296.html
5. http://www.thesunnews.com/business/story/1199248.html
6. http://www.forbes.com/lists/2009/32/basketball-values-09_Sacramento-Kings_327146.html
7. http://ken-berger.blogs.cbssports.com/mcc/blogs/entry/11838893/18850386?source=rss_blogs_NBA

Definitely a great relocation committee for Sacramento. Gotta think the small market owners will be on our side.

Done… emails sent. I offered to mow all their lawns.

Didn’t use the form letter, because I figured they were sick of reading the same thing over and over again. Just worked a few of the same points into my own personal story about what the team means to me.

GRANT (1140) was little over top confused on wed. Sport show-The Bros. were raised understanding how big boys play hardball-tipping points-when to kiss $ makeup.
They are getting the drift that NBA’s BEST Fan-NOR CAL. Business Owner’s-Mayor(s) are all in a war right now Mr. GN! NBA is only PRO Sport game for 2 hours west-8 hours’ east-9 hours north and 7.2 hours to south. What if bros. become third NBA team in 45 minutes-second-third choice on schedule-slap-in your own dome? I am from the OC-I guarantee fan base are Lakers for life. FACT: I would be in fear wearing another color in east LA. I can go on and on regarding other Sport teams-D Land in close proximity to the duck-pond building etc.
The huge build up of business(s) just around Arco past few years is at stake-it is a guarantee X will BK…..This is about many job’s lost-business BK’s-Grant-folks who in past years may perhaps cared less…care right now over fellow Nor Cal folks tipping over-going under from such a mammoth loss. You were right about past King’s staff marketing folks should not have been mentioned in poor light in paper. The rest was far left of mars…