What has changed? Trying to apply common sense to the arena issue....

As it pertains to the arena and the Maloofs you only need to ask a few questions and apply common sense to get a sense of the true story of what happened. This is how I see it…..

What has changed to make us think the Maloofs want to stay now?

Think about that. They were ready to leave for Anaheim because why? They needed a new arena. Do they have that? No. So what has changed? The only thing that changed is the NBA did not allow them to file for relocation for a year while the city found a way to build an arena, which they did and the Maloofs declined. So why all of a sudden their old arena is now good enough to stay for? Are you having trouble finding answers?

Next question….So why are they saying they want to stay?

This is where common sense and guesses come into play. Ultimately the answer is they have to. But why? Here’s my guesstimate….. the NBA won’t let them leave. I have a feeling based on the way they held their own press conference that not only the NBA but the other owners are not behind them either. Honestly could any reasonable person buy that presentation they offered? That is what they presented the owners (minus the bad economist), it was just embarrassing! So now they are stuck here.

So next question…. If they are stuck here why not take the deal, was it really that bad?

The deal was not bad. If it were the NBA would not have approved it and AEG would want nothing to do with it. Even their ridiculous red line list was about how they could screw the city over (which makes their whole ‘we’re protecting the city from itself’ statements pathetic and transparent lies. Heck the NBA was going to front them not some, but all the money on their behalf. So why not take it? Because technically they can’t.

Next question…..Why can’t they?

It’s all business. The brothers are not broke, but they are broke for NBA owners. Why do they need to be profitable so bad? They have no liquidity. All their money is tied up in stock investments. The one main asset they still have, the Kings, is already mortgaged past its value. If you were in a house you couldn’t truly afford would you take a second mortgage on it? No way. The NBA offering yet another 67 million dollar loan when you have already 170 million in loans out on the Kings would be crazy! They would owe 240 million on an asset that is valued at 225-240 million. It would be lunacy.

Next Question…….So what now?

If the Kings eek a profit they can hold onto the Kings and hope their value goes up. As long as they remain one of the few teams that don’t go in the red the Maloofs can hold on. But the minute the team goes in the red you will see the brothers panic. Why? Because they don’t have the resources to hold on in that scenario. They can reattempt a move to LA which would immediately catapult the value of the team upwards. This would allow them to take more loans safely and keep ownership or it would allow them the ability to safely sell without taking a loss. The one outside chance is a buyer could come in and decide to offer the Maloofs a deal they can’t refuse. But how likely is that? Think about it. Someone would most likely have to offer the Maloofs the value of the team (225 million) plus take on the outstanding loans (170 million) and also most likely agree to take part in the arena deal (70 million). Someone would have to be willing to pay double the value of the franchise to get the Kings. Who would do that?

LAST QUESTION……So What Happens?

In my opinion…..I think Johnson will find a way to get the arena done without the Maloofs involvement. The Maloofs in a show of good faith will waive the clause in their loan with the city that will allow them to build the new arena without the city losing the loan and the Maloofs will become an acyual tenant in the building. To make the deal work I think Johnson will get a local group to bring the NHL Hockey team to Sacramento to share the building. The NBA and the new ownership group will help bridge the 70 million needed (as well as a smaller upfront lease agreement with the Maloofs that the NBA will certainly help cover).

The new Arena gets on track with Sacramento now a two sport professionally city. The Maloofs will wait until the new building opens and then sell the Kings will the value of the franchise increases in 2017 or so.

That is what I think will happen when the dust settles. What do you all think?

(This is a FanPost from a member of the Sactown Royalty community. The views expressed come from the member, and not Sactown Royalty staff.)

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