Maloof responds to arena issue
George Maloof says his group did not agree to a $3.25M pre-development fee
The NBA says it will front the first $200,000 of the fee
Maloof says his ownership group is not speaking with any other cities
With questions again swirling as to whether the Kings will remain in Sacramento, team co-owner George Maloof spoke with SI.com on Friday to break down the state of his family's arena-building affairs.
A deal was agreed to in principle on Feb. 27 in Orlando, where the Maloofs, Sacramento Mayor and former NBA point guard Kevin Johnson and NBA commissioner David Stern all celebrated what appeared to be the end of a long negotiating road. But the Los Angeles Times on Thursday revealed the family's concerns about the deal, and the fans that nearly saw their team relocate to Anaheim in March 2011 suddenly had those fears come rushing back.
Specifically, the Maloofs say they're unwilling to pay $3.25 million in pre-development fees, as well as the additional $3.25 million they say they've been asked to cover on behalf of potential owner/operator Anschutz Entertainment Group if the deal fell apart. Stern responded by announcing Thursday that the NBA would "advance pre-development expenses on behalf of the Kings pending our report to the NBA Board of Governors at its meeting on April 12-13," though it's unknown whether they might be willing to cover the entire amount in order to avoid more complications. Johnson, meanwhile, issued a statement about the matter on Thursday.
"The success of the new entertainment and sports complex depends on complete trust and partnership among all parties," Johnson said in the statement. "It was with that spirit that we all agreed to a deal in Orlando, including the Maloof family, who looked an entire room in the eye and promised their commitment to Sacramento. In light of the Maloofs' promise, we fully expect all parties to live up to their commitments."
While the term sheet that was agreed on was non-binding, the breakdown of how those costs would be shared was included on page 10 of the 45-page document. George Maloof -- who headed the family's Palms Casino in Las Vegas before it lost majority interest and remains the chairman -- has long been seen as the most discerning member of his family when it came to this deal.
SI.com: How should people view these events of the past few days?
Maloof: You know, I think that there's still hope, a lot of hope. I think that we can get it done, but I think people have to realize that it's a process. But when you're dealing with the public and you're dealing with three parties, you don't always agree. That's part of negotiating a deal. I think the thing that I was just taken back by a little bit was, I was surprised this was even an issue because we've been very up front with this. The moment I saw the term sheet, which was the week before the deadline, and we were very clear with everybody that we weren't going to pay for those fees, so I was a little taken back. I guess people were surprised by that. Anyway, it is what it is. I just wanted to make sure people got the real story. That's important.
SI.com: The Sacramento Bee had published a copy of the non-binding term sheet and it certainly seemed as if the family had agreed to pay that portion of the pre-development fees. What am I missing here? It certainly seemed as if this was something was agreed on before.
Maloof: Absolutely not, and everybody knows it. And like I've told everybody today, if anybody says otherwise, then they're lying. From day one, that was an issue that we had. And there are other issues.
That was one that we were vehemently against, for a couple of reasons. No. 1: As a developer -- and I've developed lots of properties -- you're used to paying those types of fees, those pre-development costs and consultants or architectural fees. I've never passed that fee onto my tenant, so it didn't make sense. I'm sure someplace in the world, a tenant has paid for a pre-development cost, but the customary way is that they don't pay for that. Not only that, but [the city] asked us to pay for AEG's cost if the deal didn't happen, and that's just not a fair deal. I just didn't believe that was fair from day one.
We've stretched ourselves on numerous occasions, but at the end of the day it's part of the process. I know it's a public deal, and I think the public should be informed. We're prepared to move forward and get it done at that site, but it's got to be under the right terms for everybody.
SI.com: The NBA has already agreed to advance the first $200,000 of that $3.2 million, and I could possibly see it eventually covering the entire thing. But even if this gets settled, is this going to be just one of a number of obstacles to this deal that are challenging in the coming months?
Maloof: Well, again, we see the term sheet for the first time in present form on Feb. 17th, on a Sunday, and we're talking about a $400 million-$500 million deal, and here we are just looking at it at that point.
On any deal you do, there's always going to be pushback. It's very normal. I think the whole process is going to be a normal process of negotiating and we're not always going to agree on everything, but we'll try to work toward getting it done. We're still committed to that. I know the mayor said we all looked at each other in the eye and said, 'This is the deal,' but in reality we said that we have the framework of the deal and we have a lot of work to go. That was the real deal.
SI.com: The rumblings from your fans about you guys just not wanting to be in Sacramento and trying to get out started up pretty quickly again after the L.A. Times story broke. You feel like addressing that sentiment?
Maloof: Not true. Absolutely not true. That's 100 percent not true. When we give our commitment to something, we're going to see it through. It doesn't mean that there's not going to be issues as we go along -- that's the normal course of business and that's the way it works. We're not secretly talking to anybody else nor would we do that.
SI.com: No discussions in the background with Anaheim or anybody else?
Maloof: No. Absolutely not. Absolutely not.
SI.com: To be fair to you, plenty of folks I've spoken with are convinced that you guys leaked the story to the L.A. Times and it has people worrying about Anaheim as a threat again. Care to weigh in on that?
Maloof: I have no knowledge of how that came out. Absolutely none.
SI.com: So dots are being connected that shouldn't be connected?
Maloof: Yes, yes.
SI.com: Have you spoken to the NBA since this happened, and what kind of message are you getting from them?
Maloof: We've been in contact with the NBA, of course. They understand [our position], but we're not going to agree on everything either. It's just something that we feel pretty strongly about, particularly the idea that we would be paying for somebody else's contribution if the deal didn't work. That was probably the most irritating part of this particular issue. If the deal didn't go through, we would be stuck paying for AEG's contribution of the predevelopment costs. Why would that be fair? That's not fair. ... We have to do all of our due diligence, and figure it out. We just want to be smart about it, and that's what we're doing.
SI.com: Bottom line, how concerned should your fans in Sacramento be?
Maloof: Not concerned. Not concerned. We're committed to this process. If it doesn't work, it doesn't work, but we're fully committed to try to get it done. There's no other backup plan that we have right now. We're just focused on this. It's enough to focus on. Trust me.