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City and Whales Arena/Development Package: $947 Million

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(Sacramento, CA)
Saturday, March 23, 2013

The City would contribute $258 million to an arena - most of it coming from privatization of parking assets and the sale of City-owned land.

The developers, listed as Ron Burkle, Mark Mastrov and Vivek Ranadive would contribute $189 million to the arena and be responsible for: all expenses, operating risk, providing a project completion guarantee, cost overruns, operating expenses, routine maintenance and replacement, police, traffic and other service costs on event nights, and capital repairs.

A $1 fee on each ticket would be added with the money going to a capital repairs reserve fund.

The city will issue new 30-year bonds for the existing loan owed by the Maloof family, as long as there is collateral from the investors. That could include a lockbox on revenues from a new arena. The term sheet leaves open other possibilities for collateral.

The investors could sell the 85 acres in Natomas to help reduce the principle on the amount. The City would sell the 100 acres in Natomas as part of its land sales contribution.

Operational control of the approximately 2,700 parking spaces at the Downtown Plaza would be turned over to the investor group. One thousand spaces would be set aside as premier parking spots. Revenues from non-Plaza parking would be retained by the city.

Money made by the arena would go to the general fund in various fees, taxes, and profits that the city estimates would total $9 million - which is the amount the city would lose by privatizing its parking operations.

The city would make a return on its investment depending on the profits achieved by the arena -15 percent of first $10 million, 30 percent of next $5 million, and 50 percent  of anything over $15 million. There would be a guaranteed annual payment of no less than $1 million.

People close to the negotiations had stated the investors wanted more development around the arena to help them recoup their investment. The term sheet says the city agrees to allow the development of up to 1.5 million square feet of office, retail, housing, and hotel space around the Downtown Plaza site.

Half of the development would be office and retail space along with 250 hotel rooms and 600 units of multi-family housing.

Costs of these development projects are estimated by investor group at a little more than $500 million.

The investors commitment to the arena alone dwarfs the amount the Maloofs agreed to last year by more than $115 million. The City Council is scheduled to vote on the term sheet Tuesday night.

See the City of Sacramento Entertainment and Sports Center staff Report and Term Sheet.

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