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AEG Claims Maloofs And Kings Would Have Made $13 Million Annually With New Arena

To say AEG (the would be arena builder) and the Maloofs aren’t on the same page when it comes to, well, essentially everything, would be quite the understatement. Between the almost awkward disdain for the Maloofs from the AEG President to the irritating quotes we’ve seen the past few weeks, I don’t expect them to be gathering around a campfire for songs and marshmallows any time soon.

Credit: Kelley L Cox-US PRESSWIRE

And now comes a piece from Dale Kasler of the Sacramento Bee which reveals some interesting tidbits (like that the Maloofs were presented the said scenario in NOVEMBER before declining it in MARCH), I can’t imagine that relationship getting any better in the immediate future.

One of the most polarizing items presented in Kasler’s piece was the fact that AEG came to the conclusion that the Maloofs, with the new arena complex and a $75 million dollar payroll would make a profit of at least $13 million dollars a year (originally $11, but bumped for projected sponsorship numbers):

A new building would have left the Kings with “positive cash flow of $11 million in the first year of operations in the new arena,” Litvin wrote. The arena was supposed to open for the 2015-16 season.

NBA spokesman Mike Bass said Thursday the numbers “reflected our view at the time. Since then, we’ve revised the number up slightly to $13 million to reflect additional projected revenue from team sponsorship inventory.”

Keep in mind, the $13 million dollar profit would have been only for the first year in the new arena – but one could assume with solid business tactics (so keep George away) the Maloofs profits in coming years would only increase as the team improves. The $13 million dollar profit also didn’t include the $15 million from the NBA’s new revenue sharing program, so essentially, the Kings could be looking to profit $28 million dollars in 2015, with a $75 million dollar payroll. Obviously there are some additional costs in there that would reduce the $28 million dollar profit, but needless to say – good, good, times.

Granted, the numbers do have some assumptions in them – like a new TV deal which would pay the Kings a fair market value of $23-24 million dollars a year (for comparison sake, the small market San Diego Padres signed a TV deal a few months ago which starts out at $28 million this year), which might be short changing them a bit in the 2015 market.

So essentially, this comes down to a battle of he said/she said – AEG claiming the Maloofs could easily make money, the Maloofs claiming AEG doesn’t know what they’re talking about.

Granted, AEG does have some pretty lofty expectations in their projections, some clearly that would have difficulty being met (like ticket sales) – that said, this isn’t AEG’s first rodeo. They know what they’re doing and more than that, they’ve been very successful in what they do. Unfortunately for the Maloofs, I’m not sure you can say the same about their business practices.

So in a battle of he said, she said – who’s word do you believe?

Topics: AEG, Arena, Gavin Maloof, George Maloof, Joe Maloof, Maloof, Maloofs, Relocation, Sacramento Kings

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  • http://www.bloguin.com/evilcowtowninc Nate Hughart

    You know it’s bad that ownership claims they don’t know how to make money. This is what the Maloofs have essentially claimed. At the same time, I’m not sure any of the Family realizes that. All they are trying to do is facilitate a buyer, a buyer that needs to have control of the franchise when they buy it, and get a lot of cash for selling the team. The problem is the liquidity that the Maloofs don’t have, and the sheer amount of debt the franchise has on it’s head. But oh no, the Maloofs are rich!!!! They’re tremendously wealthy!!!!
     
    On the other hand, 53% (assuming the Maloofs have control or access to 53% of the team) ensures a new buyer that they control the franchise. Of course, this also means that the buyer gives the Maloofs a good price too. Which is assuming a lot of course.
     
    I think the Maloofs are trying to screw Sacramento for forcing them to give up the Kings. In turn, they want to sell the team to a buyer who will take the team therefore making Sacramento pay for not giving them what they want.
     
    I realize that isn’t logical, but I’m talking about the Maloofs too; logic need not apply.

  • ARoyalPain

    I really don’t know what to believe any longer. Part of me thinks Joe and Gavin really do want to stay in Sacramento, but the majority of the family who doesn’t have any ties to the community wants them gone, so they’re leaving Joe and Gavin to clean up the mess. Seems almost like a real power struggle between the family, honestly. I know they’ve always said though, they’ve regretted losing the Rockets so I think it’s going to take something epic to force them to eventually sell, cause they know once they do – they’re never getting back in.

  • http://www.bloguin.com/evilcowtowninc Nate Hughart

     @ARoyalPain There is a lot of truth to this Bryan. There has to be a power struggle, and I’m not sure who likes what or whom. The Maloofs are no longer seen as viable owners by the NBA, and AEG will likely pull out of the project after the Maloofs essentially pissed them off. Or, AEG will pull out publicly now and say they weren’t really out of it until the Maloofs exit stage left.
     
    I think the Maloof family is either A) delusional about their realistic chances of retaining ownership of the Kings moving forward or B) thinks that not committing to a lease long term makes the franchise more attractive when they put their shares up for sale.