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Two Possible Arena Sites Offer Different Mix Of Pros And Cons

Source: Sacramento Business Journal

Brokers: Ken Turton

The billionaires investigating a possible counteroffer for the Sacramento Kings have a complex question to answer: Which site is the best bet for a new downtown arena?

The two sites being considered in the effort to save Sacramento’s basketball team from a move to Seattle are the Downtown Plaza mall and the city-owned portion of the railyard.

The mall site seems to be generating more positive buzz among observers, but comparing the two requires complex analysis — including data that is not available or easily accessed by anyone but those directly involved.

Sacramento Mayor Kevin Johnson and City Manager John Shirey told reporters this week that the city will leave the arena location decision up to the big-money investors who ultimately would put in a bid to buy the Kings.

As the Business Journal went to press Wednesday, the so-called whale investors hadn’t been named and it was looking like they wouldn’t be for a while longer while the billionaires continue their due diligence on the economics of buying the Kings and developing a new arena. The likely equity investors are supermarket magnate Ron Burkle of Southern California and Bay Area entrepreneur/24 Hour Fitness founder Mark Mastrov.

So what advantages and disadvantages are the potential investors examining? Issues include cost, time frame, traffic, parking, infrastructure and spinoff development potential. Each site has pros and cons.

Several people familiar with the arena debate said an arena at the centrally located Downtown Plaza would jump-start investment immediately around the mall and would spill over into the railyard. But an arena at the railyard, because it is tucked north of the urban core, would not have the same spillover effect.

An arena at the mall site also answers the immediate need for reinvestment in Downtown Plaza, said Michael Ault, Downtown Sacramento Partnership executive director.

Ken Turton, a commercial real estate broker specializing in Sacramento’s central city, agrees. “It immediately rejuvenates and reactivates a significant and key piece of commercial real estate that has deteriorated somewhat consistently over the last couple decades,” he said. The mall site also could boost the whole K Street corridor, he said.

There seems to be no consensus on whether an arena could be developed faster at one site over the other. A common refrain, however, is that the railyard site would have a clearer path to development as it is a blank canvas.

Also, the arena feasibility research already has been completed at the railyard from a previous arena effort. That was the proposal from which the Maloof family, majority owners, walked away.

The city last closely examined the mall site for an arena in 2004. It was proposed again — but not studied — a couple years ago, but that location was viewed as a no-go because global mall operator Westfield Group, which owned Downtown Plaza until last year, didn’t seem interested.

Developing at Downtown Plaza would require negotiations with multiple existing tenants and several property owners, reconfiguring existing buildings and moving around parking.

At the railyard, “you’re starting with basically a cleaner site,” said McClellan Business Park president Larry Kelley, who has been active in the arena efforts for several years. Two years ago he was part of a group that pitched an arena at the mall site. Now Kelley is one of more than 20 locals who have committed $1 million each to add to the counteroffer for the Kings.

Ault, however, said an arena “absolutely” could be built faster at the mall because utilities, a sewer system and streets are already in place. The railyard “build-out is still a phased approach” that is years away, he added.

Also, mall owner JMA Ventures LLC has embraced the possibility of an arena and had sketches drawn up soon after buying Downtown Plaza. At the railyard, the city owns the land being considered for an arena. But railyard development would require collaboration with owners of the rest of the railyard land, including Sacramento Regional Transit District and Amtrak. Inland American Real Estate Trust, a lender owner that is not a developer, owns the bulk of the railyard. The city isn’t a natural developer, either. A private-sector developer could move more quickly.

So is one site favored over the other?

Kelley, for one, thinks the mall site makes sense. “If you could create the activity and the sense of place there, the city could grow out from that,” he said. At the railyard, he added, it would be harder for the downtown core to benefit. Developing an arena at the mall site would benefit the downtown core more — and more immediately, he said.

Downtown Sacramento Partnership hasn’t formally taken a position on a preferred site, Ault noted, but the central business district booster historically has looked more favorably at a mall site for its proximity to transit and existing parking, its ability to complement existing businesses, and its ability to link the J, K and L streets corridor to Old Sacramento.

As part of the team that seeks to develop the 700 block of K Street, D&S Development Inc. principal Bay Miry favors the mall site for an arena. Given the city has spent so much time focusing on one part of downtown, it makes sense to stay focused instead of shifting even a few blocks away, he said.

Burkle reportedly has endorsed the idea of locating a new arena at the mall site.

No matter what observers think, the arena site selection will come down to economics and time. The arena location would have to pencil out for the big-money investors who would step in to try to save the Kings.

 

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