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Seattle's KeyArena Goes to OVG

Wednesday, June 7, 2017   (0 Comments)

OVG wins the contract to rebuild Seattle’s iconic venue and seek a sports team to fill it

  • by Brad Weissberg | Venues Today
  • Today, June 7, Seattle Mayor Ed Murray announced his decision to award the
    contract to rebuild 55-year-old KeyArena to Oak View Group (OVG). Joining the mayor in his announcement were Oak View Group principals Tim Leiweke and Irving Azoff and Live Nation CEO Michael Rapino.

    “Today the mayor officially announced that Oak View Group will be our preferred partner to renovate KeyArena,” said Brian Surratt, director of the Seattle Economic Office of Development. “We hope to have a Memorandum of Understanding (MOU) with OVG by the end of this year.”

    Surratt said negotiations with OVG will commence in the next few weeks. “We’re going to have to work very hard to get it all done by the end of the year,” he said.

    Oak View Group will then have to go through the entitlement process and procure necessary permits. Once that’s completed, another agreement, much more detailed than the MOU, which will include the development and lease agreement, will have to be put in place. “The new document will spell out the long-term operating relationship between the city and OVG,” said Surratt.

    Surratt did not want to speculate on when ground would be broken but did offer that “conservatively it’s three to five years before completion of the new KeyArena.”

    At the press conference, Leiweke said the tentative plan would be to start construction after the 2019 NCAA (National Collegiate Athletics Association) men's basketball tournament games at KeyArena, with the hope of opening in 2021.

    The two primary reasons that Oak View Group’s bid was selected over the only other bid, put forward by Seattle Partners, an alliance between venue-giant Anschutz Entertainment Group (AEG) and Hudson Pacific Properties, were the design of the building and the finance package.

    “The people evaluating the proposals felt the OVG design was the more compelling,” said Surratt. “The design will stand the test of time and maximize the flexibility for future uses and changes.”

    Surratt said that OVG’s financial package that sourced outside investment and didn’t require city money was also a big plus for the evaluating committee. “Their bringing in private dollars was a huge factor,” he said.

    At the mayor’s press conference, Leiweke revealed new details about how the $564-million, privately-funded renovation would be financed.

    Joining previously announced investors Goldman Sachs, who have pledged $350 million in financing and guaranteed up to $400 million, Madison Square Garden Entertainment, who have promised $150 million and concert-promoter Live Nation, will be billionaire David Bonderman and Hollywood super-producer Jerry Bruckheimer, with the last three not disclosing their financial participation.

    It is hoped that OVG can lure National Basketball Association (NBA) and National Hockey League (NHL) teams to Seattle but all have committed to the project without any assurances from either sports league.

    "We're listening to what we're told,” said Leiweke at the press conference. “Let me emphasize that. It's been nine years since Seattle had its heart stolen, so when the Sonics moved this has been a chase ever since. We've listened to the commissioners, we know what they are saying, we know how they feel about expansion, we know what the opportunities are out there and we're going to follow the lead of the commissioners. I would say the first shot that is most likely to happen is an NHL team."

    OVG has already committed to partnering with concessionaire Delaware North on the KeyArena project, whose chairman Jeremy Jacobs is also the owner of the Boston Bruins. Vancouver Canucks owner Francesco Aquilini was in attendance at the press conference and acknowledged the league's interest in Seattle. He later said, "It's a very strong desire (to bring an NHL team to Seattle). I don't think there is anybody opposed to it."

    The OVG proposal calls for a 660,000 sq.-ft. venue. It will have 18,350 seats for basketball, 17,100 seats for hockey and a concert capacity of 17,100. OVG’s arena expansion method is to place the lower arena bowl and floor 15 feet underground to create a 660,000-sq.-ft. blueprint.

    OVG  previously announced that it brought in Populous and ICON to design and build the arena, and part of their proposal highlighted that their plan would save the iconic roof structure. They will also introduce a revolutionary two-scoreboard system, one sitting over each end of the arena. An atrium at one end of the arena called the Millennial Area, where there will be a bar and people circulating, will have a spectacular view of the Space Needle.

    The selection of OVG was made Friday, June 2. Surratt said he and the city were surprised, then, by a letter they received from Seattle Partners on Sunday saying the entity was pulling out of the competition. “We had zero indication Seattle Partners was pulling out until after they lost the bid,” said Surratt.

    In their letter, dated May June 4, Seattle Partners’ Bob Newman, president, AEG Facilities and Alex Vouvalides, chief investment officer, Hudson Pacific Properties, wrote:

    “We are writing to inform you that Seattle Partners must regretfully withdraw our bid to redesign and renovate KeyArena.

    "We remain firm in the belief that our proposal best serves the people of Seattle, but, unfortunately, significant factors through the bidding process have eroded our confidence in the ultimate execution of this project, no matter which group is selected. We fear the City is driving toward an unrealistic financing structure, and we believe the City has failed to conduct a sufficiently thorough, objective and transparent process to properly evaluate the respective strengths and weaknesses of the two proposals and, most significantly, to identify the proposal best positioned to deliver a project consistent with the community’s interests.

    "The people of Seattle deserve a world-class sports and entertainment venue capable of bringing back NBA and NHL teams. We have engaged earnestly in a process that we had hoped would be relentless in its pursuit of that objective, and we put forward a proposal we believed most certain to deliver a successful completed project that would attract professional basketball and hockey teams.

    "Notwithstanding our confidence in the merits of our proposal, over the past two months, Seattle Partners has actively sought feedback from community leaders, City staff and members of the City’s Community Advisory Council, and, in response, we have explored improvements to our proposal. However, consistent with a general lack of active engagement through this evaluation process, the City declined to seek improved terms, refusing requests from us and others to call for a “best and final” offer from both bidders. We have seen little indication of the collaborative and iterative process we were told to expect and is typical of such requests for proposals.

    "In addition, the City’s decision to withhold critical financial portions of Oak View Group’s proposal from the public, while releasing the financial details of our proposal with our full support, raises serious questions about the integrity of the decision-making process and the ability of the public to make a fair and equitable comparison.

    "Despite the lack of transparency, we are generally familiar with Oak View Group’s proposal, including changes to it that have been conveyed via media accounts and otherwise. Based on our experience, we have strong reservations about whether that proposal can be successfully achieved consistent with the City’s best interests. If the City elects to proceed with that remaining proposal, to protect the public interests of Seattle, it is imperative that you closely and diligently monitor the process to ensure that Oak View Group is held accountable for all elements of what it has very publicly promised to the citizens of Seattle.

    "Seattle Partners remains deeply committed to this great city, and we thank the countless civic leaders who offered helpful input and partnership on our proposal. We wish the City the best of luck in its pursuit of an arena project that can provide what the region’s passionate sports fans deserve – to see the Sonics and professional hockey return to the Emerald City.”

    Regardless of Seattle Partner’s letter, Surratt said the city couldn’t be happier with their decision and the process.

    “We are very excited to have selected Oak View Group as our partner,” said Surratt. “We believe Oak View Group will build a world-class arena that attracts NBA and NHL and world-class entertainment opportunities and we’re excited about moving forward and the next steps.”

    KeyArena opened its doors in 1962 and was last renovated in 1995. It’s the former home of the SuperSonics and currently home to Women’s National Basketball Associations’ Seattle Storm and hosts dozens of live events and concerts every year.

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