April 9, 2013

Burkle drops out of Sacramento's Kings group, focuses on development

Ten days before the NBA decides whether the Kings stay in Sacramento, a key investor in the effort has been forced into a secondary role.

Ten days before the NBA decides whether the Kings stay in Sacramento, a key investor in the effort has been forced into a secondary role.

Beverly Hills billionaire Ron Burkle, a driving force for the past two years in trying to keep the Kings from leaving town, will not invest in the team or the proposed Downtown Plaza arena, Mayor Kevin Johnson announced Monday afternoon.

Facing questions over a conflict of interest, Burkle instead will focus on redeveloping other portions of Downtown Plaza. "He's so committed to Sacramento," the mayor said, adding that he spoke with Burkle on Monday. "There's a host of ancillary development opportunities that Ron will participate in."

Burkle was going to take the lead in developing the proposed $448 million arena and would have held a small ownership stake in the team. Sacramento officials had said his presence was a huge asset in part because he successfully developed a new arena three years ago for his hockey team, the Pittsburgh Penguins.

Johnson insisted that Burkle's new role would not deflate the effort to keep the Kings from going to Seattle, and said other investors would pick up the financial slack. He did not give specifics.

"I don't look at this as a slow-up or a hiccup," he said. "We won't miss a beat." He said that NBA team owners, who met with the Sacramento investors last week, were comfortable with the shifting arrangement.

With Burkle taking a back seat, software magnate Vivek Ranadive and East Bay health-club financier Mark Mastrov "are going to be the lead investors" on the team and arena, the mayor said.

He hinted at more updates on the ownership situation in the next day or so, adding: "We're kind of crystallizing everybody's roles right now."

Ranadive was in Sacramento on Monday to meet with business and government leaders.

A source familiar with the matter said the Jacobs family of San Diego, founders of telecommunications giant Qualcomm Inc., would take on a more significant role in the ownership group. The source spoke on condition of anonymity because he wasn't authorized to speak for the Jacobses.

The Jacobses didn't join the Kings effort until late March and have kept a low profile. One of the family's members, Jeff Jacobs, issued a statement Monday saying "we are thrilled to join Vivek and Mark in their efforts to keep the Kings in California and revitalize Sacramento."

Even with a smaller role, Burkle's participation in the development around the proposed arena is seen as vital. That development, city officials have said, is key to making the whole project pencil out for investors.

Michael McCann, a sports-law expert with NBA TV, said the ownership change is "potentially a concern for Sacramento." But he added that it likely won't matter to the NBA if the league is satisfied that the Sacramento ownership group can finance the team and arena.

The Sacramento investors are trying to derail the Maloofs' pending sale of the Kings for $341 million to Seattle investors led by hedge fund manager Chris Hansen and Microsoft CEO Steve Ballmer.

The NBA board of governors is expected to decide the issue at its meeting April 18-19 in New York, although Commissioner David Stern said the complexity of the situation could delay the vote.

The NBA decided Burkle's role had to shift because of a conflict of interest. He is part owner of an athlete-management firm, Relativity Sports, whose clients include NBA players such as Amare Stoudemire of the New York Knicks. NBA spokesman Mike Bass confirmed that the Relativity investment meant Burkle had to withdraw.

Johnson said Sacramento officials were aware of the conflict heading into a pivotal meeting with a committee of NBA team owners last week in New York, where investors and public officials for Sacramento and Seattle both made presentations.

"When we were going back to New York, we knew that (Burkle) had a potential conflict," the retired NBA star told a crowd gathered at Downtown Plaza, where sportswear maker Fila announced it's launching a new line of basketball shoes named for Johnson. "We were trying to work out the issue. Ultimately the NBA felt it violated their rules."

Stern hinted at the issue in a news conference last week, when he said NBA owners wanted more details from Sacramento and Seattle about "capital commitments," arena-construction timelines and other issues.

Johnson said Burkle would focus on the non-arena development at Downtown Plaza. According to city officials, Burkle has preliminary plans for office and retail space, a hotel and residential units.

City spokeswoman Amy Williams said the shift would not require a new vote by the City Council on the arena deal. The city plans to contribute $258 million to the project.

Burkle was Sacramento's original white knight in the Kings drama.

In April 2011, when the Maloofs were angling to move the team to Anaheim, Burkle's associate Darius Anderson told the NBA that Burkle was willing to buy the Kings and keep them in Sacramento.

The Maloofs rebuffed the overture. But Burkle's interest helped give Sacramento a jolt of credibility with the NBA. The Maloofs backed off the Anaheim plan.

More recently, Burkle was the first billionaire investor to surface in the effort to block the Seattle move, and he quarterbacked the plan to transform Downtown Plaza into a new Kings arena.

Given the Maloofs' lingering resentment toward Burkle's intervention in 2011, his diminished role could work in Sacramento's favor, McCann said. If the Seattle deal is vetoed by the board of governors, it's expected the Maloofs would have to work out a sale with the Sacramento investors.

"The Maloofs do not like Burkle," the sports-law expert said. "By removing him from the story it could end up helping Sacramento."

Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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