AEG seeks early rights in LA deal
Tuesday, April 19, 2011
LOS ANGELES (AP) — A proposal to bring NFL football to downtown Los Angeles is not supposed to cost a public penny, but a little-noticed provision in a current draft of the plan would transfer valuable development rights from the city to the developer pitching the project.
The concession sought by sports and entertainment company AEG would allow the company to expand its robust presence in a rapidly developing area considered a cornerstone of the city’s downtown revival.
The company’s initial printed pitch, which a City Council committee began considering Monday, envisions a deal that would grant it the ability to build on a 2.4-acre parcel within its LA Live hotel and restaurant complex that the city planned to use to expand its aging convention center. Chief Legislative Analyst Gerry Miller told the committee that a NFL team would have to stay put in a downtown stadium for 20 to 30 years for city officials to approve the project.
The firm had agreed to leave the so-called Event Deck parcel alone until 2021 as part of the 2001 deal that allowed the company to build its 27-acre LA Live project on land that it owns.
After that, the 250,000 square feet of development rights over several stories would fall into AEG’s hands to add to LA Live, a buzzing oasis of nighttime activity that was promoted as a major draw to enliven a once-sleepy downtown.
AEG now says the city no longer needs access to the parcel, which experts said could be developed into retail and office space worth millions to the company each year in leasing revenue, because a new convention center building would be built along with the 72,000-seat stadium it has proposed.
The request is part of a so-called transaction overview that AEG sent to city officials in February.
“If the city is not going to use it, then there’s no need to hold it for them,” AEG spokesman Michael Roth said of the parcel, stressing that the company would need to go through a formal entitlement process with the city to have anything built there.
The AEG-owned parcel’s only allowable use under the 2001 deal would be for a convention center expansion, something the city has not made any serious moves toward constructing.
But some still may interpret the potential surrender of an asset of such value as a giveaway to AEG, said California State University, Los Angeles, political science professor Gregory Andranovich, co-author of “Olympic Dreams: The Impact of Mega-Events on Local Politics.”
“It would be an opportunity to get something online 10 years earlier,” he said. “Also, with all the other construction going on, it’s an opportunity for AEG to push something through much faster and with less scrutiny.
AEG’s stadium plan is one of two competing proposals that aim to bring football back to Los Angeles some 15 years after the Rams and Raiders left the nation’s second-largest market within months of one another.
Warehouse magnate Ed Roski has permits in place to build a separate 75,000-seat stadium about 15 miles east of Los Angeles, in the city of Industry.
Both camps have said they hope to recruit a team — and possibly two — from among those in the league that need a new stadium to maximize revenue but are unable to get one built in their current locations.
The San Diego Chargers, Oakland Raiders, Minnesota Vikings and Jacksonville Jaguars are among the teams often mentioned as possible candidates to play in the proposed venues.
AEG often touts LA Live’s role in helping rejuvenate downtown Los Angeles as a preview of the impact its stadium proposal could have when promoting its plan to city residents and officials.
The complex’s storefronts and office suites are now fully occupied, with such retail tenants as ESPN Zone, Lucky Strike Lanes bowling alley and The Yard House, a bar touting the world’s largest selection of draft beer.
Nutritional supplement company Herbalife International of America Inc. is one of the largest tenants in the complex’s office space, where AEG’s headquarters are also located.
Roth said the firm has not yet considered what to do with the space, which would face the site where the firm hopes to build its football stadium.
Whitley Collins, who represented Herbalife in its leasing negotiations with AEG as a brokerage director for real estate firm Jones Lang LaSalle, said additional development would likely include more bars and restaurants to draw fans who wouldn’t be able to tailgate in parking garages in the densely developed area.
“Based on the fact that it’s across the street from the stadium, based on the fact that the biggest knock on the stadium is no tailgating, boy, that makes a lot of sense,” said Collins, who predicted that AEG would add additional office space on the development’s upper stories.
Collins estimated that retail and office space could lease for as much as $27 per square foot once the market for commercial property recovers — up to $6.75 million each year if all 250,000 square feet are developed. Such a development would increase the amount of office and retail space at LA Live by nearly 25 percent.
AEG has said it would pick up the entire $1 billion construction tab for its stadium. The venue would be constructed over half the existing convention center, which would be rebuilt to attract more conventions.
The company’s plan calls for the city to issue some $350 million in bonds to finance the demolition and relocation of the contention center hall displaced by the stadium.
AEG officials have said they would ask the city to let it use stadium ticket taxes and new venue-related revenue from city-owned parking lots to service the debt on the bonds, but would make up an estimated $6-million-to-$8-million shortfall.
Roth said the plan would nearly double the amount of space at the convention center from 770 square feet to about 1.2 million square feet, which would allow the city to seek business from some two dozen major conventions that currently do not consider events in Los Angeles due to lack of space.
AEG CEO Tim Leiweke has said the company may ask the city for a contract to manage the entire convention center site, which would bring some 100,000 contiguous acres of downtown Los Angeles, including the AEG-owned Staples Center indoor arena and the LA Live complex, under the company’s management.
Councilwoman Jan Perry, whose district includes the site and who chairs a special City Council committee tasked with vetting the plan, said AEG’s proposed convention center configuration was preferable to the one envisioned by the 2001 deal that nestled the expansion within LA Live.
But she said the city should not surrender rights to the parcel ahead of schedule unless AEG offers a commensurate tangible benefit in return as part of negotiations.