SPENDING—Sports Bucks Find Their Way Through Whole Economy

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L.A.’s top-paid athletes are livin’ large as they spread their fabulous fortunes around, and they’re making plenty of others rich in the process.

In addition to their huge salaries, the players are pulling in big bucks from business and financial investments, as well as from entertainment endeavors bringing their collective gross annual earnings to more than a quarter billion dollars a year.

A good chunk of that money is being spent on lavish homes and other possessions.

For example, Shaquille O’Neal, L.A.’s highest-paid athlete, has spent big bucks on at least four mansions in recent years. In 1999, he dropped $2.6 million for a 15,000-square-foot Beverly Hills home with eight rooms, 14 baths, an elevator, a tennis court and a 35-foot-tall entry hall surely a strong selling point for the 7-foot-1-inch, 310-pound center.

Before then, he had been leasing a 5,000-square-foot Wilshire Corridor penthouse for $25,000 a month and had also been renting a sprawling $3 million home in the ritzy “Hill Section” of Manhattan Beach.

In addition to these not-so-humble abodes, O’Neal shelled out $4 million for a 27,000-square-foot pad in an exclusive Florida community called Isleworth and, in 1996, he purchased a huge home for his girlfriend in the star-studded Sugar Land neighborhood in Houston.

“Golden Boy” Oscar de la Hoya has also paid a pretty penny for some spiffy digs, including a mammoth-sized retreat in the San Bernardino mountains, where he trains, and a 10,000-square-foot Bel Air mansion that has six bedrooms, maid’s quarters, a gym with a sauna, plus a media room, a pool, a tennis court and a 300-foot driveway that winds through the secluded 2.2-acre estate.

Kobe Byrant and Shawn Green own equally impressive homes.

In 1999, the 22-year-old Byrant spent $2.5 million on an 8,200-square-foot ocean-view estate in Pacific Palisades and the left-handed power-hitter Green recently spent nearly $3.9 million for a newly built, 6,000-square-foot home on a quiet Pacific Palisades street.

But local real estate agents aren’t the only Angelenos getting rich on commissions paid by L.A’s top-earning athletes. There’s a rapidly growing sub-economy of sports agents, financial planners, tax attorneys and money managers who are helping themselves to some pretty hefty slices of the ever-expanding professional sports salary pie.


Management teams

David Carter, a sports business consultant at Sports Management Group in Redondo Beach, said it is not uncommon for top athletes to have as many as 15 people on their management teams.

“Typically, a high-profile athlete will have one or two agents who negotiate contracts and commercial endorsements, one manager who arranges daily activities, and one or two people handling marketing activities,” Carter said. “In addition to these folks, they may also have several people handling their financial portfolios, a couple people handling their investments and an attorney or two taking care of complicated tax compliance issues.”

Of all the players on that roster, super agents like Scott Boras (whose clients include Kevin Brown, Alex Rodriguez, Barry Bonds and Greg Maddox) and Leonard Armato (who represents Shaquille O’Neal and Oscar de la Hoya) are taking the biggest cuts of L.A’s top athletes’ salaries.

The ubiquitous Armato, who said he began his career 15 years ago when his former college basketball coach recommended that he represent fellow USC athlete Ronnie Lott in NFL negotiations, declined to comment on his commission percentages. But Carter said that most agents typically take 3 to 5 percent of every contract they negotiate and as much as 20 percent of commercial endorsements.

Beverly Hills-based Boras, who clears 5 percent of every contract he negotiates and who has been criticized in the press for exacerbating the sports salary wars, recently brokered Kevin Brown’s seven-year, $105 million contract.

Not one to kick back and count his commissions, Boras also worked out a $55 million deal for Dodger pitcher Darren Dreifort the same day he brokered Rodriguez’s record-breaking 10 year, $252 million contract. That means Brown, Driefert and Rodriguez collectively paid nearly $20 million in commissions to Boras.

Despite the hefty commissions they’re paying their agents, L.A’s highest-paid athletes still have plenty of money left over for investments.


Savvy investors

Of all the athletes on the list, O’Neal is probably the best example of an athlete who is well diversified and who has taken advantage of all the marketing and investing opportunities available to him without spreading himself too thin, said Carter and other industry observers.

In addition to his many real estate investments, O’Neal owns a record label, a clothing line called “TWIsM” and has invested in several Web sites, including SportsLine.com and Dunk.net.

Not one to limit his horizons, O’Neal has also released five rap albums including “Shaq Diesel,” “Shaq Fu: Da Return” and “You Can’t Stop the Reign” and has appeared in three movies “Blue Chips,” “Steel” and the ever-regrettable “Kazaam!”

Like O’Neal, de la Hoya is entrepreneurial-minded and well diversified. The Olympic gold-medal winning boxer recently launched his own clothing line, has sold millions of dollars of Oscar de la Hoya memorabilia at his Internet storefront called “Oscar’s Online Store” and his debut album, which recently received a Grammy nomination, has sold more than a quarter million copies worldwide.

The young but enterprising Bryant is also a savvy investor: He recently paid $2 million for a 50 percent ownership interest in Olympia Milano, one of Italy’s most celebrated basketball teams.


Bad investments

Though none of L.A’s highest-paid athletes have made any catastrophic financial decisions so far, even the otherwise financially savvy O’Neal has made a few bad investments.

Dunk.net, for example, hasn’t returned the paydirt he expected. But Carter said that Shaq didn’t have that big of a financial stake in the online company, so at the end of the day, it wasn’t too horrible of an investment.

“A lot of people think that when an athlete makes a bad investment that it’s a function of their being a dumb jock, but it’s really a function of two other things,” Carter said. “First, most highly paid athletes are young and haven’t had the time, or haven’t taken the time, to learn what it takes to manage money and, second, a lot of athletes get taken in by unscrupulous agents who prefer to keep them in the dark about how they’re managing or in some cases, mismanaging their money.”

The athletes who get in the biggest financial trouble, according to Carter and other analysts, are the ones who invest in speculative nightclubs and risky limited partnerships or who hire a manager and say, “Just invest in what you think is best and let me know how it turns out.”


Giving some away

L.A.’s top athletes, of course, aren’t simply spending money on themselves.

De la Hoya, for example, whose mother recently died from breast cancer, donated $350,000 to the White Memorial Medical Center in L.A. last year. He has also donated “millions to local youth centers that help educate L.A. kids and give them an opportunity to play sports and a safe place to go after school,” said Armando Gaytan, director of operations for the Oscar de la Hoya Foundation.

Pitcher Brown also donates time and money to local charities when he’s not throwing heavy sinking sliders for the Dodgers. In addition to working with Big Brothers/Big Sisters, Teen Recovery Centers and Children’s Cancer Centers, he also donates $50 for every strikeout to cancer research and purchases tickets to send 50 children to every Saturday home game.

O’Neal is also a fairly charitable guy. In addition to donating to the Boys and Girls Clubs and Reading is Fundamental (RIF), O’Neal also gives toys to disadvantaged kids every Christmas as “Shaq a Claus” and dresses up every Easter as “Shaq a Bunny,” Armato said.

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