AEG Courts Disney, Viacom for Complex

Staff Writer

Anschutz Entertainment Group is negotiating with both Walt Disney Co. and Viacom Inc. to anchor a planned 200,000-square-foot media and entertainment facility next to Staples Center.

As part of the developer's planned $1 billion L.A. Live complex, the project would involve moving the studios of Viacom's KROQ-FM (106.7), KCBS-FM (93.1) and ESPN to a proposed building at Olympic Boulevard and Figueroa Street, according to sources familiar with the talks.

In addition, the sources said Disney is in talks with AEG officials to open an ESPN Zone theme restaurant.

In January, Ted Tanner (photo), AEG's senior vice president of real estate, told the Business Journal that the center would be anchored by a sports television network broadcasting a live show from the building. He said there would also be an attached sports bar and grill themed restaurant.

The complex would also have a large restaurant area, anchored by Lawry's Foods Inc., and a Food Channel show broadcast from the facility, Tanner said. A third building would contain a 2,500-square-foot nightclub likely to be operated by AEG.

AEG spokesman Michael Roth said the company would not comment on lease discussions.

Disney Regional Entertainment Marketing Director John F. Pierce said the company did not have a deal with AEG. Neither John Davidson, general manager of ABC's L.A. radio stations, nor Trip Reeb, general manager of KROQ-FM and KCBS-FM returned calls seeking comment.

Paving the way

The talks with Disney, the No. 2 media company by revenues, and Viacom, No. 3, are likely to gather steam now that AEG has bought out its Staples Center partner, No. 4 media conglomerate News Corp.

As expected, AEG last week announced that it had purchased News Corp.'s equity interest in Staples for $200 million. Its Fox Sports Net studios will remain in Staples Center and the company will retain its ownership of the Fox Sports Sky Box restaurant in the arena.

Mary Beth Garber, president of the Southern California Broadcasters Association, said News Corp. had to be out of the ownership picture for AEG to lure its competitors. "This couldn't have happened with Fox as an owner," she said. "These are not friends."

At a meeting with business and civic leaders four weeks ago, AEG President and Chief Executive Tim Leiweke showed renderings that listed ESPN as a tenant in the broadcast building.

He told the group AEG was buying out its partners at Fox, clearing the way for a considerable amount of new tenant options and giving ESPN access it would otherwise been denied, according to persons who attended the meeting.

Roth said he wasn't at the meeting or aware of the renderings, but he acknowledged buying out News Corp. would give the company more control over the project.

"Buying out Fox will streamline the decision-making process and give us an opportunity to control all of our destiny, externally and within our organization," Roth said.

Momentum for the development of the long-delayed entertainment complex has picked up markedly in the last six months.

After being stalled by litigation and the city's reluctance to back financing of a 1,200-room convention hotel at the site, AEG recently moved to proceed with the project largely using private funds and has brought on local hotelier Lew Wolff as the hotel's developer.

AEG has agreed to a deal with the Academy of Television Arts & Sciences to a long-term lease for the annual Emmy Awards show at a $70 million, 7,000-seat theater at the complex.

But that deal is contingent on having both the theater and hotel ready by December 2006.

"The Emmy's have a deal with us," Roth said, "and it's very important to us that we hold up our side and have everything ready on time."

Having become more confident the hotel can get built, as reported by the Business Journal last week, AEG has begun lining up tenants for the 200,000-square-foot entertainment and retail center at Olympic and Figueroa.

Deadline pressure

To meet the deadline necessary to assure the Academy lease, Roth said AEG plans to break ground on the project by the end of the year. He said the company would announce all its signed leases and other contracts for the project in the next six to eight weeks.

"We're trying to announce several of the entities that will be moving their companies or their locations to the entertainment district," Roth said. "Once the deals are in place, there is no reason not to begin construction."

The Los Angeles City Council granted AEG entitlements in 2001 to build two hotels with a combined 1,800 rooms, nearly 1,000 housing units, the retail/entertainment complex and the live theater. To begin construction, AEG will need to simply acquire a building permit.

Hurdles still remain, however. It is anticipated that AEG will still seek millions of dollars in city subsidies to make the nearly $300 million hotel project pencil out. Sources familiar with AEG plans said the focus of that financing package would be on reaching an agreement to use the 14 percent tax collected on hotel rooms, rather than tapping the general fund.

The company may also ask the city to waive or discount permit fees and business taxes, which could add up to several million dollars in savings, according to the sources.

Councilwoman Jan Perry, whose 9th District includes the Staples Center, said it was possible AEG could get its hotel funding proposal through the City Council and begin construction by the end of the year. "They've been through this drill before with Staples Center," Perry said. "They know what they're doing."

For reprint and licensing requests for this article, CLICK HERE.