The deal paves the way for a $1-billion project around the arena that could include a theater and hotels.
A company controlled by Denver billionaire Philip Anschutz has purchased Fox Entertainment Group’s 40% interest in Staples Center, paving the way for work to begin on a massive $1-billion addition to the area surrounding the arena.
The deal, estimated at about $200 million, gives Anschutz’s entertainment and development company, AEG, greater control of the downtown arena and surrounding 28 acres. It plans to build a 4-million-square-foot development called L.A. Live, which could house a 7,000-seat theater, a 1,200-room hotel, other smaller hotels, restaurants, stores, offices and residential units.
Buying out Fox was one of the final steps necessary to get the long-anticipated project off the ground, said Timothy J. Leiweke, president of AEG. “Otherwise we wouldn’t have taken a happy relationship with a good partner and bought them out.”
AEG hopes to unveil its plans — expected to include radio and television facilities for broadcasters that would compete with Fox — in coming weeks, Leiweke said. Construction could begin by the end of this year.
Under the agreement with AEG, Fox will keep its ownership share of the Fox Sports Sky Box restaurant at the arena. And Fox’s Southern California Sports Report and other sports-oriented shows will continue to be broadcast from Fox’s studio located in Staples Center and operated by AEG Teleworks. Fox will continue to be a paid sponsor of the arena.
After Fox parent News Corp. sold the Dodgers this year, owning a stake in Staples Center no longer made sense, a Fox source said. When the media giant originally struck the deal with AEG, Fox envisioned building a regional sports behemoth in Los Angeles that would include teams, stadiums and cable channels.
News Corp. bought the Dodgers in 1998 and started a second cable channel in Los Angeles to carry Dodger, Clipper and Mighty Duck games. Its primary sports channel airs Laker, Anaheim Angel and King games. As part of the Staples agreement, News Corp. bought options for minority stakes in both the Lakers and the Kings. The idea was to eventually consolidate its sports assets into a single entity that Walt Disney Co. could not match.
Disney, which owns ESPN and the Ducks, later sold the Angels and abandoned its plans for building a regional sports broadcast empire.
News Corp. never exercised its purchase options for the Lakers and the Kings. Its priorities also shifted when Chairman Rupert Murdoch set his sights on buying DirecTV, the nation’s leading satellite TV provider, to fill a hole in his worldwide satellite operations. Needing to raise cash for the DirecTV acquisition, Murdoch sold the Dodgers, Dodger Stadium and related baseball properties to Boston real estate developer Frank McCourt this year for $430 million. News Corp. paid $311 million for the team and properties in 1998.
Murdoch bought DirecTV’s parent, Hughes Electronics Corp., for $3.1 billion plus stock in December.
AEG is no longer considering developing a downtown stadium for a professional football team and has no plans to build a replacement for Dodger Stadium in the area, a spokesman said. Anschutz also owns part of the Lakers, controlling interests in the Kings and the Galaxy soccer team, as well as the Home Depot Center in Carson, a soccer and tennis facility.
A key element of L.A. Live is a hotel that would serve the struggling Los Angeles Convention Center adjacent to Staples. The hotel would cost about $280 million and would be the third-largest in Los Angeles County, said hotel consultant Alan Reay of Atlas Hospitality Group.
Many downtown business leaders have been calling for such a hotel for more than a decade, but previous developers have balked at the cost, and city officials are reluctant to provide financial subsidies at taxpayer expense. Arranging funding for a large hotel is the last major hurdle for the L.A. Live development, an AEG spokesman said.
“Hospitality financing is very difficult, particularly in this market,” said Bobby Turner, managing partner of the Canyon-Johnson Urban Fund. “But there is no one more creative than AEG to make a very complicated transaction work.”
Canyon-Johnson co-owns three office buildings in Transamerica Center east of Staples and more than 5 acres of land zoned for both housing and commercial uses. Two Portland, Ore.-based developers plan to build about 700 loft-style condominiums at 11th Street and Grand Avenue on land purchased from Canyon-Johnson and AEG. Similar developments in the South Park area of downtown are expected to follow.
“L.A. Live is a critical development for the future of downtown,” said Carol Schatz, president of the Downtown Center Business Improvement District.
“Anything that makes that happen faster, we strongly support.”