Arena Reportedly Has $100-Million Sponsorship Deal

Developers of the proposed downtown sports complex have lined up a corporate sponsorship deal worth about $100 million, the largest amount ever for rights to name an arena.

Staples Inc., the Massachusetts-based office superstore, has agreed to a 20-year deal to become the main corporate sponsor for the $300-million sports and entertainment center in Los Angeles, sources within the company said.

A group of secondary sponsors, reportedly headed by GTE, could bring in an additional $50 million, which would make the package worth about $150 million.

The city would not receive any of the money generated from sponsorship deals, but the money could be used to cover the $58 million in municipal bonds that developers Philip F. Anschutz and Edward P. Roski Jr. have agreed to pay back.

Anschutz and Roski have agreed that sales, property or utility taxes generated by the sports complex would not be used to repay the $58 million, a key point of contention throughout negotiations.

However, the deal the city made with Anschutz and Roski is far better for Los Angeles than most similar deals in other cities.

Although the sponsorship deal was not necessary to fund construction of the arena, Anschutz and Roski, who also own the Los Angeles Kings hockey team, nearly triple the money they are supposed to pay back.

Knowing they had this sponsorship deal in the works gave the developers a safety net in pushing the arena plans through the City Council.

The council voted Tuesday to tentatively approve financial and environmental agreements for the arena, and sometime after a formal vote is taken early next week, arrangements with Staples and several other sponsors are expected to be announced.

The Staples transaction had not been finalized because of the lengthy controversy involving approval of the arena project by the City Council.

The arena will house the Los Angeles Lakers basketball team as well as the Kings. Construction is expected to start in January, and the arena is scheduled to open in the fall of 1999. The 20,000-seat facility is expected to have more than 200 events annually and is considered a candidate to hold future Grammy Awards shows along with National Basketball Assn. and National Hockey League all-star games.

“[The price] is way up there,” said a source familiar with the Staples negotiations. “But not when you consider the amount of events that will be held in the arena and the type of exposure the company will get because it is in Los Angeles, one of the media capitals of the world.”

King President Tim Leiweke has been the lead negotiator for Anschutz and Roski in obtaining corporate sponsorship.

“We do not have a [finalized] deal,” Leiweke said Friday. He said negotiations with Staples have been on hold awaiting city approval of the project but are expected to resume after the formal vote by the City Council.

The arena will be located on the North Hall site of the Convention Center. It will be near the Harbor and Santa Monica freeways’ interchange, the busiest in California with more than half a million vehicles daily.

“This deal will set a new benchmark for rights fees,” said David M. Carter, a sports management consultant who teaches at USC’s graduate school of business.

“I’m sure [Staples] will maximize their investment. . . . The location is the key.”

Naming rights have become a lucrative revenue stream for sports teams; nearly half of major professional teams are playing in arenas or stadiums named after a corporate sponsor. The Arizona Diamondbacks, who will join major league baseball next season, recently reached an $88-million, 30-year deal with Bank One for their stadium.

Staples is a new entry in the naming rights game, which has been dominated in recent years by airlines and banks.

The Angels recently signed a naming rights deal with Southern California Edison for Anaheim Stadium, worth an estimated $1.4 million per year for 20 years. The Forum, where the Lakers and the Kings now play, has a long-term deal with Great Western Bank for about $1 million a year.

Anschutz and Roski were interested in a downtown arena even before they purchased the Kings in October 1995. The negotiations with the city have been long and difficult, particularly after Councilman Joel Wachs threatened to call for an initiative drive to allow voters to decide whether the city should subsidize professional sports facilities.

The developers had said they would be force to abandon the project if the issue was put before voters.

After weeks of dueling news conferences and several closed-door meetings, agreements were reached when Anschutz and Roski guaranteed repayment of the bonds. The city’s sole financial obligation is $12 million from the Community Redevelopment Agency to acquire land, most of which will be used for parking lots.

Staples operates 683 office product superstores worldwide, primarily in the U.S. and Canada.

The company was a pioneer in office supply stores offering everything from note pads to personal computers at rock-bottom prices, and virtually since its founding in 1986 it has been one of the hottest retailers in America. Southern California has long been among its key markets.

Staples suffered a major setback this summer when the Federal Trade Commission blocked a proposed $4-billion merger with a major rival, Office Depot.

That set both companies scrambling for a new expansion strategy. Still, Staples revenues grew to $4 billion for the fiscal year ending February 1, up 29% from $3.1 billion in the prior year.

Staples founder and CEO Tom Stemberg, a onetime supermarket executive, is known as an aggressive and innovative manager.