[nas] AEG foresees profits in multisport mecca

["Warren" <wabao@adelphia.net>]

>From Street & Smith's Sports Business Journal:
http://www.sportsbusinessjournal.com/article.cms?storyId=SBJ200302170103

AEG foresees profits in multisport mecca
Complex mushroomed on soccer site

By
STEVE CAMERON
Staff writer


Sometime, maybe 10 years from now, Phil Anschutz and Tim Leiweke hope to
look back and call the Home Depot Center a vision.

But the most ambitious training facility ever built in North America —
named this month as an official training site by the U.S. Olympic
Committee — was born out of a need for a soccer stadium and a vision to
turn it into so much more.

Anschutz and Leiweke had spotted the large chunk of open space from a
helicopter window. It was just a few miles south of downtown Los Angeles.

"Basically, we were just looking around for possible soccer stadium
locations for the [Los Angeles] Galaxy, because we wanted to move them out
of the Rose Bowl," said Leiweke, president and CEO of Anschutz
Entertainment Group. "We saw this fantastic piece of property, a really
large area considering how close it seemed to the city center."

That fateful tour of potential venue sites dramatically changed priorities
for Anschutz, who owns the Galaxy and four more Major League Soccer
franchises in addition to various other sports and business holdings with
an estimated worth on the high side of $4 billion.

Most of what Leiweke and Anschutz eyeballed from the helicopter has turned
into an eye-popping reality, the 85-acre Home Depot Center — a $140
million multisport national training and event complex on the campus of
California State University-Dominguez Hills, a commuter school in the
lower-middle-class suburb of Carson.

The one-of-a-kind venue is being designed by Michigan-based Rossetti with
PCL Construction as general contractor. Aramark already has signed on as
the exclusive concessionaire.

The sprawling center is scheduled to open in stages, with the Galaxy's
showpiece stadium — a 28,000-seat gem that is connected above and below
ground to a 13,000-seat tennis bowl — set to debut in June.

In the meantime, Leiweke and his Anschutz Entertainment Group army have
lined up a diverse and remarkable set of tenants and high-profile events
in their drive to create a facility unique to free-enterprise countries.

The JP Morgan Chase Open women's tennis tournament is booked for August,
and Anschutz Entertainment Group already has hooked a major international
track meet, the 2006 IAAF World Cup.

The Galaxy will move in full-time — along with the U.S. Soccer
Federation — and so will the Pete Sampras Tennis Academy. The San Diego
Chargers have signed to hold their preseason training camp at the Home
Depot Center. There's even a velodrome on the construction schedule to
lure international cyclists.

What's more, Anschutz Entertainment Group intends to turn a profit on the
Home Depot Center, even though no training facility of any size catering
primarily to Olympic-type sports has made money.

The financial model includes some money for everyone, from Anschutz
Entertainment Group to the university to the city of Carson.

"The whole thing started with the Galaxy wanting to find a place for a
stadium, but once Tim Leiweke and Phil Anschutz started dreaming — and
adding something new every time they did — it became a totally different
project," said James Lyons, president of Cal State-Dominguez Hills.

"We realized that we had a nice place for what we assumed would be a small
stadium and started thinking along those lines, but when it started to
mushroom, the university had to look at things in a whole new light.
Frankly, we were shocked at the magnitude of what [Anschutz Entertainment
Group] eventually proposed.

"They were offering to build a complete complex of facilities that we
never could have afforded on our own, make it profitable to enable us to
share in that revenue, and maintain the entire center. There were still
questions for us and for the trustees, but in the end, [Anschutz
Entertainment Group] has structured this as a tremendous opportunity for
our school, our community and even all of Southern California."

Cal State-Dominguez Hills received a $1 million endowment up front for a
55-year lease on the property, which will be divided into two sections —
one used almost exclusively by Anschutz Entertainment Group and the other
shared with the university.

"As part of the joint-use agreement, we'll receive money based on revenue
from parking and things like that," Lyons said. "It's tough to put an
exact figure on it right now, but I'd say that number will be about
$500,000 per year, free and unencumbered."

The Anschutz group had to satisfy the university community and various
state agencies that govern it, but even with that formula in place,
Leiweke and company faced the task of finding revenue to cover
construction costs and year-to-year operating expenses for their version
of a sporting fantasyland.

Home Depot ($7 million per year for the naming rights) was an obvious
target, since the company employs 150 athletes through the U.S. Olympic
Committee's Job Opportunities program and has announced it would like to
have more than 200 athletes on its work force by the time of the 2004
Olympic Games in Athens.

"A partnership with [Anschutz] extends Home Depot's support of amateur
athletics and the Olympic Games, and allows us to help build a world-class
facility in one of the fastest-growing communities in the U.S.," said
Robert L. Nardelli, the company's president and CEO. "It also aligns our
brand with soccer — the world's most popular sport — here in the United
States."

But where does Anschutz Entertainment Group plan to find the rest of the
money?

"Actually, that part isn't as difficult as people on the outside keep
insisting it is," Leiweke said. "Certainly, the partnership with Home
Depot was a critical first step, but we've always been confident that we
could use the Staples Center model — in this case, with 12 companies as
founding partners who are intimately involved with the complex."

Anschutz's math called for these sponsorship packages to cost $500,000 to
$1 million a year, figuring to sell about a half-dozen of each.

So far, Anheuser-Busch has come aboard, and so has Toyota.

"We've actually got another two or three companies where the deal is done
but some items still need to be worked out," Leiweke said. "Basically, I'd
be surprised if we don't have all 12 sold by the end of February. We're
really that far along."

Dan Beckerman, Anschutz Entertainment Group's chief financial officer, can
lay out a fairly simple financial plan.

"The goal has been for the center to be modestly profitable, and it
certainly should be," Beckerman said. "It's not structured to be a giant
cash cow, but it isn't being built to incur losses, either."

In fact, though more precise numbers will have to wait until construction
is complete, tenants are signed and events actually take place, Beckerman
ventures a "rough guess" that the Home Depot Center should show a yearly
net profit in the area of $5 million once the whole place is up and
running.

The rough numbers break out this way: In addition to the $7 million from
Home Depot, Anschutz Entertainment Group figures to take in $9 million
from the dozen founding partners, $5 million from the sale of 42 luxury
suites and assorted club seat packages at the soccer stadium, perhaps
another $500,000 from 21 suites at the tennis venue and something around
$5 million in income from stadium and practice facility rentals,
concessions, parking and merchandise.

"All of that would put us at $26 million in revenue, or maybe a bit more,"
Beckerman said. "And we're using pretty conservative estimates on that
side of the line."

On the debit side, the Anschutz group estimates that operating expenses
for the complex should run in the $7 million range per year. The company
is committed to sharing revenue with the university and some corporate
partners that Beckerman believes should total $3 million to $5 million a
year.

Construction costs eventually will be folded into a long-term financing
arrangement. The most cautious estimate would leave Anschutz Entertainment
Group paying off $100 million in debt over 20 years at 8 percent — a
top-end figure around $11 million.

"A lot of those numbers are necessarily rough or preliminary," Beckerman
said, "but you can see that once we're holding events in the facility,
it's financially viable and will turn a profit."

The Anschutz group hasn't decided yet whether to take on any short-term
construction financing. The company is negotiating with Bank of America
for what is expected to be a $75 million loan if the market seems to
dictate that course.

"We're talking about that," Leiweke said. "It won't affect our projections
for the long term, and any short-term vehicle would have to be of definite
benefit to us, because it wouldn't be a problem to finance the entire $140
million construction cost ourselves. At this moment, that's still an
option."

Anschutz, Leiweke and others in the Anschutz family keep dreaming up
potential uses for the Home Depot Center. Beth White, the on-site general
manager, claims something new pops into her head every time she looks out
over the complex.

"I'm seeing beach volleyball and everything else you can imagine," White
said. "There's almost no limit to what we can stage here because of the
size and variety of facilities available."

For all the discussion of imaginative or innovative uses, however, there
is no question the Home Depot Center is coming to life with soccer as its
heartbeat.

In addition to the main stadium, the complex will open with six soccer
practice fields. Leiweke envisions dormitory-style housing and a hotel at
one end of the property, allowing Anschutz Entertainment Group to offer
deals as it has to English soccer giant Manchester United.

"We'd let them use our facility, with the great weather and all the
amenities we have, for some off-season training," Leiweke said. "We could
let them have it for free, with their only obligation to play two or three
matches on their way home against glamour-type opponents in U.S. stadiums
where we have teams."

Anschutz believes in soccer's future in the United States — he's
practically supporting the entire MLS — and Leiweke likewise is a true
believer.

"Look, the two biggest sporting events on the planet are the World Cup and
the Olympics, in that order," Leiweke said. "The United States, which is
now more diverse than ever in its population, is going to catch up to the
rest of the world.

"You hear plenty of critics who say soccer won't ever be that big in this
country, but those critics couldn't be more wrong. Soccer's coming to
America in a huge way, and the Home Depot Center will be the cathedral of
soccer."


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