Ballmer still talking new Clippers arena, glancing meaningfully at Staples Center lease

Los Angeles Clippers owner Steve Ballmer went and said this this week:

“Last time I checked with any of my friends who are in the real-estate business, you’d better have an option than just going back to your current landlord hat in hand and saying, ‘Please, please, please, sir, please give me the chance to play in your building again.’ So, yeah, we’re going to have real options. We’re out sort of putting together those options today.”

This is being interpreted as an intention to build a new arena just for the Clippers by the time their Staples Center lease expires in 2024, and clearly Ballmer is going to be investigating that. But it’s also clear — both from Ballmer’s statement and from simple economics — that the Clippers owner is looking to create leverage so that he can negotiate a better lease on his current home if that looks like a better option. I.e., same as it was when he first said this back in August.

Ballmer has said he won’t move the team out of L.A., so it looks like his only two options are to spend maybe $1 billion on a new arena just for himself somewhere in SoCal, or to use that threat to extract more money from his Staples lease. This is his right, and more power to him — at least assuming he doesn’t try to play cities off against each other to try to get public subsidies to pay for his new home, which has proven tough in California — but let’s name our threats accurately, shall we?

20 comments on “Ballmer still talking new Clippers arena, glancing meaningfully at Staples Center lease

  1. Doesn’t he already have leverage as he could strike a deal with the Honda Center in Anaheim?

    Of course that depends on what your definition of “not moving out of LA” is.

  2. At least if his team moves to Honda Center, he won’t have to cover up all the retired numbers and championship banners from the other team in the building.

  3. We don’t have to worry about Ballmer asking for handouts. Not gonna happen.

    Now if you’re wondering why he’d want to do this when it costs so much, that’s kind of what we want all these owners to be doing. Stop asking for handouts and do it yourself. Ballmer should be commended. But from purely a financial standpoint, it makes sense in the long run. Not only does Ballmer hope to own the team til he dies but his kids love the team and will be taking over for him as well so this isn’t some 5-10 year ownership run in which case it would make sense to just rent and get ripped off by AEG.

    Let’s also not forget that Ballmer is under the worst lease in the league. And AEG is unlikely to budge on their next round of lease talks. They already have the NBA, NHL and WNBA with or without the Clippers and can easily cover the Clipper dates with other events in case the Clips leave. It makes sense for all parties to split.

    Ballmer gets zero in suite revenue and obviously gets zero in non Clipper events as well as nothing from naming rights. Over the course of 30 years or more in a new building, he could and should get all of the $600 to $800 million that he puts into the building and then some.

    You also have to take into consideration that there’s the possibility of development aside from the arena itself. When you add it all up, it makes sense to go solo when you’re in a big market like New York, SF or LA. Otherwise, the Nets and Warriors wouldn’t be financing their own ventures. Ballmer is just following the Warrior and Net model.

    • “Now if you’re wondering why he’d want to do this when it costs so much, that’s kind of what we want all these owners to be doing.”

      We want them to be spending money without regard for whether it’s a good investment? I thought we wanted them only to be building new arenas if it made sense as a private investment, and otherwise sticking with what’s already there.

      Yeah, the Nets and Warriors are paying for their own buildings, but both teams moved to more central (and wealthier) parts of the metro area, and are using the arenas to grab a share of the concert market as well. Ballmer could maybe do that in L.A., but it’s a crowded market, and he’s already in a decent location. I still suspect it’d make more sense for him to use this as leverage for a better lease (like the Islanders’ new owners are trying to do in Brooklyn), but if he wants to go put steel in the ground with his own money, hey, no skin off my nose.

      • I don’t know. People make bad investments all the time but as long as it’s a bad investment made with someone else’s money that’s fine with me.

        Ending public subsidies is what I want. Whether fantastically rich people are efficient with their investment dollars isn’t something I often think about.

        • I didn’t mean I cared if private investors did dumb things with their money. Just that expecting them to do so might be unwarranted, at least on a regular basis.

      • He’s in a decent location but as the only 3rd wheel in the 4 major sports and with arguably the worst lease in the league, at least according to Darren Rovell who studies the business of sports pretty closely. I’ll try to find a link.

  4. @Scola and SierraSpartan

    Yes, Anaheim would make the most sense. He could buy the Ducks for less than what it would cost to build an arena from scratch plus the Ducks would gain in value whereas a new arena just loses value over time. Unfortunately, Anaheim seems too far away for his liking and there’s no guarantee that Samueli would be willing to sell the Ducks which is important because the Duck owner is the de facto operator of the building.

    • Why would he have to buy the Ducks?

      My understanding is the arena is owned by the City of Anaheim and the city and team could agree to a mutually agreeable lease, or more to the point the prospect that this could happen could help Ballmer in creating leverage with AEG when his lease is renegotiated.

      • The city of Anaheim owns the arena but the owner of the Ducks, which is now Samueli, controls the revenue. The city only gets a cut of profits if profits exceed $12 million. Due to the lack of a 2nd major tenant, profits have never exceeded $12 million so the city never makes a dime off the Honda Center. But if Ballmer were to buy the Ducks from Samueli, he’d be the guy controlling revenue up to $12 million which would make it, IMO, a wise investment being that he would now have an asset that not only costs less than a new arena but goes up in value.

  5. But yeah, Ballmer does sound confusing when he talks about options. His only options are Staples and Anaheim and he has pretty much ruled out Anaheim. The only other option at that point would be Seattle but that flies in the face of when he talks about being in LA until he dies.

    Building a new arena doesn’t make it an option. If you spend a half a billion to a billion dollars on the arena then it’s a helluva lot more than an option. You pretty much have to use it. It’s not like he’ll build the arena then have AEG give him a sweetheart lease and say, “great!, I’ll go back to Staples and leave my arena empty despite all the money I spend on it!”

  6. Ballmer should move the Clippers to the city of Industry where the NFL was considering building the new stadium. The land is still there waiting for him.

    • I mean, if Ballmer wants to move an NBA team somewhere and pay 100% of an arena’s costs and property taxes, etc, Chris Hansen is still been buying up land in Seattle and the MOU is only needed for public bonding. Of course, there’s a street running through the middle of that land, but whatevs.

      Just a few years ago they had 40,000 season ticket holders pre-pledged for Seattle NBA teams.

      • Would being the big fish in Seattle be more lucrative than being second fiddle in L.A.? Seems unlikely to me, but I guess it depends on how godawful their Staples lease really is.

        • I think I just like the idea of Hansen having over $100 million sunk into land way above assessed value trying to sell it to Ballmer in a way to maximize his profits. I guess Ballmer could chip off a fraction of the team or sign some long-term ground lease deal with Hansen that could suck away team profits, but all options would probably make a $2 billion NBA team’s value drop.

  7. Clippers aren’t going anywhere. Sterling got to move his team from an outdated arena to a brand new one without paying for it. Fox, which had just bought the Dodgers, bought 40% of AEG (which owns 100% of the Kings and 30% of the Lakers). As part of the deal, Clippers agreed to a TV rights extension with FSW. That effectively killed off the notion of the ESPN West channel consisting of Angels, Ducks and Clippers and kept FSW2 (now Prime Ticket) around. AEG then bought back Fox’s 40% and created L.A. Live. There is not a better physical location for the Clippers to be. Downtown is surrounded by freeways and rail.

    There’s nowhere to put an arena on the westside which he wants. Playa Vista has been bought up; VA land won’t ever be sold; Santa Monica airport is closing, but locals won’t allow development on it. Too bad he wasn’t around during the Pauley Pavilion rebuild.

    • There may currently be no land but keep in mind that the last 2 NBA arenas to get built, Sacramento and Brooklyn, are on land that was already taken up. Sacramento had a downtown mall while Brooklyn had residences and Freddy’s Bar among others. If Ballmer wants to do this bad enough, he’ll buy land and buy out leases if need be. That opens up a lot of options.

  8. It will basically come down to this, The LAOOC will build a new basketball arena for the Olympic Games and the Clippers will move in once the games end.

    • I thought the advantage of an LA bid was its existing facilities? Why in the world would the Olympic Organizing Committee build a new arena with one of the best arenas in the world?

  9. He needs a better lease because he’s a chump who payed 2 billion dollars for a basketball team. Cripes, it’s 12 guys and some towels, Steve!