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Wednesday, June 16, 2021

Los Angeles Lakers sign lease extension to stay at Staples Center through 2041

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The Los Angeles Lakers are staying put. On Thursday, the team announced that it has signed an extension to its current lease at the Staples Center that will keep the team in Downtown Los Angeles through the 2040-41 season. AEG, which owns both the arena and a 27 percent stake in the Lakers, has committed along with the team to invest “nine figures” into renovating and modernizing the Staples Center, according to David Wharton of the Los Angeles Times. At 22 years old, Staples is in the middle of the pack in terms of longevity among NBA arenas. It will be one of the league’s oldest venues when this lease expires. 

The Lakers currently share the arena with both the Los Angeles Clippers and the NHL‘s Los Angeles Kings. That makes scheduling difficult as the arena needs to accommodate more teams than any other, but those issues will be eased in a few years, when the Clippers move into their new Inglewood arena. The Lakers reportedly considered a similar move to build their own arena in the area, which is where they played before leaving the Forum. 

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But the situation is complicated because of their ownership structure. AEG owns both the Staples Center and a significant chunk of the Lakers, and losing both the Lakers and Clippers would significantly eat into their stadium revenues. While the exact terms of the lease are not known, the Lakers are not believed to profit in the arena’s corporate sponsorships, parking or food and beverage revenues, according to Wharton. The Clippers, by operating their own arena, will be able to do so. The other advantage of building a separate arena is the land development surrounding it. The Golden State Warriors have taken advantage of this in San Francisco by building a significant amount of office space that they are leasing out. 

That is what makes the renovations the Lakers and AEG plan to make to Staples Center so important. Without those ancillary revenue streams, the Lakers need to maximize revenue from ticket and suite sales. They are hardly crying poverty. The Lakers have an enormous local television deal with Spectrum SportsNet, but few teams spend as consistently on player salary as the Lakers do, and as the team is the Buss family’s primary business, its ability to pay for players and basketball operations relies in part on the team’s financial success.

With this new lease, they are betting that with the proper renovations, they can generate enough revenue out of the Staples Center to remain financially strong for the next two decades. It was always the likeliest outcome, but the announcement confirms that the Lakers are staying in their home of the past two decades. 

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