Time of the signs: AEG plans call for bright lights, big ads.

The answer to making the $1 billion entertainment district surrounding Staples Center pencil out may soon be staring you in the face.

With all but a small fraction of Ansehutz Entertainment Group's entertainment, retail and hotel project surrounding the arena to be financed privately, a massive, glitzy billboard component is emerging as a linchpin of the project's cash flow.

AEG can cover as much as 60 percent of the exterior area of the bulk of the complex with signage, generating several million of dollars in annual revenues.

As a result, the Staples Center district, which will include the Nokia Theatre, a convention center hotel, a broadcast facility and retail, will be awash in flashy product come-ons on a mix of "tall walls," massive video screens and projections on the sides of buildings.

The project's largest billboard, a 15-story "tall wall," could appeal" on the north side of the proposed 55-story hotel on Olympic Boulevard, where it would be visible to the 576,500 vehicles that pass through the intersection of the Harbor (110) and Santa Monica (10) freeways every day.

"When you sell a sponsorship package yon need to put elements in there to justify the cost," said Michael Roth, an AEG spokesman. "Having the ability to put signs in a high traffic area is something sponsors definitely look for."

Roth wouldn't estimate what AEG expected to bring in from the billboards or say what sponsorship packages would cost, but the "tall wall" ads on the sides of hotels along the Sunset Strip in West Hollywood have been known to fetch $60,000 a month.

"(AEG) probably thinks they can get Sunset Strip prices or more," said Rick Robinson, managing director of the Los Angeles office of billboard media buyer MacDonald Media LLC. "If they gross more than $5 million a year, they'll be hitting a home run."

The billboards fit into the complex debate over land-use rights and efforts to control visual clutter in the region. In 2002, eight months after the signage component of AEG's plan was approved, the Los Angeles City Council voted to ban more billboards in the city.

As part of a compromise reached to pass the ban, pockets of L.A. could be designated as billboard districts, including the area around Staples Center and a proposed section of Hollywood.

"It was an important consideration moving forward with our project," said Larry Bond, chairman of Bond Cos., whose Sunset + Vine project is swathed in 20 billboards. "We needed the income stream because of the lack of public funds available to offset the high cost of developing projects in that area."

He said the billboards on his project generated higher revenues than some retail stores. but would not be specific about the numbers.

Developers often lease the billboards to an advertising company and sell bonds backed by their future revenues to contribute to a project's financing, said Richard Ackerman, principal in the Los Angeles office of Apollo Advisers, which has used signs as a revenue source on numerous projects.

"The premise is to help the financing," Ackerman said. "These sites are places that need additional revenue streams because they are difficult to finance."

Apollo is financing hotelier Lew Wolff's 1,200-room hotel adjacent to the Los Angeles Convention Center, a centerpiece of the AEG development.

Ackerman said Apollo and Wolff signed a long-term lease with AEG for the rights to advertise on the side of its proposed hotel. While the terms are confidential, he said that without the revenues from the deal, the hotel wouldn't get built.

"AEG is helping us get the hotel off the ground by providing a stream of payments," Ackerman said. "It allowed us to get the construction loan to build the project."

Getting specific

Billboards throughout the district surrounding Staples Center are expected to command hefty prices because of the mix of people shopping and dining in the area or attending games at the arena and shows at the 7,000-seat Nokia Theatre Los Angeles.

AEG officials estimate that the district will attract 13.5 million people annually--comparable to Disneyland's 2003 attendance levels. "Their (billboard) value is pretty unbelievable," said Bob Sutton. L.A.'s deputy planning director.

When the district was entitled by the City Council in late 2001, AEG had a general sense where its theater, the hotel and most of the retail buildings would be positioned, but the facilities hadn't been designed. As the architectural details have emerged, design challenges have arisen that may mean changes or amendments to those approvals, Sutton said.

"Right now we're just having conversations, they haven't put any paperwork in front of me" he said. "But what I'm hearing so far, there are probably going to be some amendments needed."

Should AEG need to come back with a revised plan for all or part of the project, the city could revisit parts of the plan dealing with signage--a prospect made more likely by the increasing number of people living in the area.

"When they first got their entitlements they were still trying to figure out what this would look like," Sutton said. "Things change and that's why ... specific plans and general plans like the ones they have should be looked at every five years. Here we are going on three years already."

The city initially wanted the billboards limited to entertainment purposes, Sutton said, but an opinion by City Attorney Rocky Delgadillo found that such a limit could he a violation of AEG's First Amendment rights.

Flexibility

Since AEG's approvals allow it to cover a percentage of the exteriors with signage, it has great flexibility in terms of both the size and location of the billboards that go up.

"We can shift it around," Roth said. "A bigger sign here and a smaller one there. As long as we stay tinder the cap and comply with other regulations, we're fine."

Among those limitations, Sutton said, was a requirement that billboards be leased to tenants of the project or those who have bought sponsorship packages. "We wanted to reinforce the events there," he said. "We wanted to give it a sense of place."

Even so, Sutton said there is some wiggle room. One proposed tenant of the district is Walt Disney Co.'s ESPN cable sports network. In that situation, Disney could be one of a handful of companies allowed to advertise.

"Of course ESPN could advertise with a Disney logo but advertising fin Disneyland might be a stretch," he said. "I think some of that stuff we'll be looking at very carefully."

Regulating the aesthetics of the signs would be it challenge, Sutton said. "We can't control the content--that gets very, very tricky," he said. "It's always hard to legislate against bad taste."