LOS ANGELES — The company that wants to build an NFL stadium in downtown Los Angeles announced a milestone in mid-February: It had sold the first unit in its nearby luxury condo project that towers above the skyline.
Anschutz Entertainment Group neglected to acknowledge, however, that it had bought the Ritz-Carlton-branded condo unit itself.
That omission obscured how hard the housing slump has weighed on the company's flagship residential project, which has been hit with millions of dollars in mechanics' liens in recent months as it struggles to unload its pricey units in the soft market.
Recognizing those troubles could give added bargaining leverage to city officials working on a stadium deal with AEG, which has cast Los Angeles as the big winner — in jobs, development and prestige — if the plan for a 72,000- to 76,000-seat sports venue on the city's convention center site goes forward.
AEG on Wednesday released results from a pair of independently completed economic studies that say its plan could yield $41 million annually in new tax revenue, and that the stadium and related convention center improvements would boost the number of conventions in the city each year.
But AEG's troubled condo project would also have much to gain from a project that could quickly convert the condos from an apparent drain on the company's cash into a moneymaker for the firm.
"It's in their best interest to make a deal with the city to get their initial investment in a stronger position," said City Councilman Bill Rosendahl, who co-chairs a committee of elected officials tasked with evaluating the stadium deal.
The company's proposal calls for the city to issue up to $300 million in bonds to finance the demolition and relocation of the convention center hall the stadium would displace. AEG officials have said they would ask the city to let it use stadium ground lease payments, new property tax revenue and money from its convention center signage rights to repay those bonds.
The condo project was itself the upshot of an earlier deal with city officials, who required AEG to include a hotel in its plans for the massive entertainment complex known as LA Live because the area was short on guest rooms for convention center visitors.
AEG added a 1,001-room hotel building to the 27-acre swath of restaurants, bars and theaters, but it topped the mirrored-glass high-rise with 224 condo units to get a quicker turnaround on its investment than just guest rooms would provide.
By the time construction finished in early 2010, however, the financial crisis had slowed demand for housing to a trickle, and AEG has apparently struggled to find buyers for the upscale condo units that range in price from $850,000 to $9.3 million.
As of Tuesday, grant deeds had been recorded for only 32 units, according to county records.
That number includes the project's first two sales, dated Feb. 10: One went to AEG's parent company, Denver billionaire Philip Anschutz's Anshutz Corp.; the other was bought by AEG CEO Tim Leiweke.
Other units have gone to AEG's vice president for real estate, Ted Tanner, to its chief legal officer, Ted Fikre, and to a corporation that lists AEG chief operating and financial officer Dan Beckerman as its agent for service. Loans from AEG itself helped finance the latter two sales, county records show.
AEG spokesman Michael Roth said the executives bought the units because they saw them as a good investment and the number of new buyers has been increasing by the week. Indeed, the most recently sold unit went to former "Entertainment Tonight" host Mary Hart and her husband, producer Burt Sugarman, records show.
But Roth acknowledged that the units were not moving as briskly as originally hoped.
"According to schedule, we thought we'd be sold out by now," Roth said.
With little revenue from selling condos, the company has been hit with stacks of unpaid bills, county records show. In April and May alone, contractors filed at least $7.4 million in mechanics' liens against Olympic and Georgia Partners LLC, the AEG subsidiary set up to develop the property. They detail unpaid plumbing work, flooring and countertop installations, and other projects.
Olympic and Georgia posted bonds to cover most of those charges in mid-May.
Around the same time, the project's part owner, a real estate investment fund managed by San Francisco-based MacFarlane Partners, allowed itself to be bought out at a loss, leaving AEG as the project's sole stakeholder, Roth and MacFarlane spokeswoman Julie Chase confirmed.
Roth and Chase would not discuss how much of a loss was sustained by the MacFarlane fund, which counts among its investors the California State Teachers' Retirement System, the Illinois State Board of Investment, the New Jersey Division of Investment, the Teacher Retirement System of Texas and other pension funds.
Chase said the fund pulled out of the project to free up cash for other investments.
But the concurrence of the ownership shake-up with the condo's financial problems suggests that MacFarlane walked away from the development as part of a deal with Olympic and Georgia's lenders that allowed the project to avoid a formal default, said G.U. Krueger, who advises pension funds on real estate investments as the principal economist for the firm HousingEcon.com.
Krueger, who has no connection to the condo deal, said AEG and MacFarlane each probably had their investments in the development largely — if not entirely — wiped out by debt service and operating expenses, and that Olympic and Georgia's lenders likely signed off on a plan that permitted AEG to recapitalize the project with money from other parts of the company.
Bill Thornton, a spokesman for the Union Labor Life Insurance Co., which contributed to and administered the project's $575 million construction loan, said his company did not influence the ownership shift, but that he did not know if other members of the lending consortium played a role.
Ronald Bonneau, an associate with the investment firm PCCP LLC, which holds another $75 million in so-called mezzanine financing for the project, declined to comment.
Krueger said AEG may end up benefiting from the condo's financial troubles, since they allowed the company to buy out its former partner at a discount and become the sole owner of what could eventually be a highly lucrative project if the stadium and accompanying development are completed.
"Saving the project, making it viable and not defaulting could be a bet on the future of the whole LA Live area, once the economy recovers and if the stadium gets done," he said. "If it works, it could be an enormous windfall for them."