By FRANK SWERTLOW
Staff Reporter
Does Los Angeles really need more sound stages?
Not really, according to many local movie producers, commercial lenders and sound-stage owners. So why are the Playa Vista developers pursuing plans to build sound stages on the property that DreamWorks SKG decided to abandon earlier this month?
“It’s a horrible idea,” said Bruce Sallan, president of Davis Entertainment’s TV division. “With so many movies and TV production leaving for Canada and costs so much less (there), I can’t argue the issue unless the (federal government) and the state do something to fight the exodus.”
Yet Playa Vista’s developers remain undeterred.
“This site has a great history,” said David Herbst, vice president of corporate affairs. “In the last few years such blockbusters as ‘Titanic,’ ‘Batman Forever’ and ‘Godzilla’ were made here. We are bullish on the market. The top two industries (in Los Angeles) are entertainment and high tech, and we feel very confident in building an entertainment/new-media-type campus.”
While the original plan calls for up to 1.5 million square feet of sound stages, developers may settle for a less-ambitious project, at least initially.
Currently being considered is a plan to upgrade the two pre-existing structures on the site former airplane hangers which already are popular production facilities. The massive hangar where Howard Hughes built his wooden flying boat, the Spruce Goose, might be broken up into two or three smaller stages. Groundbreaking is slated for 2001.
But without sufficient demand, sound-stage development might be hard to justify. And right now, demand is just not that strong.
Several new sound-stage projects have recently been completed, and more are in the pipeline. Meanwhile, Hollywood producers are rushing to lower-cost locales like Canada, and major studios are cutting back their production slates. In addition, new technologies are making movie and TV producers less dependent on sound stages; today’s technologies make certain kinds of production feasible in any number of settings, including conventional warehouses.
While Playa Vista partners Morgan Stanley Dean Witter & Co. and Goldman Sachs & Co. apparently have agreed to green-light the sound-stage project, its financial feasibility without DreamWorks or any other anchor tenant is questionable, several sources agreed.
From a commercial lender’s standpoint, it would be viewed as relatively high risk, according to Steve Bram, senior vice president at George Smith Partners, a commercial mortgage firm.
“From our experience, it takes a lot of equity to build a sound stage, or it takes substantial pre-lease arrangements to get them financed,” he said. “Speculative sound stages are very tough unless you get a production company to lease part of them. A couple of years ago, it may have been easy to get independent producers to give you some sort of lease agreement, but with so much production going to Canada, they are much less anxious to lease locally.”
And keeping unanchored sound stages filled is an increasing challenge, according to Stephan Smith, a partner in Los Angeles Center Studios, which this week opens six new sound stages on the former Unocal headquarters site in downtown L.A., and plans to add another six stages there in a future phase.
“It’s more like the hotel business,” said Smith. “It’s not like an office building where a tenant signs a five- or 10-year lease.”
Competition for those short-term tenants promises to get more intense. Besides the new Los Angeles Center Studios downtown, a new 10-stage facility is expected to open in North Hollywood next year. Meanwhile, Manhattan Beach Studios is up and running with state-of-the-art facilities.
“As a producer, I seldom use sound stages,” said Len Hill, a TV movie producer. “With new lightweight cameras and fast film and plenty of warehouses available, I don’t need a permanent site. A sound stage without a production pipeline, an anchor tenant, becomes questionable as a viable business.”
Even so, Michael Bobenko, senior vice president for operations at the Entertainment Industry Development Corp., which promotes film and TV production activity in Los Angeles, said Playa Vista sound stages could succeed even without steady revenues from an anchor tenant, especially if overseas sales of Hollywood-produced programming pick up.
“It is pretty obvious there has been a downturn in production in the L.A. area right now,” Bobenko said. “But we expect that production will increase in the future at a healthy rate. I am optimistic. The Asian economies are already coming back.”
