Studios’ Next Stages

0
Studios’ Next Stages
Special Report: Real Estate Quarterly

It can be easy to overstate the direct impact of the entertainment industry on the region’s economy. After all, even the $47 billion it directly contributed locally in 2011 accounted for just 8.4 percent of all economic activity in Los Angeles County.

In coming years, however, those contributions, whose indirect impact is nearly twice that number, will extend beyond production days, box office receipts and multimillion-dollar paydays for actors. That’s because they will include massive real estate developments.

Three major studios – Walt Disney Co., Viacom Inc.’s Paramount Pictures Corp. and Comcast Corp.’s NBCUniversal Inc. – are in the midst of, or are planning, major renovations and expansions to studio lots that could add more than 60,000 direct and indirect jobs and have an estimated economic impact of more than $9 billion as they are constructed and come on line over the next three decades.

The projects are among the few substantial commercial developments in the county, where most of the recent large-scale construction has come from transportation and infrastructure, residential and industrial activity.

The improvements are expected to allow the studios to offer facilities that give them an opportunity to compete with other states and countries that offer substantial incentives to lure film and television productions. They are also intended to build the infrastructure needed to keep pace in the fast-changing digital production and postproduction sectors.

“Development increases efficiency, lowers the cost and increases the value of the assets for them,” said Andrew Raines, founding partner at Beverly Hills law firm Raines Feldman LLP who has advised major entertainment firms in leasing, acquisition and development transactions. “On some level, they are also real estate companies, if you look at the ability of the company to take their real estate and turn it into revenue-generating assets.”

Despite some high-profile flops, the motion picture industry posted a record year at the box office in calendar year 2012 as U.S. moviegoers spent $10.8 billion. That was a roughly 6 percent increase over the previous year, and the first time ticket sales rose in three years, according to BoxOfficeMojo.com.

Today, the sprawling studio lots are full during peak filming times as they outgrow their decades-old facilities.

Studio executives hope these development projects provide a competitive edge for each studio against the other, as the fight for a larger market share continues to heat up.

The improvements will also allow the companies to control – and potentially cut – expenses as they move productions from public or leased space, which are subject to rising prices in a rebounding economy.

George Garfield, west region president in the downtown L.A. office of real estate brokerage Transwestern, worked as a real estate executive for both Disney and Universal during the initial planning phases of both companies’ major real estate projects. He said the activity is a sign the studios are feeling bullish on the future of their industries and Los Angeles, and that could have positive ripple effects.

“They are making significant investments in their workplace and that is a net adder of jobs,” Garfield said. “It has a positive impact on housing and on other businesses that will come to the forefront because they want to be proximate to that critical mass.”

Against that backdrop, the Business Journal takes a look at the three large studio projects in the pipeline in Los Angeles.

NBCUniversal

Universal Studios seems like it already has it all.

Its 391-acre campus in Universal City, off of Lankershim Boulevard west of Burbank, is home to one of the world’s largest and most recognizable motion picture production lots; a theme park; and the shopping, entertainment and dining center known as CityWalk.

But it might soon get even denser.

NBCUniversal has proposed a $1.6 billion project that would add about 1.5 million square feet of production and office space; 327,000 square feet for theme park attractions, retail and dining; and two 500-room hotels, all built in phases over 25 years.

After nearly a decade of discussion, the project, known as the Evolution Plan, received unanimous approval from the Los Angeles City Council last year. It is expected to receive final approval this month from Los Angeles County Board of Supervisors, which has jurisdiction on some of the property. If approved, construction could begin shortly thereafter.

Corinne Verdery, chief real estate development and planning officer for NBCUniversal, said the plan aims to give the company the ability to grow with its industries.

“It’s just about trying to remain competitive in the business of production and tourism,” she said. “We always have to evolve and change with the industry and that’s what the plan imagines.”

The studio was built in 1915 and was the filming site for such classics as the original “Frankenstein.”

The Universal Studios theme park, which today includes the well-known tram ride through its movie sets, such as the one for “Psycho,” opened in the 1960s. Universal opened CityWalk in the 1990s.

The studio and CityWalk have not been significantly upgraded or expanded in years.

Last year, NBCUniversal dropped a smaller plan to work with downtown L.A. developer Thomas Properties Group Inc. to build a $750 million office and broadcast studio for the L.A. bureaus of NBC News, Telemundo and local affiliates across the street from the campus in favor of redeveloping a building on the lot at a former Technicolor facility.

The Evolution Plan was conceived early last decade and has spent the last several years in public hearings that have modified it to accommodate concerns from the surrounding community.

Notable among the changes has been abandoning a proposal to build approximately 3,000 residential units. Also, about $100 million in transportation and community improvements, such as traffic mitigation, have been added.

The plan does not expand the existing footprint of the property, but does call for redeveloping existing buildings and building on undeveloped land. The layout will remain largely the same; office space will be added to areas already populated by office space, and entertainment elements will be added where theme park and tourism attractions already exist.

Among the first priorities is building a substantial portion of the 1.5 million square feet of proposed office and production space, Verdery said.

The space would accommodate production and postproduction studios as well as marketing, advertising and other support functions. Most importantly for NBCUniversal, it also would add more much needed TV studio space to the lot.

Television production has increased significantly on the lot over the years, she said. Many shows have been forced to use the existing large, warehouselike spaces that were built for motion picture productions, which often means they lack attached office space or dressing rooms.

Verdery said that works fine for films, which are in production only for a short time, but is difficult for television shows such as “Chelsea Lately” and “Parenthood,” which use the studio for an extended period of time over several seasons and need more permanent facilities.

Mike Arnold, executive vice president at the Century City office of real estate brokerage Newmark Grubb Knight Frank who specializes in entertainment real estate, said it’s not uncommon for studios to want to create the type of space that would be attractive for a number of productions.

“The space becomes space for not just one production but the type of production they will put in one space,” he said. “So if you are doing a shoot for six to eight weeks, like ‘Deal or No Deal,’ when those production offices close, they need someone to backfill the production and office space.”

On the tourism side, one priority will be adding the Wizarding World of Harry Potter section to the theme park.

Verdery said that project will be among the largest investments in the family tourism market in the county in years.

It’s easy to understand NBCUniversal’s desire to add such an attraction: A similar Harry Potter attraction was built for $265 million in its Universal Studios Orlando location in 2010, generating a 30 percent increase in attendance in that Florida park over the previous year.


Paramount Pictures

Even if you’re not familiar with the 62-acre Paramount Pictures studio in Hollywood, you’d recognize the television hits shot on the property: “Glee,” “NCIS” and “Rizzoli and Isles.”

Today, the studio lot at Melrose Avenue between Gower Street and North Van Ness Avenue is preparing to undergo its first significant renovation since opening in 1926. The project would nearly double the density on the 1.8 million-square-foot lot.

“Our industry has gone through so many technological advances and changes, and it’s happening so quickly, we need our facilities to keep up with those changes,” said Sharon Keyser, senior vice president of real estate, government and community relations at Paramount, and the executive in charge of the project. “We have a need today for additional stages and a need today for production office space.”

Paramount announced the $700 million, 25-year Paramount Studios Hollywood Project in 2011. An environmental impact report of the proposed project should be completed by the end of this year, and will eventually need the approval of the Los Angeles City Council to move forward.

The nearly 100-year-old campus, home to 30 soundstages, is the last remaining major motion picture and television studio in Hollywood.

Paramount expanded in 1967 when it purchased neighboring RKO Studios, but executives never spent the time connecting the two lots into a cohesive campus, leading to growing internal traffic.

This project aims to create a unified lot, upgrade existing space and add more of the much need soundstages and production space to keep up with the demand.

The Hollywood Project is slated to add 1.4 million square feet of net space – some existing space would be demolished and replaced – to give the studio the opportunity to expand its film and television offerings for itself and the third-party companies leasing space on the lot. The project would be built in phases over 25 years.

The southern portion of the main campus, along Melrose, now includes a surface parking lot where Paramount might be able to build production and administrative offices. Plans could include a 15-story headquarters building in the southwest corner of the lot behind the former KCAL-TV (Channel 9) station.

The addition of the production office space reflects a new trend in the industry in which much of the postproduction can take place on computers in offices instead of, for instance, larger off-site analogue editing bays.

The project could also include at least five new larger technologically advanced soundstages of up to 25,000 square feet each. It would also include much needed production offices adjacent to soundstages and new postproduction facilities.

“When a feature film comes to the property, they need a stage, production offices and base camp,” Keyser said. “You want those elements in close proximity to each other and today, because the property has evolved overtime without a master plan, those three elements could be scattered.”

Dual Disney Developments

Walt Disney Co. occupies millions of square feet in the county, and it looks like it plans to keep getting bigger.

The entertainment giant has been developing its $2 billion Glendale Grand Central Creative Campus on a 125-acre parcel in the northwest part of that city since 2010.

That project, bounded by Western Avenue, Flower Street, Air Way and the 5 freeway, is one of two it has on the drawing board. Disney is also seeking authorization for a 58-acre project near Santa Clarita called ABC Studios at the Ranch.

Disney did not return repeated requests for comment.

The Glendale campus is being built in phases and is expected to reach nearly 6 million square feet by the time it is completed in 2030. Two phases totaling 588,000 square feet have already been finished and house the headquarters of KABC-TV (Channel 7) and a child care center.

Disney has not announced specific plans for filling the rest of the campus, but has suggested that as many as 7,000 full-time jobs might be created there.

The company has been reducing the amount of space it leases from third-party landlords in favor of space it already owns in a cost-saving move.

The firm vacated nearly a half-million square feet at Burbank’s 3900 W. Alameda Ave. last month in favor of two company-owned properties, one in Glendale and its larger Burbank studio lot at Buena Vista Street.

Garfield, the former Disney and Universal executive, said Disney is seeking to consolidate its departments into one central location in an effort to watch its bottom line and encourage collaboration.

“It was important to have consumer products, motion pictures, Imagineering and animation proximate because so many new businesses came out of the (collaboration of) business lines,” Garfield said. “Disney Stores came from motion pictures and consumer products, so a lot of things came from that causal collusion, so to speak.”

Across the county, the Disney ABC Studios at the Ranch is slated to cover 58 nearly vacant acres in the western portion of the 890-acre Golden Oak Ranch in the Santa Clarita Valley near Route 14.

It would transform the quiet ranch into one of the county’s largest high-tech production facilities.

ABC outgrew its studios in Burbank years ago and has been forced to rent soundstages and other facilities across the county to film shows. The Ranch project would allow it to film its productions on property it owns and controls.

The project, totaling 556,000 square feet, will include up to a dozen soundstages; six bungalows for actors, executives and writers; up to 100,000 square feet of production offices; shops and storage; administration offices and other support facilities.

Disney began leasing the Golden Oak Ranch in the 1950s, when it filmed shows such as “The Mickey Mouse Club.” It purchased the property in 1959 and added more land over the years to grow the campus to the size it is today.

In recent years, movies such as “Pirates of the Caribbean: At World’s End” and shows such as “Sons of Anarchy” have been filmed at the lot, which has a number of existing sets for future filming.

The new soundstages will primarily be used by Disney but could be rented out to other production companies. If approved, it could open within four years.

No posts to display