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Sony Plans Spur Interest in MGM Offices

With its pending acquisition of Metro-Goldwyn-Mayer Inc., Sony Corp. officials are already listening to pitches from real estate brokers whose clients want to sublease MGM’s newly built Century City headquarters.


Fueling speculation that the Japanese electronics company will liquidate MGM’s nearly 400,000 square feet in Century City and its 112,000 square feet in Santa Monica, Sony is moving forward with long-delayed plans to expand its Culver City studios.


Sony executives have been talking to Culver City officials about exercising a development agreement struck with the city 11 years ago, giving Sony the right to build 1 million square feet of space on its lot, according to Jerry Fulwood, the city’s chief administrative officer.


Those conversations, Fulwood said, started before Sony spearheaded the bid to buy MGM. Fulwood and Culver City Mayor Steven Rose confirmed that Sony is considering building a 250,000-square-foot office building and a 50,000-square-foot complex to house restaurants and possibly a gym.


No permits or applications for the expansion have been formally filed.


Sony spokeswoman Susan Tick confirmed the film studio is in the early stages of planning for the additional structures, but declined further comment. “It’s one of those long planned, long talked-about projects,” she said.


Meanwhile, brokerages such as Studley, Madison Partners, Grubb & Ellis Co. and CB Richard Ellis Inc., and perhaps others, have approached Sony officials with offers to sublease MGM’s Century City space should that become necessary, according to sources. So far the conversations have been preliminary and taken place mostly over the phone, the sources said.


“Everybody and their mother is calling them about this,” said one broker. “It’s possibly the biggest assignment in town.”


The moves come two months after a group led by Sony and cable giant Comcast Corp. agreed to pay $4.8 billion for MGM, a deal expected to be approved by MGM shareholders and various regulatory agencies by mid-2005.


Kirk Kerkorian, MGM’s 87-year-old controlling shareholder, sold off MGM’s fabled Culver City back lot on Washington Boulevard when he took over the company for the second time in the early 1970s. Part of the lot was torn up to develop apartments and condominiums, while the remaining parcels are now home to Sony’s Columbia and Tri-Star film studios.


Before moving into its new Century City headquarters in 2003, MGM was located in a Santa Monica office park now called Colorado Center. The company’s home video department, its fastest growing division, is still located there.


So far, Sony officials have only said publicly that MGM would continue to produce film and television projects under its name as a separate company headquartered in L.A. No guarantees have been made as to how many employees will keep their jobs or if the headquarters would be moved.


Rose insisted there was no connection between the most current construction plans and the potential acquisition and relocation of MGM.


“The timing is coincidental,” said Rose. “Sony is pursuing this development for no other reason than to meet the current needs of Sony’s studios. Speculation beyond that is purely speculation.”


There’s already a space crunch at the studio. Sony has recently been approved to convert one of its sound stages into about 40,000 square feet of office space. The project, which will keep the historically preserved exterior features of Sound Stage 6 intact, was approved Sept. 8 by the city’s planning commission.


If Sony exercises its development agreement and completes the projects it already has planned, it will still have long-term permission to build an additional 700,000 square feet of new structures on its lot, said Eleanor Aurthur, a contract planner working with Culver City.


Fulwood said Sony executives were scheduled to brief a small group of city employees and elected officials on a proposed real estate master plan for the facility by the end of November.

He said Sony has already given him a copy of its proposal, which includes a number of future structures on which he wouldn’t elaborate.


“I’m still reviewing their master plan,” he said, “but this is one of the key elements of their (overall) expansion.”


Besides the prospect of possibly absorbing MGM/UA, the company is trying to consolidate leases throughout the region onto the studio lot. Some of the leases that would be consolidated are located at Culver Studios, a separate media production facility in Culver City that Sony sold in April to Pacifica Ventures, a group of entertainment and real estate investors, for $125 million.


Two months ago, Pacifica Ventures entered into negotiations with the Culver City Redevelopment Agency to build a $25 million, 115,000-square-foot office and retail building on the site of a city-owned parking lot across the street from the studios.


Rose said he doesn’t believe an MGM move to Culver City is certain. “Sony is one of five partners that have bought it and we have no idea what those other partners’ plans are,” he said.

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