Warner Music Group Corp. signed a long-term lease for the full Ford Factory in downtown’s Arts District, the company reported in a Securities and Exchange Commission filing on Friday.
The lease is set to begin in August 2017 and last for nearly 13 years with an option to renew for 10 years, according to the document. The lease rate will begin at roughly $10 million annually, and Warner expects to spend between $40 million to $50 million to build out its space. During the build-out period Warner will receive a “rent abatement” of 75 percent.
The Business Journal reported in August that Warner was interested in picking up office space at the building, a former auto factory being converted to roughly 257,000 square feet of offices by Shorenstein Properties, a San Francisco-based developer.
The deal is the first major office lease in the Arts District, an area where several projects are set to come online and add roughly 2 million square feet to the market. Developers have targeted media, entertainment, and tech companies in their leasing efforts.
“We’ve worked hard to design and deliver a great building worthy of a great tenant and reflective of the creative energy throughout the Arts District,” Jim Pierre, senior vice president at Shorenstein Properties, said in an emailed statement.
Ford Factory nabbed attention last year when BuzzFeed entered talks to take over the full space. But the deal fell through, throwing into question the attraction of an emerging market where offices, retailers, and restaurants are moving in alongside seafood wholesalers and toy manufacturers.
CBRE’s John Zanetos, who represented Shorenstein in the deal along with Todd Doney, Rob Waller, Chris Penrose, and Phil Ruhl, said terms of the lease are still being ironed out, but that Shorenstein is pleased with the pending deal.
“They think this is great for the building, it’s great for the neighborhood, it’s great for the Arts District,” Zanetos said.
Cresa’s Matthew Miller represented Warner Music.
Music industry publication Billboard first reported Warner’s plans to lease the space, publishing on Friday an internal memo sent from Chief Executive Stephen Cooper to staffers. The letter reportedly announced that Warner would relocate its Burbank offices to the Arts District by early 2018.
“When looking for new offices, we took many factors into consideration, including square footage, location, and commutes,” Cooper said in the letter. “But above all, we wanted an exciting space that enables us to preserve our unique company cultures, while promoting greater collaboration across divisions. … The Ford Factory is a landmark building listed on the National Register of Historic Places. It will be given a dramatic new life, preserving its architectural character while bringing it fully into the 21st century.”
See also: Offices Created In Arts District