The Frog Sells His Lily Pad

For this issue, we interrupt the white pants set in the Hamptons to bring you some serious summer action in what entertainment companies are leasing, selling, and buying in Los Angeles.

In last month’s issue, I compared changes in entertainment and commercial real estate (CRE). It is important to note that the economy (entertainment) drives CRE, so this parallel action isn’t coincidental.

On the other hand, some less linked trends do make one think about generational or Darinwian changes, such as tech guys continuing to buy studios and make content, while CRE capital market wipeouts causing foreclosures in what is described as the “greatest wealth transfer in a generation.” 

If all the world is a stage, “I’m merely an actor” in the current upheaval 😊 

-Ted Simpson

The Frog Sells His Lily Pad

Turns out not everyone knows who Kermit the Frog is anymore, but I think many of you will recognize the name Ron Burkle. Rumor has it that Burkle is the buyer for the iconic compound on La Brea. What was interesting about this deal was that there was no broker involved, and the space wasn’t even marketed.

The official word…

The Jim Henson Company is in the process of selling the iconic Jim Henson Company Lot at 1416 N La Brea Avenue in Hollywood. (Ted here: Again, note that it is in escrow to a “related” party. That party most likely being Burkle.) The Jim Henson Company plans to consolidate its headquarters and the Jim Henson Creature Shop into a single location, moving out of La Brea due to space limitations. The headquarters will be relocated to Burbank, bringing it under the same roof as the special and visual effects company. The company has been headquartered at the property since 2000. (source: KTLA)

CRE NEWS AROUND TOWN

HE LOVES ME; HE LOVES ME NOT…HE -

Paramount Global has agreed to merge with Skydance, capping off a monthslong negotiation, in a deal that would see the Redstone family step away from control of the storied movie studio and media company.

The latest iteration of the deal will see the buying consortium, which includes private equity firms RedBird Capital Partners and KKR, invest more than $8 billion into Paramount and acquire National Amusements. The deal gives National Amusements an enterprise value of $2.4 billion, which includes $1.75 billion in equity.

Paramount’s class A shareholders will receive $23 apiece in cash or stock, while class B stockholders will receive $15 per share, equating to a cash consideration totaling $4.5 billion available to public shareholders. As part of the deal, Skydance will also inject $1.5 billion of capital into Paramount’s balance sheet. (source: CNBC)

And, of course, Ellison’s plans for what’s next with Paramount’s numerous assets will certainly have a ripple effect in the office market. And then there’s Skydance’s Lantana Center and the elder Ellison’s 2700 Colorado Ave in Santa Monica. More to come as the merger unfolds.

Up next in the merger world, Warner Bros Discovery?

East End Studios has broken ground on its downtown Los Angeles Arts District facility, East End Studios Mission Campus. Demolition and excavation are currently underway, and the vertical phase of construction is set to begin this summer. The project, with a total cost of approximately $230 million, is expected to be completed by the end of 2025. East End Studios Mission Campus will be a 245,000-square-foot Class-A facility featuring five stages ranging in size from 14,000 square feet to 35,000 square feet. The campus is expected to create 1,500 construction jobs in the city of Los Angeles and, upon completion, will create 750 permanent jobs. (source: Deadline)

WME quietly added another 21,450 square feet to 9536-9560 Wilshire Blvd.

Absurd Ventures subleased 24,280 square feet at 1451-1457 3rd Street Promenade, Santa Monica.

Buyers Continue Redevelopment of Media Campus in Burbank, California

An investment group that includes Worthe Real Estate Group, Stockbridge Capital Group, and QuadReal Property Group purchased the 27-acre Burbank Studios as part of a deal with seller Warner Bros Discovery. Buyers did not disclose the price for the property at 3000 W Alameda Ave, but public filings showed the deal at about $375 million (about $547 a square foot). A statement from the buyers said Warner Bros provided seller financing as part of a sale-leaseback transaction in which Warner will remain the property’s primary tenant. Buyers are planning the first of two phases of new development on the Burbank property, with plans including five new soundstages, each spanning between 18,000 and 20,000 square feet.

The nine-building property, spanning about 1.4 million square feet, was formerly the longtime headquarters of NBC Universal and was the production home of several news and entertainment programs broadcast by NBC and its local Los Angeles affiliate. NBC Universal sold the property in 2007 to Worthe and Stockbridge, which then sold it to Warner Bros in 2023 as part of a larger planned redevelopment. (source: Costar)

Old-school elephant bumping between Rick Caruso and Michael Hackman that started way back in 2022 may finally be coming to an end as Hackman Capital Partners has cleared one of the tallest hurdles facing its $1.25 billion Television City project, clearing the way for the development’s full approval. The City of Los Angeles has certified a key environmental review, known as an environmental impact report, for the firm’s 25-acre project, according to a city Planning Department ruling. Television City, which sits opposite Caruso’s The Grove shopping center at 7800 Beverly Boulevard, will include about 1.74 million square feet of soundstages, offices, and retail space. The firm had originally planned for an additional 150,000-square-foot, 15-story office tower, but cut that plan earlier this year. (source: The Real Deal)

Probably old news to most of the readers here, but just in case… According to The Wrap, Ron Howard and Brian Grazer are looking to sell their Imagine Entertainment banner. The company has retained JP Morgan for strategic guidance. The sale could allow global merchant bank Raine Group, Imagine’s main investor since 2016, to exit. Imagine is profitable, but its revenue and potential sale value are unknown. An individual with knowledge of the discussions told TheWrap that Howard and Grazer tapped JP Morgan as they were receiving inbound offers. Imagine Entertainment has considered selling before. In 2022, it discussed selling a majority stake to London investment firm Centricus for $600-800 million, as TheWrap previously reported. That deal didn’t happen. At that time, Imagine earned about $30 million in cash yearly. (source: The Wrap)

CREA’s HOLLYWOOD SUBMARKET BREAKDOWN

Seward Street Shines

I recently went to check in on the progress of Seward Street in Hollywood's popular New Media section. Seward is teeming with activity and is a terrific spot for small production companies and entrepreneurs looking to occupy an entire building and perhaps own (vs. Lease) it. 

Above is where construction is at one of BARDAS’ many Hollywood projects. Below is a rendering of what 717 Seward will look like when it’s finished (and here are some renderings of the interior if you’re interested).

Not far from Seward is another new BARDAS creative building worth checking out, The Echelon at 6344 Fountain. If you’re wondering why you keep hearing about BARDAS, it’s because BARDAS’ founder and real estate developer, David Simon, is charging ahead in Hollywood while others wait out the rough market. In fact, he currently has 10 projects underway in Hollywood alone. Here’s a recent Q&A with Simon from the LA Times to get a little insight on the man placing big bets on Hollywood.

Taking a step back and profiling the Hollywood submarket, here’s some info from a Costar report that we think you might find interesting, albeit “real estate-y”:

• Hollywood's office market continues to face soft market fundamentals in the third quarter of 2024. Vacancy, currently 18.6%, is around double the levels seen in the first half of 2020.

• Rents have mainly moved sideways in the area during the past 12 months, changing by only 0.9%. Asking rents in Hollywood are towards the higher end metro-wide, about 25% above Greater Los Angeles office market averages. With vacancies expected to continue to increase during the next several years, rents are anticipated to decline later this year.

• Construction activity has been modest recently, with no new projects delivered this past year. The current construction pipeline comprises two projects by BARDAS Investment Group, each about 200,000 square feet.

Hollywood Submarket Indicators (Q3 2024)

• Vacancy Rate: 18.6%

• Average Asking Rent: $4.39 SF/month (FSG)

• Net Absorption: 43,801 SF (12-month Net Absorption: -188,000 SF)

• Construction Activity: 198,500 SF Under Construction

AVAILABLE SPACE

In addition to the BARDAS projects I mentioned above, here are two interesting properties that need tenants. Let me know if I can be of service.

706-720 Cahuenga, Hollywood

This sounds like hyperbole, but most tenants dream of this building's interior when they think of a "creative office." Available floor plans from 7,608-33,217 SF, top-of-the-line everything.

331 Foothill Road, Beverly Hills

Suite 400 (14,260 SF) at 331 Foothill Rd, Beverly Hills, is available. This is another high-end creative build-out, although this one may feel a little more office-y than the Cahuenga space. Featuring unobstructed city and mountain views, the space includes 13 private offices, a large bullpen, conference areas, a reception, a professional prep kitchen, and a Juliet balcony.

RUMBLINGS

UTA is in the market for 200,000 square feet, but even with this high vacancy market, no real options exist (presuming they wouldn't share the new CAA high rise in Century City 🙂).

CENTURY CITY SUCCESS STORY

Lastly, I’m proud to have represented an anonymous celebrity client, helping them move into an architecturally significant spot at 1801 Century Park East in Century City. The class-A office was move-in ready and fully furnished, with views of the hills and Los Angeles Country Club. It is also a short walk to all the amenities of the Westfield Century City Mall.

Btw, a trend I’m noticing is that celebrities and influencers seem to be leasing up space for their own use and/or “family offices,” fueled by their incredible wealth creation.

Thanks for reading. If you want me to look into something or have some ideas for the newsletter, let me know, and I’ll get right back to you.

Ted Simpson
Founder and CEO
Commercial Real Estate Advisors
(c) +1 310.384.6512 |(e) [email protected]
CA DRE License #0109718

P.S. Whenever you’re ready, here are 3 ways I can help you with your real estate.

1. A new home for your business. So, you want to move, but you don’t know the market. I can help.

2. Time to renew your lease? Don’t quite trust your landlord? Consider me your personal polygraph. BTW, I recommend starting the lease renewal process six months out at a minimum.

3. Sublease your space. You’ve outgrown your space and need to move but don’t want to pay two rents? I got you.