Potential partners likely to be based on Beverly Drive
EmptyIf they build it, they probably will come — but when and for how much is being worked out.
That's the view of a couple of sources with knowledge of the real estate aspects of the Endeavor tie-up with WMA.
If all goes well, the combined agencies are expected to move jointly into the very green six-story offices being built in the heart of Beverly Hills in second-half 2010.
It's an important matter not only because of the financials involved in such high-profile property transactions but also because everything related to Hollywood is about image. Where and how these companies locate arguably will speak volumes about how their merger is progressing and how they function as one entity.
In September, WMA sold its three headquarters buildings on El Camino and Rodeo Drive to Lincoln Property and Chile-based Cape Horn for $143 million-$145 million, though the higher figure might take in favorable leaseback terms WMA received to remain temporarily as a tenant. In any case, it was an excellent price for the agency, especially given the downturn in the market.
As for the new digs, WMA does not own the new building on Beverly Drive that is under construction. The owner of the facility, which will have retail and restaurants on the ground floor, is George Comfort & Sons along with Morgan Stanley and several local investors. Morgan Stanley is Comfort & Sons' equity partner, meaning they are backing the project financially.
One source who is an expert in entertainment real estate said WMA has committed to a 20-year lease for more than 150,000 square feet at the new site, at a price of about $4.30 a square foot per month. The rental rate, which escalates 3% annually, was negotiated in 2006 and closed in early 2007.
At this point, that price looks auspicious for WMA and by extension new partner Endeavor: WMA's rental rate at the new building is locked in, but development and construction costs have increased significantly.
Meanwhile, WMA has alerted its current landlord of the possibility it might need to stay past 2010.
That might be a routine contingency in case the bulldozers take longer; however, on the off chance the merger doesn't come together, nearly 200,000 square feet of beautiful Beverly Hills property to lease would be on the open market.
While WMA's lease would allow it to easily move into the new structure once ready, Endeavor's lease doesn't line up. Another source with knowledge of Beverly Hills real estate said Endeavor's rental contract at 9601 Wilshire Blvd. doesn't expire until 2019.
Given the recession, it could be tricky for Endeavor to sublease the space, potentially resulting in a sizable financial hit. Other entertainment sources, however, point out that the partners could situate part of their combined work force — say, the music division — in the current 100,000-square-foot Endeavor venue.
And the real estate aspect of the merger is being called "the easy part." (partialdiff)