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Not too long ago, before the pandemic, some real estate investors may have shunned studio lots over fears they would be left with idle or underused shooting stages. Now, as Wall Street cools on office towers, hotels and shopping malls amid remote work, online shopping and COVID-19, major private equity money is flowing to operators of studio lots in North American cities. “We’re the new asset class for large financial institutions,” says Chris Cooney, CEO of EUE/Screen Gems Studios, which runs an 11-stage Atlanta complex where Netflix’s Stranger Things season four shot in 2020.
To meet a growing subscriber demand for streaming film and TV content, top studio markets in Los Angeles, Toronto, Vancouver, Atlanta and New York now see developers investing to own campus-size facilities. Longtime owners are cashing out: On Aug. 23, ViacomCBS put its CBS Studio Center property in Los Angeles up for sale as it pivots to fund its streaming efforts. And clients “don’t want junky warehouses,” says Paul Bronfman, CEO of Comweb Corp. and chair of Pinewood Toronto Studios.
For soundstage operators — whose real estate value rises and falls based on demand — knowing they can secure long-term leases and anchor tenants makes them attractive for financiers. Amid a content production boom, studio “utilization is considerably high, and it’s almost a guarantee the building will be filled,” says Alex Godfrey, the Vancouver-based vp studios at William F. White International, a Canadian studio operator.
“Over the past several years, we’ve seen accelerated demand growth, lease terms lengthen and strong credit stand behind those leases,” says Nadeem Meghji, head of real estate Americas at Blackstone, who led the investment group’s 2020 buy of a 49 percent stake in three Hudson Pacific studios in Los Angeles with 35 soundstages at properties like Sunset Bronson, Sunset Gower and Sunset Las Palmas.
Netflix established its Los Angeles headquarters at Sunset Bronson Studios in 2017 and took out new leases at production hubs in Toronto in 2019 and Vancouver a year later. Meanwhile, Lionsgate partnered with investment fund Great Point Capital Management and real estate firm National Resources in 2019 to be a minority investor and the anchor tenant in a $100 million studio complex going up in Yonkers, 20 minutes outside Manhattan. “We have total flexibility. We’re major tenants as well as investors, so we can plan ahead,” Kevin Beggs, chairman of Lionsgate TV Group, says of using the Yonkers stages to shoot his own TV series slate or sub-leasing the space for full occupancy.
Hudson Pacific Properties and Blackstone are building the Sunset Glenoaks Studios as a media campus in Sun Valley, California, with seven soundstages on 10 acres that combine office and studio space (no anchor tenant has been named yet). “It’s all in one. With a whole campus facility, you can have your VFX department, your preproduction and postproduction, your writers room and actors and talent on site,” says Victor Coleman, CEO of Hudson Pacific Properties.
Coleman adds that real estate investors like Blackstone now embrace show business because media giants like Netflix, ViacomCBS and Walt Disney use stable streaming subscriber revenues to produce much-needed content, which turns studio facilities into hot commodities. “[The investors] love the credit. They love the ability to grow the platform, which is inclusive of real estate and amenities and, yes, they really enjoy the ability to lead this sector,” Coleman says.
Investment firms Hackman Capital Partners and Square Mile Capital Management acquired the Sony Pictures animation property in Culver City in January, across the street from another of their campuses, the Culver Studios, home to Amazon Studios. Jason Hariton, chief real estate officer for the MBS Group, a division of Hackman Capital, says that major studio operators increasingly are aiming to be a one-stop shop as projects shoot domestically and abroad. “Amazon has a headquarters with Hackman Capital in Culver City, but then they’re filming in locations with partners all around the world,” Hariton notes.
And just as Amazon wants to dominate the online ecommerce market, Hackman Capital is looking to prevail in the global studio, equipment rental and ancillary services business worldwide. “We’re not trying to mine for gold,” notes Michael Hackman, CEO of Hackman Capital. “We’re selling the pots and pans and the jeans, we’re making sure people who make the content have the very best facilities, equipment and services, and, from a production logistics standpoint worldwide, secure the locations and crews they want.”
Georgia-based Trilith Studios has taken the mixed-used notion of studio campuses a step further. It has built a 235-acre town with its own houses, restaurants and schools to attract creatives to its 24 soundstages, which have been home to movies in Marvel’s Avengers franchise. “There are a lot of studios and a lot of people in the Atlanta market that can build stages,” says Craig Heyl, COO at Trilith. “We’re not just building big empty spaces. We’re trying to build purposeful places that inspire creativity, with bars and restaurants and exercise facilities next door.”
The winners in the new film studio construction boom are expected to be major players with established relationships and monster studios in Hollywood or other places in North America where talent and tax credits are already available. New York City and Los Angeles aren’t going anywhere because A-list talent lives there, notes Tima Bell, a principal at Relativity Architects, which has plans in the works for six campus-size studios in Los Angeles alone. Elsewhere, the bottom line continues to drive decision-making on where Hollywood movies and TV series shoot. Adds Bell: “Just having that film stage does not make people want to shoot in Vancouver, but the tax credit does.”
A version of this story first appeared in the Aug. 25 issue of The Hollywood Reporter magazine. Click here to subscribe.
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