EXCLUSIVE: MGM Reducing Office Space in Century City
Beleaguered MGM has struck a deal with the landlord of its namesake office building in Century City to vacate three of its 10 floors of headquarters office space.
The agreement, which amends MGM's substantial lease with landlord JMB Realty Corp., was reached ahead of the studio's expected filing for bankruptcy and was made in order to streamline the studio's real estate holdings, sources said.
The Lion now leases about 200,000 square feet at the 35-story tower and will give back up to 75,000 square feet, depending on which floors it vacates, according to Hunt Barnett, a principal with L.A. Realty Partners, a commercial real estate brokerage that represents Chicago-based JMB.
MGM's lease at the building, which is located at 10250 Constellation Blvd. and called the MGM Tower, runs through 2018.
"They want some immediate relief of three floors and we said OK," said Barnett, who added that JMB has the ability to select which floors MGM will vacate and retains the option of taking back a fourth floor from the studio. "They are fairly sparsely populated in places."
It is not yet clear when MGM would have to vacate the offices. The lease restructuring would be approved as part of the studio's bankruptcy plan, which is expected to be filed in U.S. Bankruptcy Court in New York this week.
The studio's efforts to file a reorganization plan have been slowed by late-stage demands from investor Carl Icahn. MGM's plan has been "prepackaged" in consultation with more than 100 of its creditors and names Spyglass Entertainment co-toppers Gary Barber and Roger Birnbaum as co-CEOs of the studio. Lenders would control more than 95% of equity in MGM; the studio's $4 billion of debt would be wiped away as part of the plan.
It is believed that Spyglass, which is headquartered at a Westwood high-rise, would consolidate its space into the MGM Tower. The streamlining of MGM's space is in line with Spyglass' stated intent to downsize MGM operations, slimming production and staffing and eliminating a film distribution unit.
Icahn, one of the largest holders of MGM debt, has backed a rival reorganization plan put forth by Lionsgate, which has proposed a merger with MGM.
Once ownership of the studio is ironed out, JMB will meet with MGM to discussion its office options at the tower moving forward, Barnett said.
"One of three things will happen: They will continue to operate in our building, they will vacate our building, or they will operate under some new structure," said Barnett, who expects those talks to take place within a year.
While the financial terms of MGM's lease are not known, it is believed to be among the largest in the history of Los Angeles County. In 2000 the Los Angeles Times reported that the deal was valued at almost $500 million, though it appears that at the time MGM planned to occupy more space than it currently uses.
The studio moved into the building in 2003 when it opened. A source said that MGM pays more than $5 per square foot per month, putting the lease at the very top of the Los Angeles office market.
MGM declined to comment.