This deal makes sense for both sides. It enables Sam Zell (and the employees of the Tribune empire) to pay down the debt on the recent acquisition and it transfers one of the oldest studio lots to private hands that are committed to running film and TV studios in Hollywood.
In the long run there undoubtedly will be some mixed, higher density uses on these old lots - but as long as the amount of square footage dedicated to actual production remains the same - or increases - everyone wins.
This example shows how preserving appropriately zoning industrial land can create jobs as opposed to the job destruction currently happening downtown by a misapplication of the same concept to no longer appropriately zoned land.
LA 01 29 08
ZELL SELLS 2: READY FOR HIS CLOSE-UP?
Benjamin Mark Cole
Real estate titan Sam Zell will soon sell the storied 10.5-acre Tribune Studios in Hollywood for $130 million to Los Angeles-based Hudson Capital LLC, a private equity real estate house, according to sources familiar with the transaction.
The closely watched sale is the first disposition of real estate for Tribune Co. under its new owner, Sam Zell.
It is the second studio buy in five months for Victor Coleman, managing partner at Hudson, who was known for years as Chairman Richard Ziman's sidekick at the old Los Angeles-based Arden Realty Inc., the public REIT. Arden was acquired by Trizec and GE in 2005, and Trizec was then acquired by Brookfield Properties (nyse: BPO) in 2006.
Only last September, Coleman and Hudson Capital grabbed the 16-acre Sunset-Gower Studio lot (the old Columbia Pictures studio), in a $200 million transaction.
Coleman declined to comment yesterday, saying "in one or two days I can talk." Cushman & Wakefield was retained last year to shop the Tribune lot, also on Sunset Boulevard.
Some observers regarded Coleman's second act -- the buying of the Tribune studios, known locally for its KTLA-5 television broadcasts – as brilliantly written, both for short-term operational reasons, and as a long-term land banking play.
"The two lots are just a stone's throw apart," said a longtime market observer. "The movie business is like a lot of businesses, in that it is a matter of logistics. If you have that many more soundstages close by to offer a Disney, that many more alternatives to meet their just-in-time deadlines, then you are that much more competitive."
John Tronson, principal with the Ramsey-Shilling Co. brokerage, said the second studio buy reveals that "Coleman has become comfortable with the studio business, comfortable he can keep the stages rented at good prices."
Until the recent writer's strike, demand for stages was strong, and some fretted Hollywood didn't have enough to keep show business in town.
The wholesale conversion of the Tribune and Sunset-Gower lots to "higher and better uses" is not probable anytime soon, said Tronson. "The position of the (Los Angeles) City Council on this is pretty clear: they want the stages to stay, that they are irreplaceable assets."
But in order to entice Coleman to keep filming, the city would likely offer inducements, such as leniency in zonings for additional entertainment industry-related buildings on the lots, such as creative office space.
Others have speculated that outsized studio lots, in densifying urban locations, will eventually go the way of used car lots, or other land-hungry enterprises, such as the old Marineland theme park in Palos Verde, or Gilmore Field just south of Hollywood, where midget auto racers circled the oval track, back in the 1930s.
"Sooner or later, the pressures just eat up the land," said one broker.
The pressures seem to be mounting in Hollywood. For decades a backwater in Los Angeles, in the 1990s Tinseltown began to revive, boosted in part by the city-subsidized the Hollywood & Highland mall on Hollywood Boulevard. (built by Trizec, it failed and was acquired by CIM Group at a vast discount; CIM now owns many top sites along Hollywood Boulevard.) The mall was connected to a new subway stop, and there has been a residential and nightlife renaissance as well.
Indeed, more than $3 billion worth of development is slated within Hollywood's 1,107 acres, according to the City of Los Angeles Community Redevelopment Agency.
At Hollywood and Vine alone, the former crossroads of movie and radio businesses, at least $1.2 billion in developments with more than 2,000 housing units are underway or planned, including the huge Hollywood & Vine mixed-use project by Legacy Partners, which will house a W Hotel.
Ramsey-Shilling broker Tronson reports retail rents have risen steeply in recent years, while Hollywood office priced doubles to $400 a square footin
2007 from $200 a square foot in 2004 according to reports issued by brokerage Grubb & Ellis.
Coleman's latest acquisition, the Tribune lot , is steeped in Tinseltown lore, having been bought by Warner Bros. in 1920. "The Jazz Singer," the first talkie ever produced, was shot there, starring Al Jolson. Paramount Pictures bought the lot in 1954, and shot TV shows, including the long-running serial "Gunsmoke."
Tribune Co. acquired the property in 1986 from Gene Autry's Golden West Broadcasting, which had purchased the lot in 1963. Until his recent death, veteran newscaster Hal Fishman anchored the KTLA news from the studio almost every night for nearly 40 years.
Of course, the Chicago-based Tribune Co., a media conglomerate, was acquired last year by Zell, who is now selling off assets in part to pay down debt. Sound familiar?