Fox retains historic lot worth a possible $1.5B
Disney acquisition opens studio space for others to rent
In the end, the legendary Los Angeles birthplace of what became the vast Fox film empire was just too dear to part with.
The historic lot on Pico Boulevard in Century City was retained by the newly formed Fox Corp., even as Walt Disney Co. absorbed much of 21st Century Fox’s entertainment assets in a $71.3-billion deal that put Captain America and Wolverine on the same team.
Fox has not spelled out its plans for the more-than 50-acre property, but there is certainly more than nostalgia for Hollywood history behind the decision.
Lachlan Murdoch, eldest son of media mogul Rupert Murdoch, will run the company controlled by the family as its chairman and chief executive. And it’s safe to predict that the old lot where generations of movies and television shows were filmed will remain a cash-generating pillar of the surviving Fox empire for years to come.
Although the reconfigured company will have a decidedly broadcast emphasis — its assets include Fox News, the Fox Broadcasting network and Fox Sports — it will remain in the scripted TV business, continuing to air “The Simpsons” and “Family Guy,” even though those programs now are owned by Disney.
The lot contains both administrative offices and soundstages, and holds immense value as an entertainment manufacturing center — but also as a potential real estate development site.
The Fox lot was not assigned a specific value in the Disney deal, but 25-acre CBS Television City in the Fairfax district sold for $750 million in December to Los Angeles real estate developer Hackman Capital Partners. Real estate industry observers have speculated that the Fox property could be worth more than $1.5 billion.
The values reflect the fierce demand for studios as both places to make entertainment and sought-after sites for dense real estate development.
Fox laid the foundation for major additions in 2016 when it filed a proposal with the city Planning Department to add more than 1 million square feet of offices, soundstages and other production and support facilities over the next 20 years. The lot has about 1.5 million square feet of building space now.
Progress has been slow. A draft environmental impact report on the potential effects the development would have on neighborhoods around the studio is still in the early stages, a Planning Department representative said.
The incentive to add offices and other facilities that could be rented to entertainment industry tenants is high in this period of rapid growth among free-spending new competitors in the business, such as Netflix Inc., Amazon. com Inc., Apple Inc. and Alphabet Inc., the parent company of Google.
Other studio owners are already cashing in on the demand for office and production space from young video-streaming content creators and old-line Hollywood companies.
Netflix has leased more than 700,000 square feet from Hudson Pacific Properties Inc., which owns three studios in Hollywood that date to the early days of motion pictures. The Los Angeles landlord is adding offices and other facilities to its studios that it can rent to entertainment industry tenants.
The same strategy is being employed in Culver City by Hackman Capital, which is doubling the size of Culver Studios for a major new tenant — Amazon Studios.
The streaming entertainment provider will eventually occupy 530,000 square feet on the lot founded by silent move pioneer Thomas Ince, including its signature 1920s mansion on Washington Boulevard.
Although the Fox lot already hosts productions from third-party producers, the company is not known for renting office space to outsiders, so there may not be a rush to add more offices to the lot.
In the past, other major studios have leased soundstage space, including Nbcuniversal, which produced “House” for broadcast on Fox. But today, the lot is almost exclusively occupied by producers and crews working on Fox productions.
The lot will generate two streams of revenue for the new incarnation of Fox — the lease of office space to Disney and the rental of studio facilities for thirdparty productions, which initially will be predominantly filled by productions that Disney is taking over, according to filings with the Securities and Exchange Commission.
Fox agreed to lease offices to Disney for a minimum of seven years, with Disney having the right to renew the lease for up to 10 more years.
In the 1990s, Fox added more offices to the lot for subsidiaries such as FX Networks and 20th Century Fox Animation, but it hasn’t set out to cash in on demand among third parties such as Netflix and Amazon for offices on a movie lot.
The lot had far too little space for Fox, which has long rented more than 400,000 square feet in the Fox Plaza tower in Century City and 430,000 square feet in Playa Vista, according to industry trackers.
However, it’s expected that more than 3,000 jobs, mostly in the Los Angeles area, will eventually be eliminated as part of Disney’s consolidation of the remaining Fox assets, according to two people familiar with the matter.
It’s unclear whether that could open up space on the lot or pave the way for consolidation of offices at the facility.
The corporate heart of Fox Studios is still the three-story main administrative building erected in 1936 using proceeds of movies starring Shirley Temple.
But should the new Fox decide to rent out space to the new streaming giants, it can expect to exact a premium sum. Those leases provide a steady stream of income for the studios’ owners. Average asking rents in Century City are $5.22 per square foot per month, 38 percent higher than the average rate in Los Angeles County, according to property brokerage CBRE. Landlords can charge even more for space on movie lots because they are close to the action for independent production companies and offer the security and cachet prized by many in the entertainment industry.