By Konrad Putzier
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 30, 2020).
Real-estate investors at Blackstone Group Inc. are getting into
They are doing it not by making movies or TV shows themselves,
but by acquiring stakes in the production facilities and other real
estate where companies like Netflix Inc. and the Walt Disney Co.
are creating content.
Blackstone on Sunday took its biggest step in this direction
when the New York investment firm signed a deal to take a 49% stake
in a venture that will own three film-studio lots and five adjacent
office buildings in Hollywood, Calif., valuing the properties at
The studios' current owner, Hudson Pacific Properties Inc., or
HPP, will keep a 51% stake in the venture and will continue
managing the properties, which include the Sunset Bronson, Sunset
Gower and Sunset Las Palmas studios, the companies said. Netflix,
CBS and Walt Disney are among the facilities' customers, according
Film studios and production facilities have become hot
commodities as Netflix, Amazon.com Inc. and Apple Inc. compete for
streaming customers and race to produce more original movies and
shows. Blackstone also owns a portfolio of office buildings in
Burbank, Calif., with media tenants like Disney, Warner Bros
Entertainment Inc. and NBCUniversal Media LLC.
Blackstone sees content production as a booming industry in
which supply is highly constricted, said Nadeem Meghji,
Blackstone's head of real estate for the Americas.
"We think this is really a long-term trend," Mr. Meghji said.
"We're thematic investors and focus on sectors with strong
tailwinds, and content creation is a prime example."
Blackstone's partnership with HPP is the latest sign that one of
the world's largest real-estate owners is expanding beyond
traditional bricks-and-mortar buildings, embracing properties more
closely tied to online commerce and content creation.
The firm has already been loading up on industrial warehouses
that often serve as distribution centers for e-commerce. Logistics
represented about one-third of Blackstone's global real-estate
portfolio in the first quarter, up from only 2% in 2010, according
to the firm.
It has been moving in the opposite direction with retail
properties and hotels, which in the first quarter accounted for
less than 15% of the global portfolio, compared with about half in
2010, Blackstone said.
Those shifts are in line with how some of Blackstone's peers
have also been recalibrating their property investing. But the
firm's move into production facilities is effectively carving out a
new and untested category for large global real-estate
"There just aren't that many people in the studio game," said
John Tronson, a Los Angeles-based principal at real-estate
brokerage firm Avison Young.
Some say that is for good reason. The business is far from easy.
Studio owners are expected to offer a range of services, such as
security and information technology, often on short notice.
Contracts with production companies can be as short as one month,
meaning revenues can fall quickly if customers stay away.
"This is not really real estate," said Doug Steiner, chairman of
Steiner Studios, a film studio in Brooklyn. "We like to say it's
like a boutique hotel serving a particular industry."
Still, Mr. Tronson said he expects demand for film studios to
continue to increase while supply is limited.
There is little land to build on in cities like Los Angeles and
New York, and studio owners often struggle to compete for the few
available sites with apartment or office developers. Film studios
are typically single-story buildings, and some properties have been
torn down to build multistory office or apartment properties.
"There is actually an attrition of a lot of these studios," Mr.
Outside of Hollywood, the market for production facilities has
heated up as tax-incentive programs drive crews to new states and
countries, and the number of movies and TV shows made each year
rises. A construction boom for production facilities followed the
implementation of Georgia's popular tax-credit program, which
offers a rebate of up to 30% on TV shows and movies that film in
What's more, the rise of streaming services has led to a glut in
programming -- and a shortage of available soundstages to make it
in. Netflix has built its own production hub in Albuquerque to
mitigate that shortage, and Disney in 2019 signed a long-term lease
with Pinewood Group, outside London, to ensure it would have
shooting space at the facilities for several years.
HPP chief executive Victor Coleman said about half the studio
space is leased out to production companies for terms of three or
more years. Rental income at his studios has been growing for the
past decade, he added, and Blackstone and HPP plan to expand their
joint portfolio and are eyeing investments in cities like
Vancouver, New York and London.
For now, most film studios are closed because of the pandemic.
But Mr. Meghji expects more companies will want to lease film
studios once productions resume.
"There is pent-up demand to create new content," he said.
Erich Schwartzel contributed to this article.
Write to Konrad Putzier at firstname.lastname@example.org
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