New JV Targets Production Studios Development

King Street Capital Management, Alberta Investment Management Corp. and a sovereign wealth fund have formed a joint venture alongside East End Studios to acquire and develop class-A production studios. The investment strategy aims to meet the escalating demand for production space in Los Angeles.

The strategy will target the redevelopment of existing facilities, along with development opportunities. The joint venture currently has three projects under construction in the Los Angeles area representing a total capitalization of $500 million and more than 750,000 square feet of studio space. Two of the studio projects are located in Glendale, and the other is in Downtown Los Angeles.

David Walch, a partner at King Street, said that the company is attracted to the supply-demand imbalance in the studio market, while Ian Woychuk, director of real estate at AIMCo, noted that the streaming wars have continued to new demand. Both King Street and East End Studios have experience in the entertainment real estate space.

The streaming wars have actually propelled production studios into the mainstream. Some experts have even called the assets the new darling of CRE in Los Angeles. Research earlier this year from CBRE found that strength in the global entertainment market has contributed to a 1.2 million-square-foot pipeline of new studio space development and occupancy of existing spaces has stayed above 95%.

This joint venture announcement comes on the heels of a major studio deal announced yesterday. A partnership between Worthe Real Estate Group and investment firm Stockbridge has completed a deal with Warner Bros. to acquire the Ranch Lot, a historic studio facility in Burbank, in a sale-leaseback transaction. The transfer of ownership will take place in 2023, and Warner Bros. will take occupancy of the property in 2025, following a redevelopment by the new ownership.

The Worthe-Stockbridge partnership plans to spend $500 million to redevelop the 32-acre land site. The redevelopment will include 16 sound stages with connected production support space, a multi-level parking structure, a commissary, mill space and a 320,000-square-foot office complex. The development project will total 926,000 square feet.

The King Street joint venture will target major US film hubs and in international markets.