Appraising Motion Picture Studios

Some Background

 Historically the Studios were owned and operated by major production companies.  Product filmed and edited on the major’s lots.  Limited facilities used for outside rentals.  Many operators came on line to operate properties for real estate revenue  Began to change substantially in the 1980s

 Advent of Television

 Decline of the Major Studios  Movie attendance (which had been declining steadily since the Golden Age) hit an all-time low in  Example: From 15 releases in 1973, the next year MGM was down to 5; its average for the rest of the 1970s would be even lower.  New independent (some major-related) production companies emerged: Touchstone Pictures, Buena Vista, Orion Pictures, Tri_-Star Pictures, HBO  In 1986, the combined share of the six classic majors—at that point Paramount, Warner Bros., Columbia, Universal, Fox, and MGM/UA—fell to 64%, the lowest since the beginning of the Golden Age.  Smaller independents garnered 13%—more than any major studio aside from Paramount.  By comparison in 1964 all of the companies beside the then seven majors and Disney had combined for a grand total of 1%.

 Movie Attendance

Filling A Void

 Rise of the For Rent Facility  Not just a Cost Approach any more  Entrepreneurs take advantage; not “movie” people  Several facilities with “deferred maintenance” (nicely said)  Occupancy rises, increased demand  Renovations begin, some stages and offices added

Major Motion Picture Studios Warner Bros.Burbank UniversalUniversal City ParamountHollywood SonyCulver City CBS - RadfordStudio City FoxCentury City DisneyBurbank CulverCulver City Manhattan Beach RaleighHollywood Sunset-GowerHollywood Hollywood CenterHollywood Sunset Bronson (KTLA)Hollywood The LotWest Hollywood Los Angeles CenterLos Angeles Red StudiosHollywood

Major Motion Picture Studios By Type Studio TotalSquare No.NameLocationStagesFeet Major Production Companies: 1Warner Bros.Burbank34544,829 2UniversalUniversal City31383,712 3ParamountHollywood28358,969 4SonyCulver City22396,041 5CBS - RadfordStudio City18336,850 6FoxCentury City15299,389 7DisneyBurbank7113,918 Subtotal2,433,708 Independent/For-Rent: 8CulverCulver City14154,245 9Manhattan Beach 14287,000 10RaleighHollywood12120,789 11Sunset-GowerHollywood12156,214 12Hollywood CenterHollywood10124,180 13Sunset Bronson (KTLA)Hollywood884,270 14The LotWest Hollywood788,164 15Los Angeles CenterLos Angeles6108,000 16Red StudiosHollywood577,979 Subtotal1,200,841 Total2433,634,549

Valuing The Studio

 Income Approach  Type of Revenue:  Direct Stage Revenue (rent)  Indirect Stage Revenue (power, dressing rooms, air-conditioning, guards, stage managers, forklifts, expendables  Equipment Rentals  Office Rentals (includes miscellaneous such as editing rooms)  Parking, Telephone  Level of Revenue  Discounts from “rate card” rates for stages  Many “package” deals  Obviously many are short term rentals  Vacant factor not your typical “5%”  Must carefully analyze historicals  Indirect Stage Revenue often from about 15% to 25% of total Stage  Equipment Rentals – must be only at subject facility  Often many other sources of revenue – not part of the real estate

 Income Approach  Type of Expenses:  Taxes  Insurance  Repairs and Maintenance  Utilities  Salaries (must include a management fee)  Equipment Costs (maintenance and replacements)  Level of Expenses  High expense ratio (typical 40% to 50%+)  Salaries and equipment costs can be half the total expenses  Although not included in historicals, often include a “guru” manager expense

 Sales Comparison Approach  Not many sales of the major studios  Sales of “conversions” less comparable  Many “conversions” type throughout Los Angeles  Santa Clarita (ground up)  Quixote  Smashbox  Delfino  Occidential  GMT  Chandler Valley Center  Lacy Street  Often must “trend” the few sales  Often highly specific to property performance  Going Concern a separate issue  Cap rates can be difficult to extract

 Sales Comparison Approach (1) Included sale lease-back SaleSquareNo. ofSale Price StudioDateFeetStagesTotal/Sq.Ft. Culver Studios Culver City 4/04294,92513$73,000,000$ Same 3/11396,45813$89,650,000$ Manhattan Beach Studios Manhattan Beach 11/04586,63214$98,000,000$ Same 6/07586,63214$150,000,000$ Sunset-Gower Studios Hollywood 11/04556,00012$110,000,000$ Same 8/07619,00012$205,000,000$ Same 6/10619,00012Portfolio KTLA Studios (Bronson) Hollywood 1/08238,1938$125,000,000 $ Leaseback Same 6/10238,1938Portfolio Ren-Mar (now Red Studios) Hollywood 1/10135,2076$23,500,000$ KCET Studios Hollywood 4/11105,0002$42,000,000$400.00