NOHO

By CHRISTOPHER WOODARD Staff Reporter A $750 million movie studio and commercial complex will put North Hollywood on the entertainment industry’s map, creating up to 14,000 permanent jobs and sparking economic renewal in one the Valley’s most depressed areas. That’s the dream anyway. But it remains to be seen whether developer J. Allen Radford can make the project live up to expectations. Sound stages, one of the key components of the project, are plentiful in Los Angeles, with more under construction. Meanwhile, the project calls for North Hollywood to absorb an unprecedented amount of office space, 2.6 million square feet, over 10 years. This, at a time when the entertainment industry is experiencing some slowing and places like New York, Arizona and Canada are clamoring for a bigger piece of L.A.’s film and television production pie. “It seems overly ambitious and unrealistic in view of the present market,” said Glenn Hoiby, a member of a citizens’ committee that oversees redevelopment in North Hollywood. “I question whether the financial aspects are that well thought-out.” But Radford maintains that the project will pencil out. While L.A. does have more than 300 sound stages and 20 others are under construction, many are old and obsolete. Today’s demand is primarily for larger, state-of-the art studios like his, he said. The sound stages, in turn, will act as an engine to power demand for office and retail space. But, said Radford, “The real juggernaut is going to be the Metro Station (being developed) at our front doorstep. Business people will have the opportunity to get on a subway and with safety and convenience be at the downtown Civic Center in 22 minutes.” A Community Redevelopment Agency panel recently recommended that Radford and his partnership, JARCO/SLG & G; LLC, be selected over a group calling itself the Academy Media Centre LLC to redevelop 42 acres of mostly rundown manufacturing and auto shop businesses on either side of Chandler Boulevard. The site is between Lankershim Boulevard and Vineland Avenue, next to the new Red Line station, which is scheduled for completion in spring 2000. On March 18, the Community Redevelopment Agency board is expected to approve the recommendation by directing its staff to hammer out a development agreement with Radford. Radford’s “North Hollywood Studio Complex” would entail 10 sound stages, 18,000 square feet each, another 180,000 square feet of pre- and post-production offices, two 20-story office towers, two 10-story office towers, 400 condominiums, and 100,000 square feet of retail space. Meanwhile, Radford is also seeking to acquire an adjacent 11-acre site from the MTA, where JARCO/SLG & G; hopes to eventually build two additional 20-story office towers, another 250,000 square feet of retail space, a movie theater and restaurants. While Radford is confident about the project’s future, it comes at a time when the entertainment industry appears to be slowing down. For the first time in several years, the number of jobs in television and motion picture production declined by 1,100 in 1998, a 0.8 percent decline from 132,400 jobs the year before, said Jack Kyser, chief economist with the Economic Development Corp. of L.A. County. The decline, while slight, marks a reversal from the growth spurt that saw 15,400 new entertainment jobs created in 1995, 8,400 new jobs in 1996 and 13,000 new jobs in 1997. At the same time, the number of location shoot days in Los Angeles declined from 47,633 in 1997 to 45,653 last year. While the industry remains generally strong, said Kyser, “it looks like we’re in a digestion period.” A Radford-commissioned study conducted by the Natelson Co. Inc. found that although L.A. has some 300 sound stages, the area could support another 40 or so new stages, in addition to the 20 or so currently under construction throughout the region. Radford’s projection that North Hollywood could absorb an average of 260,000 square feet of office space annually over the next decade is “aggressive,” but the limited supply of competitive office space in neighboring Glendale, Burbank and Universal City make that projection feasible, the consultants found. Those findings seem to conflict with the difficulties PacTen Partners is having in leasing its new 530,000-square-foot office tower in Glendale. The developer recently signed leases for the first 125,000 square feet of space at Glendale Plaza, but so far the project hasn’t attracted the high-rent, entertainment clients the developer had hoped for. Several other projects in Glendale, meanwhile, have been scaled back. And no new proposals have appeared on the drawing board. Carl Muhlstein, a vice president for Cushman Realty Corp., said the trouble attracting entertainment clients to Glendale is part of the cyclical nature of the entertainment business. While the industry might not be in expansion mode now, its long-term prospects remain strong, he said. Radford’s project, Muhlstein added, should be economically viable as a result. “Canada might get more market share, but it just ping-pongs back and forth,” he said. “Content is still king. And Los Angeles is the global center for content.” Radford said the sound stages are the component that will make his project a winner. “Every square foot of sound stage generates (the need for) office (space) at a five-to-one ratio,” he said. Tim Mahoney, president of Hollywood Center Studios, an independent studio where shows such as “Candid Camera,” “Real TV” and “Love Connection” are taped, also seemed enthusiastic about Radford’s proposed sound stages. He confirmed that his company has been in negotiations with Radford to help build and operate the new stages in North Hollywood. Mahoney hopes to become an equity partner. While L.A. might seem to have a glut of stages, many are too small or outdated, he said. Where a 12,000-square-foot studio would have sufficed in the 1980s, today’s television sitcoms with their numerous sets require between 15,000 and 20,000 square feet of space, he said. The location of Radford’s project also seems ideal, Mahoney said, because North Hollywood is at the center of a cluster of entertainment companies stretching from Disney Studios in Burbank to the CBS Studio Group in Studio City. Property that sells for $50 a square foot in Hollywood is going for about half as much in North Hollywood, Mahoney added. Paul Stockwell, corporate managing director of real estate firm Julien J. Studley Inc. and a former vice president of real estate for the Walt Disney Co., agreed that sound stages remain a sound investment. The trick is getting financing. “Lenders are looking for long-term tenants and sound stages are more like a hotel, where a tenant might stay for a month,” he said. Radford said he already has $160 million of financing in place, more than enough for the first phase of development. The financing would be in the form of a bond, but he declined to disclose the name of the underwriter he said he has lined up. Besides its financial feasibility, another aspect of Radford’s project that has raised questions is the CRA’s involvement, especially its likely use of eminent domain power to help Radford assemble the project site. “What you’re doing is taking away private property to give to another developer. In my view, it’s a perversion of the eminent domain concept,” said Hoiby. Radford said he is sympathetic to property owners’ concerns, having had some of his own land condemned by the CRA in the past. Still, the project is expected to eventually bring a tax windfall to the city, boosting its property tax revenues from $281,000 currently to an estimated $9.5 million annually, Radford said. In addition, the property, once redeveloped, would bring in $3.1 million in sales and hotel taxes to the city’s coffers. The use of eminent domain is inevitable in some cases, Radford said. As an example, he cited one property owner who is demanding $750,000 for the same sized parcels that Radford has been acquiring from others at the site for $75,000. “When it’s for what we consider the betterment of the community, that’s when eminent domain should be used,” he said. Critics like Hoiby said the CRA’s track record doesn’t exactly inspire confidence in its ability to get things done. They point to the Academy of Television Arts and Sciences project as an example. The Academy project, which also was developed in the North Hollywood Redevelopment Area, ultimately was built only after the original developer went bust. Plans for a four-star hotel, a restaurant with banquet facilities and vastly more retail and office space never materialized. Julien J. Studley’s Stockwell said the Academy project was the victim of unlucky timing more than anything else. The project was developed in the early ’90s, during a severe real estate recession. Stockwell said he believes North Hollywood will continue to benefit from a spillover of entertainment companies from Burbank and Glendale, but he cautioned that Radford must be careful not to develop too much property, too quickly. “North Hollywood is an area everybody wants to see do well, but there have been so many starts and stops,” said Stockwell. “This needs to be done in bite-sized pieces.”