The Academy Sells Hollywood City Block to Kilroy Realty Corporation

In an off-market transaction, Kilroy Realty Corporation has purchased a four-acre Hollywood parcel from the Academy of Motion Picture Arts and Sciences for $48 million.  Located immediately north of the Academy’s Pickford Center for Motion Picture Study, the full city-block site was originally intended to house the future Academy Museum of Motion Pictures when it was acquired by AMPAS in 2005 for $50 million.

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However, in October 2011, the Academy and the Los Angeles Country Museum of Art announced a partnership through which the movie museum would be housed in the Wilshire May Co. building on the LACMA campus.

With the purchase now complete, Kilroy Realty Corporation has announced plans to seek approval and entitlements to develop a creative media mixed-use campus on the site. Plans include more than 450,000 square feet of office space, apartments and retail space with Shimoda Design Group spearheading the design.

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The deal marks another major Hollywood project for Kilroy Realty Corporation, and another move towards the area's ongoing revitalization, which has faced recent setbacks with a newly released California Geological Survey that could indefinitely stall mega projects, such as the Millennium Hollywood towers.

But all of Kilroy Realty's large-scale developments -- including the Columbia Square project as well as the renovation of Sunset Media Center, a 22-story, 322,000-square-foot office complex on Sunset Boulevard just east of Vine -- are far from the earthquake fault lines, says KRC's executive vice president David Simon. "We’re not near any of the study zones. We’re in the area where development can and will happen," he says.

"The Academy site will be different from Columbia Square," says Simon, referencing the 675,000 square-foot mixed use campus located on the former site of CBS Los Angeles' television and radio operation, which began construction last year. "This is going to be more about housing smaller production and post-production companies, whereas Columbia will be more focused on larger headquarter users, entertainment and media technology companies. The Academy site will have very stylish rental units, but at a more accessible price point."

Simon added that KRC will continue AMPAS' "Oscars Outdoors" open-air summer movie screening series until construction begins: "We're currently talking to the Academy about a multitude of ideas to continue the summer film shows, and beyond."

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L.A.'s Creative Office Hotspots for 2014

Three commercial real estate experts share with The Hollywood Reporter about how they would cast their votes for Los Angeles' next wave of entertainment office deals:

George Garfield, President, West Region, Transwestern:

Perhaps the hottest entertainment real estate story of 2013 came from L.A.'s nontraditional entertainment firms. As we look at the Internet's influence on entertainment, this is the most interesting: Online distribution platforms for YouTube, Netflix and Amazon Studios shook up the scene with plans to produce branded content separate from that of TV, cable and movie studios. They require their own kinds of studios and are among the largest new space users in the city. YouTube Space LA in Playa Vista is a prototype of creative studios set within formerly obsolete buildings. And there is new office demand from digital media firms and advertising agencies looking to capitalize on the growth of these nontraditional studios. Santa Monica and the Lower Westside are still hot markets. But 2014 might be the year that the Hollywood submarket takes off, with increased development on Sunset Boulevard near Sunset Gower Studios, as well as Hollywood and Downtown.

Additionally, large studios will continue consolidation into real estate footprints they own and control. For example, as Comcast completes its acquisition of NBC Universal, it too may consolidate Los Angeles operations. Following Comcast's recent purchase of 10 Universal City Plaza -- the 35-story tower adjacent to Universal Studios -- additional NBC Universal personnel moved into the building. Such moves may serve as an example of how consolidation could proceed in 2014 and the years to come.

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Andrew Jennison, Partner, Industry Partners:

When vacancy rates for true creative and soft creative space in Santa Monica hover around 6 percent, then the natural migration is for tenants to look east and west at options that are potentially more abundant and less expensive. A typical tenant evaluating the marketplace will strongly consider relocating out of their desired geographic if there is a $0.30-$0.50/square foot savings in rent. Right now, I envision more creative tenants will consider tertiary markets for creative space given the lack of availability on the Westside. The submarket I see attracting creative tenants this year are El Segundo and DTLA. Both offer unique creative options at a very competitive price point. For so many years, DTLA was never considered an option unless you were in the service business. With all of the real estate activity taking place there -- residential, hospitality like the Ace Hotel and the influx of restaurants -- it is becoming a lively epicenter. Businesses see the transformation and know about it and will respond to it by moving their offices there.

Eric Sussman, UCLA School, senior lecturer, Ziman Center of Real Estate, UCLA Anderson School of Management:

There is no question that downtown L.A. is going to be super hot and a magnet for entertainment tenants. It has got a coolness factor -- these are the kind of tenants who don't just want vanilla shell, yawner office space. It has to have polished concrete floors, open space and exposed vents -- that kind of thing. Downtown L.A. is getting that cool factor, and you combine that with a 15 percent vacancy rate and reasonably affordable high-density housing, and it makes sense they you're going to see creative office deals there this year.

Playa Vista also hits a lot of those factors. It's the whole package, with that cool factor and office space that isn't your dropped-ceiling, traditional tower thing. That's another area where we're likely to see more deals this year.

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