Blackstone, Bain, TPG and more pour billions into Hollywood studios

  • Institutional investors continue to see gold in Hollywood studios despite a slowdown in content spending.
  • Blackstone, Bain, Silver Lake and more are pouring billions into sound studios and related services.
  • Investors are bullish on the industry as people’s time and spending on entertainment continues to increase.

The rise of streaming has created an explosion in demand for new programming — and the spaces where it is produced.

Just as investors are pouring money into film and TV production companies, they are also doubling down on studio space, betting that the content boom is here to stay.

The production real estate arena has attracted giants like Blackstone, which in 2020 acquired 49% of three Los Angeles-based studios from real estate investment fund Hudson Pacific Properties. In 2021, the two companies announced plans to invest up to $190 million to develop a large studio on the outskirts of Los Angeles – Sunset Glenoaks Studios. And this year they plan to start construction on a large facility near London. They are also actively looking to acquire existing studio properties.

Also gaining traction in Hollywood is Bain Capital Real Estate, which in 2019 created a joint venture with Bardas Investment Group, a West Hollywood real estate investment and development company. They’ve announced plans for more than $1 billion in studio developments across Hollywood and are on the lookout for more projects.

The top markets – Los Angeles and New York – added 4.5% and 23% more sound stage square feet, respectively, from 2020 to 2022, according to data tracked by CBRE.

And investors insisted to Insider that their long-term view of the space has not dimmed, even as high interest rates and a slowdown in new content spending dampen near-term activity.

Global content spending is expected to grow just 2% this year, its slowest increase in a decade, according to Ampere Analysis. But investors are looking at data that shows Americans streamed 27% more content in 2022, according to Nielsen, while their entertainment spending (in theaters, at home and on mobile) has increased 15% since 2017 to $36.8 billion. in 2021, according to the MPA.

Even if production volume is reduced, investors argue that media companies’ drive for efficiency could mitigate this drop, favoring studios over more expensive filming on location. They’re also banking on the fact that real estate and equipment makes up a small portion of a production’s budget, which bodes well for the industry should the industry hit a content slowdown.

“Consumer spending and hours spent continue to increase,” said Anthony Jasenski, who leads CBRE’s national film studio valuation practice. “There’s been more views and spending on ticket sales and entertainment over the last five years. That’s the root of the demand.”

Institutional investors have historically been cool with investing in studio spaces because they’re operating businesses that require hands-on involvement. Big lots of studios have largely been in the hands of the media companies themselves. But new developments and long-term studio leases that guarantee steady revenues have attracted new entrants.

And with media companies looking to free up capital to invest in content, it’s not hard to imagine the possibility of iconic campuses like Universal or Paramount being sold into the hands of financial players and even an IPO of a studio platform at some point. .

“The entertainment industry is notoriously fickle, they’re facing a strike,” Jeff Stotland, Hudson Pacific’s EVP of global studios, tells Insider – as Hollywood is increasingly anticipating a writers’ strike later this spring. “But that’s a short-term dynamic. We think it’s going to grow. In 10 years, we think there will be more money spent on content than today.”

“Of the people we’ve talked to about demand, content budgets fluctuate, but everyone remains extremely busy,” said David Simon, founder and leader of Bardas. “(Companies) are figuring out how to catch up with Netflix and do their own thing.”

Insider has identified 12 investors who are making big moves in the space, based on conversations with key stakeholders about current and upcoming deals, as well as existing reports about the boom of recent years.

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