Buyers cast spotlight on film studios; see growth in set pieces.

On a slow weekday at Sunset-Gower Studios in Hollywood, Andrew Tainiter--a principal in the firm that recently acquired the site--meanders through a backdrop resembling an idealized 1950s main street.

Although Tainiter has only been on the lot for three weeks he's not dewy-eyed at the productions staged in the storied former Columbia Pictures backlot.

"I guess you could say this is more glamorous than our other properties," said Tainiter, a principal at Palo Alto-based private equity firm Global Innovation Partners LLC, "but really it's no different than any of our other real estate deals."

GI Partners isn't alone in banking on studio lots making good real estate investments. An increasing number of large film and television studios traded hands this year and in every transaction sellers with entertainment backgrounds have given way to real estate investors.

In April, Sony Corp. sold its 17-acre Culver Studios for $125 million to a partnership of New York-based investment bank Lehman Bros. Holdings Inc. and El Segundo-based real estate investor Pacific Coast Capital Partners LLC and Pacifica Venture Partners.

Roy E. Disney's Shamrock Holdings of California Inc. sold its 22-acre Manhattan Beach Studios in November to L.A.-based opportunity investor Oaktree Capital Management Co. Terms weren't disclosed but sources pegged the price close to $100 million.

And just before Thanksgiving, G.I Partners closed on its deal to buy Sunset-Gower Studios from Pick-Vanoff Co. LLC, a family-owned company that leased the studios since 1977 and bought the property in 1983 for $8 million. Neither side disclosed the sales price but sources said it was in the neighborhood of $110 million.

The deals come at a time when studio space throughout Los Angeles County is at a premium. Despite the challenges of runaway production and a reality television craze that has cut down on the number of scripted shows requiring studio space, production facilities are near capacity.

Managers at Culver Studios and Sunset-Gower Studios said both facilities were close to fully booked. Manhattan Beach Studios and Oaktree Capital Management didn't return calls.

Still, entertainment tenants can be a short-lived, fickle clientele. Manhattan Beach Studios may lose David E. Kelly--its largest tenant, who is rumored to be retiring. (Kelly produced "Ally McBeal," along with "Boston Public" and "The Practice," both of which were shot in Manhattan Beach.)

Sunset-Gower will lose HBO Inc.'s "Six Feet Under" when the show finishes shooting its last season at the end of 2005, Alan Ball, the show's executive producer, announced earlier this year.

"I don't think we'll have trouble finding a show to fill their space," said Tainiter. "The question is will it be a long-running production like theirs."

Expansive plans

Investors say the studios make good investments because the underlying real estate has tremendous value as potential housing or retail developments should the studio operations falter.

Even so, hotelier Lew Wolff--a former head of real estate operations for Twentieth Century Fox - said the value of the studio deals remain rooted in the film business. "This is like buying a business," Wolff said. "They are on good real estate but you better make sure they run as a solid business, too."

And recent buyers are betting on continued demand as they plan to improve their facilities. Rather than being cautious, they are pushing forward to develop their sites.

GI Partners has hired architecture firm Gensler to design a multi-million dollar renovation of the tired Sunset-Gower Studio lot. Besides adding a fresh coat of paint and new awnings, GI Partners will bury some unsightly overhead high-voltage wires and make the studio entrance off Sunset Boulevard into a pedestrian walkway.

Also in the works, GI Partners plans a 10-story office building fronting Sunset Boulevard on a couple of surface parking lots just east of the main entrance. Construction on the building, which would also have one or two levels of underground parking, is expected to begin by the end of 2005, possibly sooner, according to Tainiter.

Simultaneously, GI Partners will build a 250-spot aboveground parking garage on the site. "We have enough parking now," Tainiter said, "but if each show brings in 75 extras on the same day, things could get tight."

Long-range, Tainiter said, GI Partners could develop two more sound stages, though he said that decision would depend on a spike in demand for studio space.

"Maybe if they stopped shooting reality television shows and there were 30 new shows looking for space we would build them," he said. "But that would make the lot pretty tight and we like that fight now it's open and easy to get trucks in here."

Meanwhile, Culver Studios has entered into exclusive negotiations with Culver City's redevelopment agency to build a $25 million office tower next to its studio site. The building, intended to house film and television producers who also lease studio space, will potentially contain a pedestrian bridge connecting the building with Culver Studios lot.

Hal Katersky, the chairman and chief executive of Culver Studios, said the building would provide badly needed office space.

"One of the problems with the studio is that we don't have enough office space," he said. "We have had to turn down a number of production companies because we don't have enough space."