Music giant stays in Hollywood landmark, major expansion set.

HOLLYWOOD - The record company based in Tinseltown's most visible and enduring landmark - the cylindrical Capitol Records Inc. headquarters highrise - will remain at the "stack-of-records" tower and undertake a multimillion-dollar expansion project.

The deal has been worked out under an agreement negotiated primarily with Mayor Richard Riordan's Economic Development Office. The pending agreement is expected to be inked within the next two to four weeks.

Sources at Capitol and city hall and in the Hollywood real estate community told the Business Journal last week that the deal entails a major renovation of Capitol's landmark 1970-vintage tower - the world's first round office building - and adjacent new development. Particulars of the expansion include construction of new recording studios, additional retail/office development and parking adjacent to the tower.

Under the deal, much of the block bounded by Vine Street, Hollywood Boulevard, Yucca Street and Argyle Avenue would become something of a "campus-like" environment with a new "streetscape," a source said.

The city, in order to assist Capitol, will purchase the adjacent property - a little less than one acre - for the expansion and lease it to Capitol. The record company will agree to maintain its headquarters at the 1750 Vine St. tower for more than 10 years. Capitol will also keep a specified number of people employed at the headquarters property and pursue annual employment growth targets, sources explained.

New development

The new development on the adjacent property will be phased in, beginning with studios and parking and possibly ending with office and retail space. What type of retail stores may be built is unknown, but one source noted that John Lennon's Walk of Fame star is immediately outside the Capitol tower, and that Capitol still holds rights to Beatles' recordings and merchandising.

Capitol's most popular recording artists range from Mel Torme and Frank Sinatra to Linda Ronstadt and Bonnie Raitt to Beastie Boys, Everclear and Foo Fighters.

The agreement with the mayor's office was more than two years in the making. It means the Thorn EMI PLC subsidiary won't follow other entertainment companies that departed the Hollywood scene as the once-glamorous district decayed over the last few decades.

After the city's earlier endeavors at redevelopment in Hollywood resulted mostly in controversy and financial failures - and failed to stem the outflow of key corporate citizens - the Capitol deal seems to represent a landmark achievement for Mayor Riordan's Economic Development department and its L.A. Business Team.

Before entering serious discussions with the city, Capitol had been working with a real estate brokerage considering relocation alternatives outside of Hollywood, sources confirmed.

Hollywood boosters hope the public-private partnership behind the Capitol property's renovation/expansion will ultimately be seen as a key event signaling Hollywood's long-anticipated return to its glory days. Sources said Capitol's pledge to remain in Hollywood, along with the aggressive commitment of city resources, constitute a strong statement about the district's future prospects.

New look

One informed source noted the lower will get a new skin that "sparkles" - perhaps symbolizing a new path toward Hollywood's past glitziness, in the wake of disappointing redevelopment efforts.

The news couldn't come at a more meaningful time for Hollywood, where businesses have been devastated by the Metropolitan Transportation Authority's subway construction activities, the general economic recession and continued urban decay.

Within the last two years alone, two of Hollywood's other highest-profile record companies - Motown Record Co. L.P. and Bertelsmann Music Group - have set up shop in the more upscale Miracle Mile and Beverly Hills districts. Motown is now moving most of those offices to New York City.

Sources said the office of City Councilwoman Jackie Goldberg, who represents the Hollywood area, also was involved in negotiating the Capitol deal, but Goldberg's representatives did not return calls last week. Representatives of the mayor's office also declined official comment.

Capitol was founded in 1942 by Johnny Mercer, Glenn Wallichs and Buddy DeSylva. It was acquired by Electrical & Musical Industries (EMI) in 1954. The company became a major force in the entertainment industry in the 1960s and early 1970s, signing artists such as the Beatles and Pink Floyd. In 1979, a then-struggling EMI was purchased by London-based Thorn Electrical Industries.