Wall Street private-equity titan Blackstone is buying majority ownership of the Burbank Media District's biggest office portfolio in a deal that values the properties at $1.7 billion.
The six office properties, with a combined total of 3.3 million square feet, house some of the highest-profile entertainment companies in the business, including offices of
The Warner Bros., NBCUniversal and Disney main studio lots also are nearby, making the offices attractive to entertainment firms.
Blackstone said it wanted to be in one of the key cradles of content creation, especially as big Web-based firms such as YouTube owner Google and Amazon are rapidly expanding their entertainment businesses.
The Burbank locations are "particularly attractive to production companies, distribution companies, gaming companies and others who are competing for talent and want to be in close proximity to the studios," Blackstone Head of Americas Nadeem Meghji said.
The properties were developed or purchased over several years by Santa Monica developers Jeff Worthe and M. David Paul.
Worthe will retain a 20% ownership stake in the properties as Blackstone buys out his co-owners at undisclosed prices. Four of the properties traded hands Wednesday and sales of the other two are expected to close within three weeks, Blackstone and Worthe said.
Worthe Real Estate Group will continue to manage the properties.
"For us, this is an opportunity to take six different projects with six different partners and consolidate them with one partner," Worthe said. "We can have one business plan and achieve greater results than we have today."
Blackstone and Worthe now control about 70% of the office supply in the Burbank Media District, which will make them more capable of controlling rents in the area.
The properties are about 90% leased, with most of the vacancy in the 460,000-square-foot Tower, a white, 32-story high-rise overlooking the Ventura Freeway that was completed in 1989 and once occupied by Disney. It was vacant when purchased by Worthe in 2014 and is now 65% leased, he said.
The other properties in the portfolio are Central Park at 250,000 square feet, the Disney Channel Building at 425,000 square feet, the Pinnacle at 625,000 square feet, the Pointe at 485,000 square feet and Media Studios at 900,000 square feet.
The partnership of Blackstone and Worth also owns land parcels entitled for the development of an additional 900,000 square feet of office buildings.
Worthe's Burbank Studios, the former home of NBC on Alameda Avenue where "The Tonight Show" was once filmed, was not included in the portfolio.
Worthe predicted that office demand in the Media District will continue to grow as new companies break into entertainment.
"The demand for content and the value attributed to those who create it has amplified over the last few years," he said. "Everyone across the technology and media spectrum has decided Los Angeles is somewhere they need to be to tap into the content machine."
Companies that have sold their shares of properties so far are Clarion Partners, Stockbridge Capital Group, Shorenstein Properties and Five Mile Capital Partners. The owners of the properties expected to close within three weeks are Hudson Pacific Properties and PCCP, Worthe said.
Blackstone is acquiring the portfolio with its core-plus fund, which means it doesn't plan to resell them as a short-term real estate play, Meghji said.
"We intend to own these assets for a very long time," he said.