Shopzilla to stay in West L.A. offices
Popular online shopping search engine Shopzilla Inc. has agreed to stay in its Westside offices after Los Angeles officials backed off a plan to raise city taxes on Internet businesses, the company said Friday.
Shopzilla has renewed its lease for two floors in the Westside Media Center, an office complex at West Olympic Boulevard and South Bundy Drive. Terms of the agreement with landlord Kilroy Realty Corp. were not released, but industry experts familiar with the deal for the 53,000-square-foot space said it was worth as much as $15 million over five to seven years.
Shopzilla, which is owned by Scripps Networks Interactive Inc., was founded in Los Angeles in 1996 and its managers planned to keep its headquarters at the current site when the company’s lease expired later this year. They considered leaving the city, though, after Internet companies were reclassified last year to the “business and professional” tax category from “multimedia,” resulting in a fivefold annual tax rate increase.
“The potential added cost made it prohibitive to stay,” said Dave Toomey, the real estate broker who represented Shopzilla in its search for new space. “We considered Santa Monica, Culver City and other locations outside L.A.”
Meanwhile, Shopzilla and Toomey of Cresa Partners lobbied city officials to change the tax rules on Internet-based businesses. This month, Mayor Antonio Villaraigosa signed an ordinance creating a new business tax category for firms that “generate revenues by providing access to Internet-based electronic applications or Internet-based search engines.”
The Westside of Los Angeles has been one of the largest enclaves of Internet companies outside the San Francisco Bay Area since the industry’s start-up gold rush of the 1990s. The first tenant of the building at 12200 W. Olympic was EToys Inc., which defaulted on its lease in 2001 after declaring bankruptcy.
EToys left behind some improvements ideal for another Internet company, such as raised floors that leave room underneath for networks of electronic cables, and a large fire-protected room to house computer servers, said Brad Kates, the chief financial officer of Shopzilla.
“We were really happy with this building,” Kates said. When Los Angeles raised its business taxes, though, “all the neighboring cities came courting with very attractive deals.”
