Studio Plan Is Risky Business but Not Mission Impossible for NoHo

Just how far could the entertainment industry’s momentum take North Hollywood? A developer who has proposed a 43-acre studio complex in the area stands poised to find out.

While a production boom has prompted developers throughout Los Angeles to dream big, real estate experts say making such a project pencil out will not be easy.

J. Allen Radford, the developer who has proposed developing a 43-acre studio complex next to the yet-unfinished subway station in North Hollywood, may be walking an especially tricky financial line.

“Is there a market for another studio? I think absolutely,” said Paul Stockwell, corporate managing director at the real estate firm of Julien J. Studley and former vice president of real estate for the Walt Disney Co. But, he said, “there’s a variety of basic real estate issues to overcome.”

Radford has proposed building sound stages, offices, stores, bungalows, plazas and gardens north and south of Chandler between Lankershim Boulevard and Vineland Avenue. The proposal is still highly conjectural and is already generating controversy. But it is being hailed by elected officials as a bold step in luring new investment to North Hollywood.

The need for studio space is so acute that sound-stage shortages are being blamed for stalling growth in the entertainment industry as a whole.

But despite the high demand, simply declaring one’s intent to build sound stages is not a ticket to riches, studio managers say.

They say renting sound stages can be a low-margin, precarious business. Space is leased month to month. Production crews back out. And there is talk that production may ebb as networks and others become more concerned about high costs.

If Radford ends up paying a high price for land, the proposed North Hollywood Studios could be saddled with more debt than it could reasonably support.

It could, in short, be a very different story than the entertainment-industry boom that transformed much of Burbank in past years from an aerospace-industry hotbed to a television and movie mecca, said Andrew Feola, a sales associate for Ramsey-Schilling Co. commercial real estate who has worked periodically with Radford.

Burbank was successfully redeveloped in part because of timing, Feola said. Entertainment companies were able to take advantage of rock-bottom prices for acquiring property as the aerospace industry moved out over past decades. In some cases, Feola said, companies were able to “buy existing structures at a price slightly above land value.”

At the time, the media companies, “were the only ones who could use it,” he said.

But times have changed. Today, though much of North Hollywood still looks like the enclave of defense-industry subcontractors it once was, real estate there is not moribund.

“The transformation is already underway,” said Nigel Stout, senior associate at Grubb & Ellis. Stout said prices in the southern portion of North Hollywood have recovered with the rest of the real estate market--especially as overflow from Burbank’s media district moves in.

“From 1994 on, we have seen absorption and price increases,” he said. “There are very few buildings on the market now.”

Also, some property owners in the area have already said they won’t sell willingly to Radford.

These include entertainment-related companies such as California Art Products, which makes fiberglass sculptures and props.

In a move that is making holdouts nervous, Radford has sought the help of the Los Angeles Community Redevelopment Agency, which plans to put out a request for proposals to see if any developer will offer a competing proposal for redevelopment of the area.

Through subsidies, and through its power of eminent domain, the CRA could make acquisition of property easier for Radford or another developer. On Tuesday, the Los Angeles City Council, by a 12-0 vote, agreed to apply for federal Housing and Urban Development grants and loans to assist with land acquisition and public improvements in the area.

But the agency has its own financial worries. “We would be very concerned if the project will require massive amounts of city or agency subsidy,” said Walter Beaumont, assistant CRA project manager. “We don’t have unlimited resources. If the cupboard’s bare, the cupboard’s bare.”

Rocky Delgadillo, deputy mayor for economic development, said Radford’s risk will be offset somewhat by spreading that risk across various enterprises.

Not just sound stages, but stores, offices and restaurants would help pay the bills at North Hollywood Studios, Delgadillo predicted.

“It would be a natural for the multimedia industry to be there,” he said.

As for the question of whether Radford can get his property for the price he needs, Delgadillo said that North Hollywood--though just across the street from Burbank’s media center--still offers property values on the order of 50% less than Burbank’s, despite the fact that it’s considered a highly desirable location for entertainment uses.

It’s a situation that can’t continue forever, say brokers. Eventually, Burbank will spill over, and North Hollywood will surge back. “It will, it has to,” Feola said.

Radford’s proposal may be risky, but, “It’s always the pioneers that make it or break it,” Stout said. “It’s the pioneers that end up changing an area.”