Legendary movie studio Metro-Goldwyn-Mayer Inc. will move to new, less lavish headquarters now that it has emerged from bankruptcy protection.
MGM plans to leave a high-profile skyscraper in Century City and rent a six-story office building in Beverly Hills that was built for the former William Morris Agency but has never been fully occupied.
The cost-saving move is part of a plan by creditors to wipe out about $5 billion in debt, clearing the way for the 86-year-old studio to focus its efforts on producing and releasing movies and television shows, according to real estate experts and a person close to the entertainment company who know about the deal but weren't authorized to speak publicly. MGM and other parties to the lease declined to comment.
The studio, which emerged from Chapter 11 last week, is expected to save tens of millions of dollars in rent by bailing out of its grand headquarters at 10250 Constellation Blvd. well before its lease is set to expire in 2018. MGM expects to be in the new site by the end of next year, according to a person familiar with the matter.
MGM is paying nearly $5 a square foot per month to rent about 200,000 square feet in Century City but will pay substantially less for the 144,000-square-foot building at 235-269 N. Beverly Drive, real estate experts said.
When MGM's decision to come to Century City was announced in 2000, the lease valued at $500 million was perhaps the largest in Los Angeles history. The building was completed in 2003.
MGM's move could be affected by a dispute between the owner of the Beverly Hills building and talent agency William Morris Endeavor Entertainment.
The former William Morris Agency agreed to lease the property developed especially for it but the talent firm was taken over by rival Endeavor in 2009. Managers of William Morris Endeavor want to terminate the agreement and are in arbitration with property owners George Comfort & Sons.
MGM will leave behind opulent offices that reflected the grand vision of former chairman and chief executive Alex Yemenidjian, a top lieutenant of MGM owner Kirk Kerkorian, who ran the billionaire's Las Vegas casino-hotel MGM Grand.
Yemenidjian spared no expense in building out the studio's space with such Las Vegas-style flourishes as towering marble pillars and a grand spiral staircase lined with a wall of awards. In the lobby of the 14th floor, which includes the executive suites, is a wall of floating Oscar statuettes for such Academy Award winners as "Silence of the Lambs," "Rocky" and "West Side Story."
The bottom third of the tower was built with extra-large floors to oblige MGM, architect Scott Johnson said. That design allowed executives to have outdoor decks.
MGM agreed to be the building's anchor tenant about halfway through the design process, Johnson said. He saw to it that MGM got its own elevator bank, security checkpoint and private garage access so visiting celebrities wouldn't have to pass through public spaces. The street leading to the MGM garage was renamed MGM Drive, and the top of the 35-floor skyscraper features a massive sign with MGM's roaring lion logo, which lights up at night.
MGM also built three screening rooms, including a 100-seat theater on the ground floor now controlled by talent agency International Creative Management.
Yemenidjian was known as a "tough customer," Johnson said. "He was an esthete with lots of opinions about finishes." A man who designed his own wide-collar shirts, Yemenidjian imported MGM's marble from Italy.
MGM has the opportunity to adopt a more restrained style in its new offices in Beverly Hills, which the studio must build out before it can move in. The building design includes a private theater and private outdoor patio.
"It's a prudent move for them," said real estate consultant Larry Kosmont, who was not involved in the deal. "Downsizing and relocating to a space that is still prominent but not overly ostentatious and burdened by expenses is fundamental for their survival."
The studio and George Comfort & Sons didn't respond to requests for comments about the agreement. Gary Weiss, the broker for MGM Tower landlord JMB Realty Corp., declined to discuss the deal but said the tower would remain attractive to tenants.
"Century City does not have a lot of trophy space available," said Weiss, a principal at L.A. Realty Partners. Vacancy in the neighborhood is about 14%, he said.
MGM's broker, Les Small of Lesmark Strategic Real Estate Services, declined to comment.