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Warner Music May Consolidate Operations in Burbank

Warner Music May Consolidate Operations in Burbank Real Estate by Shelly Garcia The real estate market has been grim in Burbank lately, but at least one developer may soon be singing a different tune. Warner Music Group has been negotiating for about 200,000 square feet in M. David Paul’s Pinnacle project to consolidate some or all of its divisions at the newly constructed facility. The deal, if completed, is not likely to make a big net difference in Burbank’s occupancy rate, which has risen dramatically in recent months. But it would go a long way to ease the pressure on M. David Paul & Associates, which has all but completed the first phase of its 585,000-square-foot development and has so far failed to attract any office tenants. (The company did lease retail space to two restaurants, Morton’s of Chicago and Prego.) Officials at M. David Paul did not return phone calls. But a WMG request for building signage was recently considered and approved by Burbank’s planning board. “It’s a very good indication that they’re well on their way to doing this project in Burbank,” said Bud Ovrom, Burbank city manager. In one group of materials submitted to the planning board, Warner’s signage designs included names and accompanying logos for five divisions. They are: Warner Music Group, Atlantic Records, Elektra Records, Warner Strategic Marketing and Warner Entertainment Arts. However, it is likely the names were placed for illustrative purposes and do not indicate the actual names of the divisions that would move into the building. Warner Entertainment Arts, for example, is probably WEA, Warner Electra Atlantic Inc., the company’s distribution arm. And Warner Strategic Marketing is the name of the corporate division through which WMG reports. WMG’s record companies include Atlantic, Elektra, Maverick and Warner Bros. Records. WMG is the result of a string of mergers and acquisitions, most recently with AOL Time Warner Inc., and the company’s divisions have been reporting financial information in separate quarters as a result. For the first quarter, WMG reported a 4.8-percent increase in revenues to $947 million. “It was always a logical solution,” said one local broker. “Because of the reorganization in the corporate hierarchy, it makes sense to be under one roof.” The slowdown in entertainment industry leasing and the dot-com meltdown brought Burbank’s office vacancy rate to 13.7 percent in the first quarter of 2002. Because several of the WMG divisions are currently housed in Burbank (others are scattered on the Westside and in Santa Monica) and the companies would vacate those premises, a lease deal with M. David Paul would have only a small impact on those numbers. But a deal could persuade M. David Paul to resume work on the second phase of Pinnacle. Sherman Oaks Development Sherman Oaks may soon get a new development. A joint venture between PCS and Chandler Partners has entered escrow to acquire a three-acre parcel on Ventura Boulevard east of Hazeltine Avenue. The nearly block-long property is the site of the former Barone’s restaurant, which has been shuttered for some time. PCS, very active in residential redevelopment in the area, with projects including the Premiere at Sherman Oaks, a luxury apartment complex on Woodman Avenue, is in talks with the community and city officials to determine a use for the site. “We’re just in the midst of trying to work through some early ideas,” said Paul Jennings, CEO of PCS. “We’re working with the community to try and determine the best use.” Jennings said he has no “preconceived ideas” for the parcel, and he hopes to establish a use based on meetings with local homeowners over the next few months. Once he and the community agree on what to develop, he plans to begin the entitlement process. Westlake Sale Arden Realty Inc. sold a 59,981-square-foot office building in Westlake Village for $8.3 million. The buyer is Metro Properties. The building, Renaissance Court, at 31416 Agoura Road, is fully leased. Michael Slater, Tom Dwyer, Mark Perry and Bonnie McRae, brokers with CB Richard Ellis, represented both the buyer and the seller in the deal. San Fernando Rehab A team from NAI Capital Commercial is marketing a newly renovated industrial facility in the city of San Fernando. Voit Development Co. acquired the property, at 675 Glenoaks Blvd., about six months ago, and has remodeled it to include 24-foot clearance and the kinds of landscaping typically found in Class A industrial buildings. The 210,283-square-foot building is for sale at $15.45 million, or for lease at $0.58 per square foot. David Young, senior vice president at NAI, who is marketing the property along with NAI’s Chad Gahr, said he expects strong demand for the facility despite the slowdown in the Class A industrial sector. “The areas having problems with those sizes are, one, Conejo, because everything is astronomically priced out there, or Valencia, where all the developers came out of the ground with exactly the same product at exactly the same time so you have a number of buildings competing against each other,” said Young. “But if you look in the San Fernando Valley, there really isn’t that much to choose from.” Although the vacancy rate has risen for industrial properties recently, Young said it is still under 5 percent in the Northeast Valley, where there has been a dearth of available properties. Calabasas Lease Qmedtrix Systems Inc., a software developer, has leased 22,000 square feet at 26677 W. Agoura Road in Calabasas. The six-year deal is valued at $3.4 million. Bryan Lewitt of CRESA Partners represented the tenant. Jeff Johnston of The Johnston Group, represented the landlord, Malibu Canyon Office Partners Inc. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

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