Business Facilities -November 2008

COVER STORY By Gerry Khermouch Anatomy of a Deal: An inside look at how a leading broker found the perfect site in Los Angeles for Fox’s burgeoning Interactive Media unit Studley Finds a New Space for MySpace I t was a brisk set of challenges that News Corporation offered Studley, a broker that likes to market itself as being adept at “executing complexity”: find a large block of space in an overheated Los Angeles market for its burgeoning Fox Interactive Media (FIM) unit. But do it in a way that would not unbalance the delicate corporate culture of the unit’s recent addition, MySpace, which was viewed as key to the media conglomerate’s attack on the media-convergence world. Make it expandable—though how much space would be needed in coming years was not at all clear—and throw in plenty of extra parking spaces. And to keep the troops happy, try to keep it in west LA, not too far from its current location on the Fox studio lot in Beverly Hills. Well, scratch west LA. Though several sites were considered in that area, the deal ultimately secured by Studley took FIM eight miles south of the Fox lot to a mixed-used development called Playa Vista going up south of Marina del Rey, a couple of miles in from the Pacific. At 418,000 square feet, it was one of the larger relocations in memory in Southern California. But what made it most notable was the structure Studley was able to negotiate as economic conditions began to weaken and the market began to cool off. With landlords beginning to betray the first signs of anxiety about filling their speculative projects, Studley was able to convince the winning bidder, Lincoln Property Co., to go with an open-book structure—getting paid for the cost of construction plus a profit—and then layered on a cap on those construction costs. Throw in a dramatically increased parking ratio, and it yielded a significantly below-market rent that helped justify a relocation to what, to many Fox executives, was a barely charted wilderness eight miles distant For the landlord, Lincoln Property, the open-book process allowed it to delete enough features from the project that were unneeded by Fox so that it could eke out a profit even after the extensive concessions it made to the tenant. “In my mind, Fox got a great deal,” said David Binswanger, execuBUSINESS FACILITIES 13 TAILORING THE PROJECT TO THE PROPOSED SITE from the comforts and familiarity of their west LA epicenter. “They were building when the market was white-hot, but then the pro formas suddenly didn’t look so hot,” recalled Peter Capuciati, national director of Studley’s Corporate Services Group. “So they decided to hit a single or sacrifice fly and try to make money on the balance of the project. At the end of the day, we ended up 15-25% below market, thanks to the structure, the cap and so on.” PHOTO CREDIT: STUDLEY, INC.

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Business Facilities -November 2008 Contents First Word Sanpshots Corporate Moves: Utah Kodak Develops a Megasite in Upstate New York Anatomy of a Deal: Studley Finds a New Space for Myspace Metro Spotlight: Johnson City, TN A Renaissance of Growth in Medical Plastics The Lone Star State Flexes Its Muscles Asia: A Portrait of Growth Sky's the Limit for High-tech in Arizona Corporate Moves: Pennsylvania Ohio Leads the Way Alabama's Tide Rolls to the Future IEDC 2008 Award Winners Advertiser Index Introducing Navigator Livexchange

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