Business Facilities -November 2008

COVER STORY tive vice president of Lincoln Property. “With smaller tenants I could have driven higher rents. But Fox helped us eliminate costs.” He was encouraged enough by the outcome to plan to break ground in early November on 300,000 square feet of additional space, both to accommodate FIM’s anticipated growth and to build on the leasing momentum within Horizon and the Playa Vista development as a whole. Fox Interactive Media’s 12-year lease, signed in June, gave the company 418,000 out of the 460,000 square feet of available space in the two buildings comprising the initial phase of Horizon at Playa Vista. To meet FIM’s expansion needs, 145,000 square feet of contiguous space is available including 42,000 square feet at an open-book rate (that is, the remaining space in the first two buildings of Horizon) and three 33,000-squarefoot tranches that will be available at an arbitrated market rent. If FIM opts to take all three tranches, the developer must build the space. FIM’s three-phase move will commence in May 2009 and proceed through Phase 2 later that year and Phase 3 in early 2010. (Construction has been running about a month late, so these targets may shift slightly.) Among key features of the lease structure, the construction cap was particularly well timed for the client because it eliminated the risk of cost escalation at a time that prices of construction-related commodities were beginning to soar. Further millions were saved by a 50-basis-point reduction in the rent constant, an annual escalator of just 3.29% versus 4% at most of the alternatives, and the elimination of some carrying costs from the capital structure for14 NOVEMBER 2008 mula. Studley executives say that last concession alone is worth roughly $10 million, given the extended period some of the space will remain unoccupied during a phased occupancy stretching over more than an 18-month period. Not least, in an environment where parking space generally is at a premium, Studley managed to increase the on-site parking by more than 500 stalls to 4.34 spaces per 1,000 square feet versus a more standard ratio of 3 spaces per 1,000 feet. The net result to the client, Studley executives calculate, was a benefit of more than $85 million over the 12-year term of the lease. The effective annuity rent (including an equalized parking expense) nets out to $58.53 per square foot, compared with the $72.49 of Lincoln Property’s asking terms and the $64.60 negotiated by Belkin for space in another commercial project at Playa Vista, offered by Tishman Speyer Properties. Fox Interactive Media was established in early 2005 as an interactive media play for News Corp., the media conglomerate controlled by Rupert Murdoch. It took a big step toward achieving critical mass later that year with its acquisition of Intermix Media, owner of MySpace.com, and two smaller companies. The combined entities were consolidated at a new headquarters on the Fox lot in LA. From employing about 500 early that year, the company had grown by mid2008 to 1,600 full-time employees, about half of them on the MySpace side, occupying 275,000 square feet of space. As the company has matured from its startup status, though, the time had come to seek a new headquarters that could accommodate an anticipated expansion by 2011 to more David Gordon, Vice President Studley, Inc. PROJECT “CHAMELEON” BEGINS than 2,500 employees occupying 435,000 square feet of space. But it had to be done without alienating hard-to-replace creative employees or undermining corporate esprit at a delicate time in the evolution of the oncefreewheeling unit. From outside the company, Lincoln Property’s Binswanger said it was evident how much attention Murdoch himself lavished on this unit from the disproportionate amount of time he spent discussing its activities on the company’s quarterly earnings conference calls. The project began in March 2006 as a hush-hush initiative code-named Chameleon. The reason for the quiet: News Corp. executives didn’t want to spook employees who’d just moved into new space after several prior relocations with the prospect of another move, and one possibly far afield from their preferred habitat in the western reaches of LA. The company and its predecessors had been in six locations all told, including a couple of bridge locations found by Studley. One challenge from the outset, said Capuciati, was an “ever-changing demand side,” with the company’s brisk growth making it difficult to peg PHOTO CREDIT: STUDLEY, INC. http://www.MySpace.com

Table of Contents Feed for the Digital Edition of Business Facilities -November 2008

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

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.