Netflix’s Bid to Buy Radford Studio Lot Stalls

Netflix‘s proposed acquisition of the historic Radford Studio Center lot has stalled as the entertainment giant weighs whether to move forward with purchase, raising questions of how much production space it expects to need in Los Angeles and whether it believes owning a major Hollywood lot still makes sense. “Netflix has not closed the transaction, and they are not deciding to close it until sometime maybe later in the year,” said Hudson Pacific CEO Victor Coleman during an earnings call on Thursday. “Or not.” Netflix is the third-biggest tenant of Hudson Pacific properties, leasing the ICON, EPIC and CUE buildings at Sunset Studios in Los Angeles. One line of speculation has been that Netflix is looking to become an owner rather than a tenant in L.A. and that Radford would fit the bill for a sprawling studio property. The Hollywood Reporter has learned that there’s been an extension in the initial 90-day due diligence period for Netflix to examine the Radford property, according to a person familiar with the transaction. The development doesn’t necessarily signal the deal won’t close, this source cautions, though it highlights the gravity of taking on a sprawling production campus in L.A. as filming levels in the region hover around historic lows. In recent years, Netflix and other studios have prioritized shooting in other states and countries where labor and other costs are cheaper that offer more generous filming subsidies. The expectation in Hollywood real estate circles is that the deal will ultimately close. “Everyone assumes it’s going to get done,” this source says. The transaction, estimated at $330 million to $400 million, comes as Netflix reassesses its commitments to soundstage space in L.A. The company has been cancelling some obligations with Hudson Pacific, the source adds, potentially suggesting that it’s taking seriously a shift from leasing production space to owning it. In an August financial disclosure, Hudson Pacific disclosed that three soundstage leases were terminated in the first half of the year. The filing didn’t identify the tenants. Chatter of the Radford deal emerged in April. Since then, borrowing rates have gone up. If Netflix planned to finance some of the nine-figure purchase with debt, that increase could make the transaction more expensive to finance than it would’ve been earlier in the year. A Radford purchase would have major implications for Hudson Pacific, which has been negotiating with Netflix over its existing office and studio footprint. Netflix, which declined to comment, leases over 700,000 square feet across three office buildings. Those leases — including for the 13-story office called EPIC on Sunset Blvd. — are scheduled to expire in 2031. On the earnings call, Coleman stressed Radford can’t fulfill Netflix’s office space needs. “The replacement of Radford for their existing office doesn’t fit the footprint as we’ve talked about in the past,” he said. “We have and continue to have very fruitful, very productive conversations with them. I think we will have some resolution on some levels of that, hopefully by year-end and continuing these conversations positively for them to extend beyond 2031 is looking in the direction that we’re comfortable with.” That uncertainty hangs over Hudson Pacific’s bid to refinance its Hollywood media portfolio, a 2.2 million-square-foot collection of studio lots and office buildings. It includes the three studio campuses — Sunset Gower Studios, Sunset Las Palmas Studios and Sunset Bronson Studios — where much of the industry’s production infrastructure is concentrated, on top of multiple buildings leased by Netflix. The company recently secured a one-year extension of a roughly $1.1 billion loan, pushing its maturity to next year without requiring a principal paydown. Executives indicated that a longer-term refinancing strategy depends on getting clarity about Netflix’s situation. Hudson Pacific’s “first priority is to continue our conversations” with Netflix, said company president Mark Lammas. “Only after we have clarity around that, their requirement and how that ultimately shakes out, will it ultimately be productive to then reengage with the lender.” A little more than a mile west of EPIC on Santa Monica Blvd., Echelon, a luxe $450 million studio offering, is opening its doors later this year. Netflix has expressed interest in becoming a tenant, according to a person familiar with the situation.