(Bloomberg)—Time was when the road to Hollywood riches was paved with glittering stars and rollicking scripts. These days, Tinseltown’s newest mogul is building his empire one soundstage at a time.
Meet Michael Hackman, 64, who’s betting a fortune on controlling where the movies get made.
His Hackman Capital Partners, already the largest independent owner of entertainment production real estate, signed a deal Monday to buy the Sony Pictures Animation campus near Los Angeles. It’s seeking to capitalize on demand for streaming content that’s soaring faster than new facilities are being built for the creative class.
Hackman’s goal: Double his $4 billion in entertainment property to $8 billion by the end of next year.
“We’re not looking to mine the gold,” Hackman, comparing today’s streaming boom with California’s early Gold Rush days, said in an interview. “We’re happy supplying the jeans and the pans.”
Demand for movie lots has exploded as producers such as Netflix Inc., Walt Disney Co. and Amazon.com Inc. compete for subscribers, especially since last year’s Covid-19 stay-at-home orders left so much of the world couch-bound. Studio vacancy rates were already in the low single digits before the pandemic, with new supply limited by high land costs in markets like Los Angeles and New York where talent lives.
Entry Barriers
“It’s hand-to-hand combat to add 10 or 20 soundstages to the marketplace,” Carl Muhlstein, a Los Angeles-based international director with Jones Lang LaSalle Inc., said in an interview. “The barriers to entry are brutal.”
Hackman has more than 70 soundstages on eight lots and about 35 more in development. The biggest Los Angeles-area studio lot location, Warner Brothers in Burbank, has 36 sound stages, according to CBRE Group Inc.
The appetite for more property is propelled by entertainment production spending that’s grown at a 22% annual clip since 2017, reaching a projected $94 billion in 2020, according to a presentation by Blackstone Group Inc. The world’s largest manager of alternative assets joined the Hollywood space race last year in a $1.65 billion joint venture with Hudson Pacific Properties Inc., which hosts Netflix’s Hollywood headquarters. Netflix, whose subscribers exceed 200 million globally, has more than 500 titles in post-production or ready to launch, according to a Jan. 19 earnings presentation.
Hackman grew up in Columbus, Ohio, and attended Ohio State University. He moved to California for a job at industrial property developer Majestic Realty Co. and later the predecessor of CBRE, before founding his own firm in 1986.
His early ventures focused on converting underused industrial properties, like former aircraft plants, to what’s become known as creative office space. Hackman is still working that strategy, reaching a 12-year lease deal this month for Beyond Meat Inc.’s new headquarters at a former aerospace facility he owns near Los Angeles International Airport. He values his total real estate portfolio at $6 billion.
‘Rubik’s Cubes’
Acquiring movie lots was a natural step in Los Angeles, where entertainment is referred to as “the industry.” Hackman was early to see the supply-demand mismatch, said Jeff Pion, a CBRE vice chairman specializing in entertainment properties.
“Michael does mental Rubik’s Cubes in his head to try to figure out different ways to approach business,” Pion said. “He’s crazy smart.”
The Sony Animation campus cost about $160 million, according to people with knowledge of the deal. It’s across the street from Culver Studios, Hackman’s first big movie property, where classics such as “Citizen Kane” and “Gone With the Wind” were shot. Now the headquarters to Amazon Studios, Hackman bought Culver Studios for $89.7 million in 2014.
He’s been on a shopping spree since then, partnering last year to buy SilverCup Studios in New York and Eastbrook Studios in London. In 2019, he acquired CBS Television City in Los Angeles for $750 million and MBS Group in Manhattan Beach, California, which also provides global production and logistics services, for $650 million from the Carlyle Group Inc.
“Paying more always helps, but it’s far more than that,” Craig Solomon, chief executive officer of Square Mile Capital Management, Hackman’s main financial partner, said of the success in closing transactions.
‘Category Killer’
The MBS deal, in particular, gives Hackman an edge because he now provides services like logistics and lighting to 300 soundstages owned by 40 production companies, providing an insider’s view of industry trends plus relationships with property owners for potential future acquisitions. This week Hackman announced a partnership for MBS to manage Raleigh Studios, a Los Angeles family-owned business with 15 soundstages.
“They’re the category killer,” JLL’s Muhlstein said of MBS.
The day may come when stage leasing slows, if more producers follow the short-lived Quibi Holdings, which shuttered in October after failing to sign up enough subscribers.
The biggest challenge for now is finding locations to build new soundstages -- jumbo-jet-sized sheds needing sprawling parking lots for crews, prop builders, costumers and casts of thousands -- that are in driving distance for actors and other talent. Hackman said he gets calls every week from people pitching to convert an obsolete mall or warehouse site to a production lot, but the numbers rarely pencil out for aspiring movie-property moguls.
“Everyone wants a studio,” he said.
© 2021 Bloomberg L.P.
