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CBS-Viacom Deal Could Be Next Act in Media Real Estate Shakeout Drama

Reports of Reunification of Companies Point to Potential Property Shifts

JUNE 24, 2019|LOU HIRSH


At stake in a potential CBS acquisition of Viacom are the futures of real estate properties including the iconic Paramount Pictures movie studio lot in Los Angeles. Photo: CoStar

If media giants CBS Corp. and Viacom Inc. end up merging as reports suggest, the results could include commercial real estate shakeups across the United States as the companies look to avoid duplicate operations and a reduced combined workforce.

Potentially at stake are the fates of multiple U.S. locations where the two New York-based companies do business, including Viacom’s storied Paramount Pictures movie studio lot and CBS’s Studio Center TV production facilities in Los Angeles.

All of this stems from a wave of recent mergers among traditional media titans, as they scramble to boost content production amid growing threats from online streaming rivals led by Netflix.

"Anytime you have this type of changing landscape in business, it’s going to affect the real estate because that’s such a basic element of operations," said Michael Soto, research manager in the Los Angeles office of brokerage firm Transwestern.

"The reality of the media business now is that you either get bigger, or maybe you’ll end up getting swallowed up by somebody who’s already bigger than you," Soto added.

He noted that the combined current market value of CBS and Viacom – currently about $30 billion – would still be dwarfed by the size of competitors that were recently enlarged through big acquisitions, including Walt Disney Co. at $202 billion and AT&T/Warner Media at $231 billion, as of mid-June.

"You need scale to compete in this environment," Soto said. "Even if CBS and Viacom don’t merge, one or both could become an acquisition target by someone else. And if they combine they could still be a target."

Citing sources familiar with the situation, the Wall Street Journal reported this month that CBS Corp. is preparing to make a purchase offer for Viacom Inc. sometime in coming weeks, after such a deal was discussed by the CBS board.

CBS, with a history dating back to 1927, was previously owned by Viacom before majority owner Sumner Redstone split the companies into two separate entities in 2006, as the media baron retained majority control of both. A reunification of the companies has been discussed at least three times over the past four years.

Past Property Sales

If history is a guide, a re-combination could result in job cuts and real estate space downsizing and rearrangements. Most recently, following Disney’s $71 billion acquisition of Twentieth Century Fox film and TV production assets, a total of 140 Twentieth Century Fox Film Corp. workers at the Century City studio lot in Los Angeles were informed they would be losing their jobs, according to two recent layoff notices filed with the California Employment Development Department.

The first 53 of those layoffs are scheduled to take effect on July 15, as many of the jobs once performed at the Fox lot are now being done by employees at other locations of Burbank, California-based Disney.

Various media reports have said hundreds of more job cuts could be coming at both Disney and the smaller new Fox Corp. because of post-deal integration and downsizing.

If CBS acquires Viacom, Soto said there could be similar workforce and real estate reshuffling ahead, even if it’s not at the same scale as in other recent mergers.

According to CoStar and company data, CBS currently operates at about 60 owned and leased locations worldwide, including several owned U.S. broadcast TV stations and other sites housing divisions such as its Showtime premium cable network and CBS Interactive streaming service.

After CBS sold its nearly 70-year-old Television City production complex to Hackman Capital Partners in a $750 million sale-leaseback deal last year, the largest CBS-owned holding in Los Angeles is now its Studio Center complex, with 18 sound stages spanning 46 acres at 4024 Radford Ave., in the Los Angeles village of Studio City.

That site’s history goes back to 1930, when it started as a film studio, but it’s become best known over the years as the production home to popular TV series ranging from "Gunsmoke" and "Gilligan’s Island," to "The Mary Tyler Moore Show" and "Seinfeld."

Viacom has about 20 locations, including several offices on both U.S. coasts geared to its multiple cable networks, such as Nickelodeon, MTV and Comedy Central.

Old-Style Studio

Its most high-profile real estate is the Paramount lot, the last of the old-style major movie studios actually still operating in Hollywood, with its main gate at 5555 Melrose Ave.

Spanning 62 acres with 32 sound stages, that studio’s century-plus history includes the production of multiple movie classics such as "Citizen Kane," "The Graduate" and "The Godfather," along with TV shows like "Happy Days" and "The Brady Bunch."

Real estate questions following an acquisition by CBS could include what now becomes of a major expansion of the Paramount lot that had been announced by Viacom back in 2011, at an estimated cost of $700 million.

The Los Angeles City Council in 2016 approved an update of the Paramount master plan, allowing the studio to eventually add about 1.4 million square feet of new facilities, but the project has yet to move forward.

Viacom and CBS officials didn't immediately comment. Some of the big decisions ahead will probably play out in the separate Manhattan headquarters of CBS and Viacom, both of which are considerable in size but might not stay that way in a post-acquisition scenario.

CoStar's database indicates that the CBS headquarters building spans more than 250,000 square feet across multiple floors of a 38-story office tower owned by CBS Corp. at 51 W. 52nd St. CBS itself occupies just under one-third of that 872,000-square-foot property, built in 1963 and known commonly as Black Rock.

Also in Manhattan, CBS Corp. owns the nearby CBS Broadcast Center, spanning more than 334,000 square feet at 530 W. 57th St., a production facility originally built in 1937.

Viacom’s New York City headquarters span more than 1.4 million square feet at 1515 Broadway, where it occupies the bulk of the space within the 57-floor office tower known as One Astor Plaza, owned by Allianz Real Estate of America.



Article by CoStar

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