Blackstone taps CMBS market to finance its Hollywood venture
The Blackstone Group has a new collateral option for CMBS investors: the newly built Hollywood film studios used by Netflix and Walt Disney to support original-production programming for their popular entertainment streaming services.
According to ratings agency presale reports, Blackstone is tapping the securitization market to finance a $900 million single-asset, single-borrower commercial mortgage that funded the private-equity firm’s purchase of a 49% share in a $1.65 billion studio/office-facility portfolio, majority owned by Hudson Pacific Partners (NYSE:HPP), a publicly traded REIT specializing in media/entertainment properties.
The deal, dubbed GB Trust 2020-FLIX, will include five classes of notes backed by a two-year, variable rate interest-only loan (with three one-year optional extensions) tied to one-month Libor.
The loan is secured the the lease receivables from three primary tenants: Netflix (paying 31.7% of the base rent receivables), Disney (25.9%) and CBS/Viacom (3.7%), all with long-term leases for the more-than 2 million square feet of Hollywood studios and related office-production properties.
The transaction is sponsored Blackstone Property Partners and Hudson Pacific Partners, who have entered into a joint venture on the studio portfolio.
The facilities represent a "one-stop shop" for Netflix and Disney to film, produce and edit new programs to air on their respective in-home services. Netflix alone spent about $14.7 billion in producing new content for its service in 2019, according to a company regulatory filing.
The studio properties also serve as a rare new-studio construction project for the highly crowded Hollywood studio market.
According to Moody's, there has been little added stage space added to the Hollywood market over the 20 years. Three new studio lots that have opened in the past year, totaling 240,000 square feet of stage space and 14 stages, collectively. “Aside from those recent developments," the Moody's report stated, "there have been no new additions of supply since the Los Angeles Center Studios (450,000 sf) and Manhattan Beach Studios Media Campus (587,000 sf) were opened in the late 1990s.”
All of the long-term leases held by Netflix, Disney and other tenants are more than five years beyond the loan's maturity.
The MBS transaction features a Class A note tranche totaling $419.5 million, with preliminary triple-A ratings from Moody's and DBRS Morningstar.
Goldman Sachs and Barclays are lead mangers and joint bookrunners on the loan syndication.