Netflix's proposed acquisition of the historic Radford Studio Center lot has stalled, as the streaming giant weighs whether to move forward with the purchase. The hesitation raises questions about how much production space Netflix expects to need in Los Angeles, and whether owning a major Hollywood lot still makes sense for the company.
"Netflix has not closed the transaction, and they are not deciding to close it until sometime maybe later in the year," Hudson Pacific chief executive Victor Coleman said during an earnings call on Thursday. "Or not."
The Hollywood Reporter has learned that the initial 90-day due diligence period for Netflix to examine the Radford property has been extended, according to a person familiar with the transaction. The source cautioned that the extension does not necessarily mean the deal is dead, but said it underscores the weight of taking on a sprawling production campus in Los Angeles at a time when filming levels in the region are hovering around historic lows. In recent years, Netflix and other studios have increasingly prioritized shooting in states and countries where labor and other costs are cheaper and filming subsidies are more generous.
Still, the expectation in Hollywood real estate circles is that the transaction will ultimately be completed. "Everyone assumes it's going to get done," the source said. The deal, estimated at $330 million to $400 million, comes as Netflix reassesses its commitments to Los Angeles soundstage space. The company has been cancelling some obligations with Hudson Pacific, the source added, a possible sign that it is serious about shifting from leasing production space to owning it.
In an August financial disclosure, Hudson Pacific said three soundstage leases were terminated in the first half of the year, tied to the wind down of Quixote stages that were not owned and operated. Talk of the Radford deal first emerged in April, and borrowing rates have risen since then. If Netflix planned to finance part of the nine-figure purchase with debt, the transaction would now be more expensive to fund than it would have been earlier in the year.
A Radford purchase would carry major implications for Hudson Pacific, which has been negotiating with Netflix over the streamer's existing office and studio footprint. Netflix, its third-biggest tenant, leases the ICON, EPIC and CUE buildings at Sunset Studios in Los Angeles, totaling more than 700,000 square feet across three office buildings. Those leases, including one for the 13-story EPIC office tower on Sunset Blvd., are scheduled to expire in 2031. Netflix declined to comment.
On the earnings call, Coleman stressed that Radford cannot satisfy Netflix's office space requirements. "The replacement of Radford for their existing office doesn't fit the footprint as we've talked about in the past," he said, adding that the two companies continue to have "very fruitful, very productive conversations." He said he hopes for some resolution by the end of the year, and suggested Netflix extending beyond 2031 is "looking in the direction that we're comfortable with."
The uncertainty looms over Hudson Pacific's effort to refinance its Hollywood media portfolio, a 2.2 million-square-foot collection of studio lots and office buildings that includes the Sunset Gower Studios, Sunset Las Palmas Studios and Sunset Bronson Studios campuses, along with multiple buildings leased by Netflix. The company recently secured a one-year extension on a loan of roughly $1.1 billion, pushing its maturity to next year without requiring a principal paydown. Executives indicated that a longer-term refinancing strategy hinges on getting clarity about Netflix's plans.
Hudson Pacific's "first priority is to continue our conversations" with Netflix, company president Mark Lammas said. "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."
Meanwhile, a little more than a mile west of EPIC on Santa Monica Blvd., a luxe $450 million studio project called Echelon is set to open its doors later this year. Netflix has expressed interest in becoming a tenant, according to a person familiar with the situation.
