TPG Real Estate is the latest private manager to enter the film studio sector, but the San Francisco manager is taking a slightly different tack than its peers.
Rather than plant its flag in the major hubs for English language film and television production – Los Angeles, New York and London – TPG is betting on a pair of next-tier markets: Toronto and Chicago.
The firm acquired Cinespace Studios, a family-owned company with 56 sound stages between the two cities and more than 100 acres of developable land. The deal was valued at roughly $1.1 billion, PERE understands.
Jacob Muller, managing director for TPG Real Estate, said both cities have well-established film industries with large workforces. As demand for studio space continues to rise, he sees the lower costs and greater ease of operation in Chicago and Toronto making them more attractive to production companies than New York and Los Angeles.
For TPG, Chicago and Toronto also represented an opportunity to enter growing studio markets at an attractive cost basis. “LA and New York are the major filming markets but they are more stable and pricing is more mature,” Muller told PERE. “We’re excited by the growth prospects of Toronto and Chicago as two of the top six production markets in North America.”
TPG is targeting opportunistic returns from its investment in Cinespace. It plans to add 12 soundstages in Toronto and 15 more in Chicago, some through ground-up development and others by repositioning existing buildings. It will also improve the platform’s existing soundstages to make them more attractive to production companies, Muller said.
The firm does not have any immediate plans to acquire more studio properties, Muller added, but it is on the lookout for other emerging hubs, not only in North America but also throughout Europe.
“London is the epicenter of European film but there are really interesting studios in Berlin, Budapest, Prague, Paris and Spain,” he said. “A lot of streaming companies are filming in-country and that continues to drive demand for production space.”
This past September, TPG Real Estate announced it would acquire a majority stake in Studio Babelsberg AG, the leading film studio in Germany. That acquisition has not been finalized; it was disclosed to adhere with German regulations, Muller said, as Studio Babelsberg is a publicly traded company. Cinespace is TPG’s first foray into the studio space.
Avi Banyasz, co-head of TPG Real Estate, said the firm has been exploring opportunities related to the film and television industry since 2019. TPG sees soundstages as an avenue for tapping into the booming demand for streaming content, a thesis to which a growing number of firms have subscribed.
“We’ve seen robust interest in competitive auction environments from a very deep field of bidders,” Banyasz said, “but we were able to acquire Cinespace off-market.”
In both the Cinespace and Studio Babelsberg transactions, TPG is buying into an existing platform, Banyasz told PERE. He sees that being critically important for the newly institutionalized property type.
“We believe there are significant advantages to having a platform with facilities in multiple cities led by a best-in-class management team,” he said. “With the Cinespace platform, we are able to service our clients to best suit their needs depending on market, with the flexibility to move them from studio to studio and from one project to the next.”
TPG is not the only firm eying next-tier film hubs. Last week, Square Mile Capital and Hackman Capital, the leading private equity buyers of studio space, acquired Wardpark Film and Television Studios, the only full-service production campus in Scotland. The property has 200,000 square feet of production space including five soundstages. The popular TV show Outlander is filmed there.
Under the moniker MBS Group, Hackman and Square Mile have amassed a $7.5 billion portfolios consisting of 400 soundstages around the world. In addition to large footprints in Los Angeles, New York and London, the partnership also owns production space in Georgia, Louisiana and Ireland.
Blackstone, which entered the sector through a 49 percent stake acquisition of studio specialist Hudson Pacific Properties last year, has expanded its reach into the UK as well. In August, the firms secured a development site 17 miles north of London. They plan to invest £700 million ($930 million; €826 million) into the future studio complex.