The Capitol Records Tower, a Hollywood landmark with its cylindrical structure resembling a stack of records, is being sold in a deal that could lead to the development of an adjacent building designed to address the area's growing office shortage.
Music giant EMI Group said Thursday that it agreed to sell the 13-story tower and adjacent properties for $50 million to New York-based developer Argent Ventures. EMI said the lease-back deal allows its Capitol Records label and Capitol Studios to continue operations for "many years" at the site north of Hollywood Boulevard on Vine Street.
The new owners are expected to propose the construction of another building on an Argyle Avenue parking lot southeast of the iconic tower that was included in the deal. Argent didn't respond to a request for comment, but its Los Angeles real estate brokers, Chris Bonbright and John Tronson of Ramsey-Shilling, said Argent hoped to build a mixed-use high-rise.
"Hollywood is desperately in need of new office space," Bonbright said.
Contributing to the office shortage has been the conversion over the last three years of 30% of Hollywood's office space into housing, which is also highly sought after. Indeed, some of the competitors bidding on the Capitol tower were residential developers interested in turning it into condominiums, Tronson said
The office shortage and residential boom are part of a Hollywood revival that began a few years ago after decades of decay and the flight of many entertainment businesses.
In the 1990s, Capitol also considered abandoning Hollywood for newer facilities, but city officials persuaded it to stay in part by helping the company refurbish a nearby office building.
Now several large entertainment companies are quietly looking for office space in Hollywood, Bonbright said, but they are having difficulty locating substantial blocks of space because vacancy is at a historic low of 6.9% and falling.
"They want to be here because the amenities are finally here now -- there are places to go to eat and shop that haven't been here for years," Bonbright said. "It's hip, like the Meatpacking District in New York."
Capitol Records representative Jeanne Meyer agreed. "We have seen the renaissance happening around the building and believe that will continue," Meyer said. "We are going to remain a very active corporate citizen of Hollywood."
More than $1.2 billion worth of residential, retail and hotel development is planned or underway within a few blocks of Hollywood and Vine.
The city's Community Redevelopment Agency said Wednesday that it had reached an agreement with the owner of a small property on Vine Street that would allow construction to begin shortly on a $500-million mixed-use complex around the Vine Street subway station. The complex will include a luxury W Hotel, 150 condominiums, 375 apartments and 61,500 square feet of upscale stores.
"A lot of people are waiting to see if that would be built or if it was a mirage," said Leron Gubler, president of the Hollywood Chamber of Commerce. "The Hollywood and Vine area is going to look very different five years from now."
The Capitol tower was completed in 1956 and houses the operations of Capitol Records and Capitol Studios, a recording facility that includes an echo chamber engineered by guitarist Les Paul.
Other legends who have recorded there include label co-founder Johnny Mercer, Nat King Cole, Frank Sinatra and the Beach Boys.
The facility is used every year to make backup recordings of music for the Oscars, Emmys and Grammys for use in telecast emergencies.
This is the first Los Angeles acquisition for Argent, which owns more than $2.5 billion worth of commercial and residential real estate, mostly in New York and New Jersey. Among its holdings are the 1-million-square-foot Manhattan Mall in New York that has stores and offices.
It also owns Bonita Place, a 440,000-square-foot warehouse in Fullerton.