Quixote Studios announced Tuesday that it will close its Atlanta-based production services business and scale back its L.A. soundstage operations as the production downturn continues.
The changes will result in approximately 70 layoffs in Atlanta and Los Angeles.
Hudson Pacific Properties acquired the company in 2022 for $360 million, but was subsequently forced to write down the entire value of the Quijote division due to significant operating losses.
“Obviously, this wasn’t the best deal we’ve ever done, but compared to all the other deals we’ve done in the past, we’ve done well,” Hudson Pacific Chairman and CEO Victor Coleman said at an investor conference in March. “We believe there are multiple options for that asset that could bring it down to zero or at least flat by the end of the year.”
Hudson Pacific also owns another portfolio of Los Angeles-based soundstages, Sunset Studios. Those properties leased to Netflix and other production companies are not affected by the change, and the company said they are 96% leased.
Hudson leased additional soundstages under the Quijote brand, including facilities in Pacoima, Panorama City, and West Hollywood. Occupancy rates for these properties are quite low, at just 53.3% last year. Although those assets will be relinquished, the company is sticking with its Atwater Village location across the Los Angeles River from Griffith Park. The cost savings are expected to save the company approximately $21 million to $27 million annually.
“Quijote is taking steps to move away from leased soundstages and markets that are characterized by structural cost and demand disadvantages. This will allow Hudson Pacific to focus its financial and operational resources on higher-performing segments of its office portfolio and studio business,” Hudson Pacific President Mark Lamas said in a statement.
Following the closure of its services operations in New Orleans and Albuquerque last year, the company is also closing its production services operations in Atlanta and refocusing that aspect of its business on Los Angeles and New York.
Coleman argued at an investor conference in March that Los Angeles and New York are faring better in the recession than second-tier hub cities like Atlanta, Chicago, Albuquerque and New Orleans.
“Those markets are even more depressed,” he says. “The tax credits in both Los Angeles and New York have strengthened what we think is a production flow.”
Hudson also owns the Icon, Q and Epic office towers on Sunset Boulevard in Hollywood, which are leased to Netflix as its Los Angeles headquarters until 2031.
Netflix is believed to be close to a deal to acquire the Radford Studios site in Studio City, but it remains to be seen how that will affect the current studio lease.
