We all know that Ari Emanuel is an asshole, but we also thought he was at least a smart asshole. Because he decided to back out of the William Morris Agency’s commitment to lease that big blue Beverly Hills office building after Endeavor took over the venerable tenpercentery. Well, now that decision is biting him on the ass big-time. Informed sources tell me that WME could be on the hook for anywhere from $25 million to $70 million because of Emanuel’s petulance. (Talk about money going down the drain.)
I’ve been following this building story since 2008 when Morris first decided to sell its buildings and make the move, through the WMA-Endeavor merger in 2009, and well into Ari’s subsequent antics. But then two weeks ago I was tipped to the latest news. What happened is that, of the two-pronged arbitration, the first ruling went WME’s way but the second one didn’t. Ari’s argument had been that George Comfort & Sons violated its lease agreement with WME by letting rival Gersh agency move from Canon Drive into another Comfort space next door at 9465 Wilshire Blvd. That was just 50 feet away from the site of the new WME headquarters in the 6-story building going up at 231-265 N. Beverly Drive. The two agencies would have shared valet parking services and a parking lot. (God forbid!)
So WME decided that was a lease dealbreaker. The arbiter agreed that was a violation. But the arbiter then determined that this breach was not material enough to warrant WME breaking the lease. Comfort’s damages are mitigated by MGM leasing the space. But at a cheaper price than what WMA had been willing to pay at the top of the market when real estate was still strong. Plus, the City of Beverly Hills gave Comfort a big incentive if it leased to a major talent agency (because CAA and ICM had already left BH). When I asked about the 8-figures which Ari is about to lose for the agency, WME hemmed and hawed and finally would say only that the damages phase of the arbitration hadn’t begun yet so the final number isn’t known.
It was William Morris Agency CEO Jim Wiatt who made the initial deal to sell the agency’s longtime and outdated Beverly Hills digs and seek out a hot new headquarters. But Wiatt was pushed out by Emanuel and never made the April 2009 merge. Immediately, Ari began complaining about the impending move. Though at the time he claimed it was “a collective decision”, Ari succeeded in convincing the newly merged company to fire the global architecture firm Gensler which Morris originally hired to develop its new headquarters. The problem was that Gensler had designed CAA’s current space and Ari hated it. (“I heard CAA is trying for some white-leather, Gucci-style, 1970s grandeur over there,” Emanuel was quoted as saying about CAA’s headquarters.) WME claimed at the time that the change wouldn’t cost a dime.
Not long after, Emanuel decided that he wanted the newly merged company to stay at Endeavor’s headquarters at 9601 Wilshire Blvd. At the time, his decision seemed short-sighted. After all, the Endeavor space couldn’t even fit both agencies’ personnel and those early WME staff meetings had to be held at the nearby Beverly Wilshire Hotel. But then Emanuel started firing people left and right. Voilà, space galore. (No matter the human cost and lives destroyed…) In September 2009 Comfort initiated legal proceedings. Emanuel shrugged them off. Instead he had the new WME buy up more space in the Endeavor building and kept certain divisions like the Music Department housed back at the old Morris building. Now Ari isn’t stupid enough to count on winning WME’s appeal against the recent rulings because everyone knows that reversing arbitration decisions are notoriously difficult.