Disney’s ‘Backlot’ Project Approved Over MCA Protest
The Walt Disney Co. was given the go-ahead Tuesday to plan an elaborate theme park, shopping mall and “Hollywood Fantasy Hotel” for a 40-acre redevelopment site in downtown Burbank.
Over the protests of a rival entertainment giant, the Burbank City Council voted unanimously to give Disney an option to buy the land for $1 million--which city officials acknowledged is a bargain price--to develop what would be called “The Disney-MGM Studio Backlot” at a cost of $150 million to $300 million.
Michael Eisner, Disney’s chief executive officer, said preliminary plans call for “behind-the-scenes Hollywood themes, street performers, live theater, Disney animation tours and operating radio and TV media centers.”
If the project receives final approval from the council after detailed plans are completed, the studio’s animation department and offices for the Disney Channel would be moved to the site, Eisner said. A man-made lake, the “Burbank Ocean,” would be built atop a six-story parking garage, with a waterfall screening the structure from the nearby Golden State Freeway, he said.
The plan clearly captivated Burbank officials, with Councilwoman Mary Lou Howard declaring, “It’s time the city had something that Johnny Carson wouldn’t make fun of.”
Rival Company Protests
But a lawyer representing MCA Inc., which has its headquarters in nearby Universal City, complained at the evening council meeting that his company should have been given the opportunity to bid against Disney.
“There is a question whether this is the proper thing to do with city property without asking for competitive bids,” attorney Daniel M. Shapiro said.
“You’re giving away 40 acres,” he said, calling the proposed sale price a fraction of the land’s value.
If adopted, Disney’s plan would accomplish at least two strategic goals for the Burbank-based company. Disney would not only relieve its crowded studio lot with a satellite office complex and “backlot” for filming, but could strike a blow at MCA’s effort to develop an entertainment and retail complex on its property in Universal City.
The two companies have been warring over the “backlot” concept for two years, since an aggressive new management team at Disney announced plans to build a studio tour in central Florida, where MCA already planned such an attraction.
Before the Tuesday night meeting, Jay S. Stein, president of MCA Recreation Services Group, said MCA sought, but never received, information about the Burbank redevelopment site, which until recently had been set aside for a traditional shopping mall.
Burbank Mayor Michael R. Hastings confirmed that he made an overture to MCA’s Stein three or four weeks ago to determine whether the company might want to make a proposal to compete with Disney’s.
After a phone conversation with Stein, Hastings said, he asked a city staff member to send information to MCA but “somewhere it fell through the cracks.” Hastings declined to be more specific, characterizing the failed effort as an “internal problem.”
Hastings said the snafu was discovered Monday when he made a follow-up call to Stein.
“What Disney is proposing is outrageous,” Stein said before the council meeting. “They want a free option for a year on 40 acres of prime real estate, plain and simple. That’s a giveaway.”
The Burbank council, acting as the city’s redevelopment agency, gave Disney an option to buy the 40-acre site for what amounts to 57 cents a square foot.
“At $1 million, Disney is clearly getting a special price, but we would be getting a special project,” City Manager Bud Ovrom said.
Other developers would have been willing to pay $35 million for the property, but that they would have built a more traditional shopping center in return, he said.
“I really object vigorously to Disney’s behind-the-scenes maneuvering, creating for themselves a no-lose situation, while at the same time eliminating competition. There’s something rotten here and it’s damned unfair,” Stein said.
“We want to be given an opportunity to bid, based on the same information that Disney already possesses.”
Under the agreement approved Tuesday, the city cannot negotiate with any other developer, and Disney will come up with a design, parking layouts and construction schedules within six months. Further plans and revisions are to be drawn up in the subsequent six months.
Either side may pull out of negotiations after the 12-month period if it is dissatisfied with the final plans.
Under an agreement with the site’s previous developer, Ernest W. Hahn, the city was to receive $1 million for 30 acres and hoped to sell the other 10 acres for $8.7 million.
Bigger Potential Seen
“I am convinced the Disney development has greater potential to generate more revenue and economic spinoff for the city over the long haul than any traditional center,” Ovrom said in explaining the lower price.
Besides property taxes, the project would generate $1 million to $3 million a year in revenue for the city through sales taxes and other sources, Ovrom said.
Eisner said “The Disney-MGM Studio Backlot” would resemble an actual movie backlot, with streets depicting historical periods and exotic locales.
Disney in 1985 obtained rights to use themes or excerpts from the vast MGM film library, which include such classics as “Gone With the Wind” and “The Wizard of Oz.”
Another Disney official said about one-third of the acreage would be devoted to retail stores, and the entire project could be anchored by “two major international retailers,” which he did not name.
After the presentation, Eisner said that Disney would finance the venture alone. Three months ago, he told Disney shareholders that the Burbank project, if undertaken, would be in conjunction with Jim Rouse and his Maryland-based company, Enterprise Development.
When asked why Disney now wants to proceed alone, Eisner replied, “It’s our backyard.”
Disney officials did not disclose a projected admission price for the entertainment facilities at the site, which is bordered by Magnolia and Burbank boulevards, 3rd Street and the Golden State Freeway. Burbank officials have been openly excited since February about the prospect of having a Disney development in their downtown. Although other developers expressed interest in building on the 40-acre property, city officials only seemed to consider the Disney plan seriously.
The proposal overshadowed the disappointment Burbank officials felt at the collapse of the Towncenter, a $158-million redevelopment project that had been planned for more than 10 years. The project collapsed last February when the developer lost commitments from four department stores expected to anchor the mall.
Rivals in Florida
Stein contends that MCA is a match for Disney in both real estate development and entertainment. His division runs MCA’s Universal Studios Tour, which recently announced an expansion of a 23-year-old attraction that could cost as much as $75-million. MCA is also building a theme park in central Florida in a joint venture with Cineplex Odeon, the Canadian movie-theater company.
MCA and Disney crossed swords in Florida two years ago, when Disney announced plans to build its own studio tour on its Walt Disney World property near Orlando. At the time, MCA accused Disney of trying to sabotage competition from MCA’s long-proposed attraction in Orlando.
MCA officials contended that Disney lobbied Florida legislators to block a bill in 1985 that would have enabled MCA’s then-proposed partner, a state employees’ pension fund, to invest in the project, a charge Disney vehemently denied.
