Playa Vista Project: Union of Cash, Flash?

From studios in Burbank to shopping centers in Orange County, union pension money has helped finance scores of real estate projects large and small across Southern California.

But those projects and investments pale in comparison to an ambitious and risky union venture to buy control of the region’s largest and most controversial proposed development, Playa Vista.

An investment group organized by Los Angeles financier Gary Winnick and backed by AFL-CIO pension money is proposing to supply about $200 million in badly needed cash to pay off the debt on the property and start construction on the stalled development, which would include the main studio and headquarters for DreamWorks SKG. A decision on this proposal and others is expected by the end of next week.

“It’s the first time in the country where union-owned financial institutions are leading a major deal of this size and this import,” said Michael Steed, senior vice president for Ullico, a financial holding company that manages union pension funds and is owned by affiliates of the AFL-CIO. “It’s one hell of a deal, and we think it’s going make a lot of money.”

The size of the union group’s bid has drawn attention in Los Angeles real estate circles.

“I think it’s unusual. I see that [union] money come available only in [smaller] special situations,” said one area real estate lender.

Union leaders said they hope to use their investment in Playa Vista to launch a nationwide initiative to focus union pension funds on real estate projects that result in superior investment returns and create large numbers of jobs, said Steed.

Playa Vista is expected to prove a boon to the region’s construction workers by creating an estimated 130,000 jobs during the decade it would take to complete the multibillion dollar complex.

In addition, the unions would be in an enviable position if they could come to the rescue of the high-profile project, whose developer--Maguire Thomas Partners--has been unable to independently raise financing to start the project and pay off bank debt. That delay has resulted in a public feud with executives at DreamWorks.

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The development’s many potential rewards convinced the AFL-CIO’s building trades last week to vote unanimously to invest in the project, Steed said.

However, the unions and Winnick, who was once a partner with junk bond king Michael Millken at Drexel Burnham Lambert, are up against some of Wall Street’s most powerful investment houses--such as Goldman Sachs and Morgan Stanley--that also want a piece of Playa Vista.

In addition, many local property experts point out that Winnick, who heads Beverly Hills-based Pacific Capital Group, lacks experience in putting together and managing such massive real estate deals now being contemplated.

“That would be scary,” said one local investment banker. “That’s what you need to attack that property.”

Winnick declined to be interviewed.

But union officials point out that another partner in their investment group, Virginia real estate development company J.E. Robert Cos., has more than enough expertise in analyzing and carrying out complex real estate projects.

Large-scale developments have proven troublesome for other union pension funds. The Southern California/Arizona Glaziers, Architectural, Metal & Glass Workers Pension Fund teamed up with other investors in 1990 to pay $47 million for a former 157-acre dump in Carson. Instead of quickly transforming the site into a giant outlet mall, the project has run into numerous environmental problems.

The Carson project now appears ready to begin construction, but only after other investors were brought in to provide the necessary financing, leaving the glaziers union with a smaller piece of the project, said Carson Mayor Michael Mitoma.

Officials for the glaziers union pension fund did not return numerous phone calls for comment.

But union pensions fund managers can also point to the financing or investing in many successful real estate ventures, including a new Disney animation studio in Burbank and supermarket shopping centers in Los Angeles.

Times writer Jesus Sanchez can be reached via e-mail at jesus.sanchez@latimes.com