Agreement May Ward Off Foreclosure on Playa Vista

Parties in the troubled, $8-billion Playa Vista real estate project where DreamWorks SKG wants to build its studio lot said Wednesday that they have reached a preliminary agreement to develop the property, a move that would halt foreclosure proceedings and lay the foundation to possibly get the stalled development off the ground by year’s end.

Financially strapped developer Robert Maguire announced the agreement with the two Wall Street real estate funds that for the last three months have put a full-court press on him through foreclosure proceedings.

Maguire said in a statement that he is now in “exclusive negotiations” as a result of what he called an “agreement in principle.” Morgan Stanley’s Real Estate Fund and Goldman, Sachs & Co.’s Whitehall Street Real Estate Fund, which hold the bulk of the property debt, had filed a notice of sale in June calling for the 1,087-acre property near Marina del Rey to be put up for sale on Monday.

People close to the deal, however, cautioned that numerous details still need to be worked out, noting that a previous financing agreement was hyped in January but subsequently unraveled.

“It’s not a final deal. He bought himself a little bit of time. The good news is at least he signed something,” one DreamWorks source said.

Among the key details still to be worked out is a new agreement with DreamWorks. The original agreement tying the fledging studio--founded by director Steven Spielberg, entertainment mogul David Geffen and veteran studio executive Jeffrey Katzenberg--to Playa Vista has expired due to delays in the project.

DreamWorks’ involvement is critical both for providing the Hollywood glitz financiers want to stir interest in Playa Vista and for the batch of tax and permit incentives the city of Los Angeles is offering if the studio locates there.

The agreement is said to limit Maguire’s involvement in the project, a key point in the ongoing negotiations. Sources said under the new deal, Maguire would be allowed to buy an equity stake of up to 20% in a partnership developing the commercial portion of the project, and also a separate partnership developing the commercial buildings. But he would be virtually uninvolved in a new master partnership overseeing the entire development.

Maguire would not be involved in developing the studio lot for DreamWorks, with whom he is embroiled in a nasty feud that has helped slow the project. DreamWorks blames Maguire for holding up Playa Vista while trying to cut a better deal for himself to ease his financial difficulties. Maguire has blamed other factors for the delays, such as protests from environmentalists.

Maguire’s agreement is said to be conditioned on his successfully buying out two partners who own the property with his Maguire Partners. They are Las Vegas-based Howard Hughes Corp., which is a subsidiary of the Rouse Co. real estate giant, and real estate conglomerate JMB.

Proposed sources of financing include Los Angeles supermarket magnate Ron Burkle and Los Angeles financier Gary Winnick, although as of Wednesday no agreement involving the two had been reached. Winnick’s company and Union Labor Life Insurance Co. had failed earlier this year in a separate attempt to buy a majority control of the project before it teamed up with Morgan Stanley and Goldman Sachs in the spring.

Buying out his partners is critical for Maguire. In addition to receiving developer fees, Maguire wants to reap some of the eventual profits from the development. Hughes, under its deal, has first shot at initial profits, so Maguire would not see any profits for years.

Maguire has been involved in tense, brinkmanship-like negotiations with Goldman Sachs and Morgan Stanley, which bought the debt from a group of banks led by Chase Manhattan Bank. Chase turned up the heat when it filed a notice of default on the property in March.

Maguire has been threatening to put the partnerships owning the property in bankruptcy, a move that would be likely to kill the DreamWorks portion of the project, and also kept Los Angeles litigator Michael J. Henningan on standby to possibly seek a court order to stall foreclosure proceedings.

In his statement, Maguire expressed optimism that the project will finally be built.

“After eight years, the obstacles to this project should finally be behind us, and we are eager to move forward,” he said.