A LOOK AHEAD * After years of delays, developers of the 1,087-acre, multibillion-dollar Playa Vista project near LAX are poised to break ground. But some remain skeptical about their chances for . . . : Keeping Their Dream Development on Track
Just north of Los Angeles International Airport, the bulldozers are rumbling on metropolitan Los Angeles’ last giant stretch of open land.
But as the developers of Playa Vista trumpet their new beginnings after years of delay, they grow quiet on one important subject:
Tenants.
Specifically, DreamWorks SKG, the fledgling entertainment empire that once looked like a sure-thing anchor for Playa Vista.
The 1,087-acre, multibillion-dollar project near Marina del Rey has fought through a series of environmental challenges and claimed a fresh infusion of big, New York investment firm money.
Finally, the site is being readied for below-ground infrastructure such as sewer pipes and fiber optic cable. By the spring of 2000, Playa planners hope to have built 600 to 800 of their projected 13,200 townhouses and apartments and opened a component of what will one day be up to 5 million square feet of commercial office space and 600,000 square feet of retail stores.
Planners also project that by 2000 they will be well along the way to restoring the sensitive Ballona wetlands that at one time threatened to derail the project entirely. About 50% of the project--more than 500 acres--is devoted to open space, including wetlands, parks and jogging paths.
Yet even as development begins in earnest, Playa Vista is faced with nagging questions about whether the long-term real estate market will create sufficient demand among business clients and home buyers.
“Windows only stay open for so long, so you hate to miss out or come to the party late,” said company President Peter Denniston. “So the issue is, how long does the party last?”
Denniston and his investors, some of whom have waited more than 20 years to see this first bit of real movement, are betting it lasts long enough to see their project through.
The surest guarantee of success, Denniston acknowledges, would be landing DreamWorks, whose facilities are now scattered in and around Universal City and Glendale.
In 1995 DreamWorks principals Steven Spielberg, David Geffen and Jeffrey Katzenberg began preliminary discussions about housing their new studios at the ocean-front development.
The Los Angeles City Council quickly stepped in with $85 million in tax incentives aimed at keeping the new studio from fleeing to Burbank or other outlying areas.
In spite of the ballyhoo, however, the deal never progressed beyond the very preliminary stages. There was never any commitment on paper.
As DreamWorks reassessed its needs--and the expense of building a new lot--the negotiations were rumored to be floundering on the combative styles of the entertainment moguls and Playa Vista’s original developer, Robert Maguire.
Then last year, the real estate divisions of Goldman Sachs & Co. and Morgan Stanley & Co. agreed to invest $200 million of badly needed new funds into Playa Vista in exchange for majority ownership. The new management and fresh infusion of cash boosted the odds of luring DreamWorks and other big-name business tenants.
All either side will say, however, is that fresh negotiations are ongoing.
Andy Spahn, DreamWorks’ head of corporate affairs, said the changes in Playa Vista management have made “the possibility of a DreamWorks deal much more realistic.”
Denniston, wary of repeating the mistakes of earlier Playa Vista managers by prematurely proclaiming a deal, said only that he hopes to have an announcement within 30 days.
In the meantime, he stressed, negotiations with other entities are also going forward.
Getting DreamWorks would assure Playa Vista of a host of other tenants: ancillary businesses, would-be suppliers and hopeful creative partners vying to be near Hollywood’s newest, biggest studio.
“The project was master-planned without DreamWorks,” Denniston said. “All that being said, life is easier with DreamWorks than without.”
Denniston said the development is in discussions now with eight serious prospective tenants, the largest of which is negotiating for more than 300,000 square feet of space. He refused to be specific, acknowledging that negotiations could be affected by whether DreamWorks is part of the mix.
“I think people have to see something happening,” said David Dale-Johnson, who directs the real estate program at USC’s Marshall School of Business. “It’s been such a long and torturous, on-again, off-again process that if I were a home buyer or a tenant, I guess I’d want to see sticks and bricks before I committed to anything.”
That’s why as the developers move along with the below-ground work on the project’s first phase, signs will begin to appear throughout the property: “Future residential site,” “Future entertainment, media and technology district,” and so on.
“I think once it’s under construction and people can see it’s actually happening, all the worries about its long gestation period will be history,” Dale-Johnson said. “It’s so well-located, it will work eventually.” While the total cost of Playa Vista has been estimated as high as $8 billion in the past, officials these days will not provide a figure.
In addition to its residential and commercial plans, Playa Vista is also carefully deconstructing many of the old Hughes Aircraft Co. buildings in hopes of reusing some of the materials and maintaining some buildings for historical preservation.
The DreamWorks legacy has been false starts, Denniston said. “It was over-promoted without substance, without the resources in place to do what needed to be done. Today we have the resources in place to make it real--and it will be real.”
