DreamWorks, Developer Sign Playa Vista Pact
After years of feuding and false starts, DreamWorks SKG on Monday announced it had signed a definitive agreement to build a $250-million studio and headquarters at Playa Vista, a sprawling real estate development that will rise near Marina del Rey.
The agreement is a major milestone for a project that has been surrounded by hype as well as the promise of generating thousands of high-paying jobs and bolstering Los Angeles’ position as the capital of the entertainment industry.
DreamWorks--founded by entertainment moguls David Geffen, Jeffrey Katzenberg and Steven Spielberg--still faces some hurdles before closing the deal, including raising financing and submitting plans to city officials. If all goes as planned, DreamWorks and a staff of about 1,000 people will move into its new Playa Vista home by the middle of 2001.
“We are very excited to have signed these agreements which bring us one step closer to realizing our dream of building a state-of-the-art studio at Playa Vista,” said Katzenberg in a statement. “There is still a lot of work ahead, but we look forward, at long last, to making the city of Los Angeles our home.”
The signed agreement provides a major boost for Playa Capital--developers of the about 1,000-acre project--as they seek to attract other entertainment and high-technology tenants to Playa Vista, which also will contain housing for thousands of residents.
“While bringing DreamWorks to Playa Vista has often seemed like climbing a steep mountain, we are nearing the top. . . .” said Playa Vista President Peter Denniston in a statement.
Under the agreement, which was signed late Friday, DreamWorks is paying $20 million--$13 million in cash and $7 million in notes--for 47 acres of land. The company will have the rights to build up to 1.5 million square feet of space, including eight sound stages and a lakeside headquarters. DreamWorks also will acquire the Spruce Goose hangar--where aviation mogul Howard Hughes built the famed wooden airplane--that will be renovated into a massive sound stage and studio facility.
Construction of the studio property is expected to cost in the neighborhood of $250 million, and DreamWorks plans major revisions to the original architectural plans for the project now that the final agreement has been reached. Ultimately the company may spend as much as $400 million to develop the entire studio site. DreamWorks has until February to make progress in securing financing, and until June to actually do so, sources said. Groundbreaking could take place as early as the summer.
Sources close to the company don’t expect financing to pose a major problem. One potential source is computer billionaire Paul Allen, who is now the single largest investor in the studio. People close to the project expect Allen to play some kind of financing role, although DreamWorks executives call that possibility mere speculation.
Still another potential source is the Union Labor Life Insurance Co. pension fund, which along with Los Angeles financier Gary Winnick’s Pacific Capital Group, has exercised an option to gain a stake of about 28% in the overall project, making them equal partners with investment banks Goldman Sachs and Morgan Stanley.
Crumbling Plans and Timetables
It was nearly three years ago when a horde of business and political leaders as well as media gathered in the cavernous Spruce Goose hangar to hail DreamWorks’ plans to move to Playa Vista. Ground was to have been broken by the middle of 1996.
But those timetables and plans quickly crumbled as DreamWorks and Playa Vista developer Robert Maguire battled for control. As lenders began foreclosure proceedings, a group of lenders and investment bankers assumed ownership of the development last year. Despite the new owners, negotiations with DreamWorks nearly fell apart many times until late this summer, when both sides said they had reached a basic understanding.
Maguire, who retains a small ownership stake in the project, was the “sole dissenting vote” on the agreement with DreamWorks, said Playa Vista spokesman David Herbst. Maguire, who was not available for comment, has threatened to take legal action that could delay the project.
Despite Maguire’s legal threats and the continued opposition of some environmental groups, the project continues to win widespread support among local government leaders. State and city officials have pledged about $70 million worth of tax breaks and transportation improvements if DreamWorks--whose operations are spread across the Los Angeles area--moves to Playa Vista.
On Monday, Councilwoman Ruth Galanter--whose district includes Playa Vista--and Mayor Richard Riordan sought to take credit for helping bring both sides together. “DreamWorks has always been an integral part of our vision for Playa Vista and this is an important step forward,” said a statement issued by Galanter.
“This [project] signals the fact that Los Angeles is laying its claim to being the capital of the 21st century,” said Rocky Delgadillo, deputy mayor for economic development. “The mayor has made it clear that this transaction is good for the city.”
