Filling a DreamWorks-Size Hole

Faced with the loss of its star tenant, DreamWorks SKG, the owners of the giant Playa Vista development must now rely on the man once regarded as their chief adversary: developer Robert F. Maguire.

Playa Vista officials said Friday that Maguire--head of Los Angeles-based Maguire Partners--now has the right, under the terms of the contract with Playa Vista, to develop 114 acres of commercial space--including the site where DreamWorks SKG was to build its studio and headquarters. (Maguire already had the right to develop 67 acres before DreamWorks pulled out of the deal).

“We are excited,” said David Herbst, public affairs director for Playa Vista, which spreads over more than 1,000 acres near of Marina del Rey. “We have every confidence and know [MaguirePartners] are going to do a great job.”

Maguire was not available for comment.

Herbst said that Maguire’s firm is entitled to build more than 3 million square feet of commercial and studio production space. The first phase of commercial--as well as residential--development at Playa Vista should be completed in early 2001, he said.

Playa Vista officials said they remain committed to building a studio facility despite DreamWorks’ announcement Thursday that it will abandon the site in the face of rising costs.

“We are in the process of dusting off [earlier] plans we had to do studio space,” Herbst said. “We are talking to the industry about what the need is.”

Maguire lost control of the project in late 1997 amid financial problems and a bitter feud with DreamWorks. Maguire battled to retain a stake in Playa Vista after a powerful group of investors--including affiliates of Goldman Sachs, Oaktree Capital Management and Union Labor Life Insurance--emerged to buy the property and keep it from falling into bankruptcy.

In the end, Maguire was left with a small ownership stake and his involvement was limited to the development of commercial property outside the DreamWorks studio campus.

Ironically, it was Maguire who began the ill-fated courtship of DreamWorks in the mid-1990s, after traditional corporate tenants had cut back on leasing during the recession. Now, faced with pressures to cut costs, many entertainment companies are curbing their appetite for new production and office space.

Playa Vista will also encounter growing competition for those entertainment firms that are still expanding. In downtown Los Angeles, for example, six new sound stages and production facilities will open later this summer.

“There is plenty of office space out there. There is plenty of sound stage space,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. “It’s going to be very interesting to see how this all works out.”

Real estate observers say that Maguire--whose firm was one of the region’s largest developers in the late 1980s and early 1990s--must still secure tenants and financing for any commercial development. Without DreamWorks, it will be harder for Playa Vista to attract the cutting-edge technology, multimedia and entertainment firms that its owners have been courting for several years.

“DreamWorks legitimized that area,” said real estate broker Clay W. Hammerstein. “It’s still a very viable site for large users of space. The key is to find another big anchor [tenant] that other tenants want to be around.”

DreamWorks now has 1,000 employees at its animation division campus in Glendale. An additional 500 workers in its live-action film and TV division are based on the Universal Studios lot in Universal City. Those two areas are the most likely places for the company to build or lease much-needed new office space, said Andy Spahn, head of DreamWorks’ corporate affairs.

DreamWorks has city approvals to add several buildings in Glendale.

Another option might be for DreamWorks to lease space in the planned North Hollywood Studio Project planned by developer Allen Radford.