After months of delay and stalemate, the developers of the Playa Vista project have reached an “agreement in principle” with a new group of partners that will bring in the roughly $200 million necessary to get the project moving forward with DreamWorks as its major tenant.
Maguire Thomas Partners said Thursday that it has chosen Pacific Capital Group, led by Beverly Hills financier Gary Winnick, whose team also includes Union Labor Life Insurance Co. and the J.E. Robert Co. Together, they would form a new partnership for the project, which aims to be the home to DreamWorks and a futuristic residential and business community.
The Winnick-led group would become the largest investor in the project.
DreamWorks officials viewed the move as a step in the right direction, although they were careful to add that it does not mean it is a done deal. Several weeks and even months of due diligence remain, as well as the lengthy process of putting the complicated investment arrangement on paper in detail.
In fact, it probably will not be until the fourth quarter of this year that the project breaks ground, and construction on structures wouldn’t begin until early next year.
“Playa Vista has always been our first choice and we are pleased the necessary financing is likely to be secured soon so that we can move forward in creating our studio and office campus,” DreamWorks’ Jeffrey Katzenberg said in a statement.
Saddled with debt, the project was in need of a major investor to pay the cost of building roads and infrastructure as well as to satisfy lenders.
Following a much-publicized kickoff press conference in December 1995, the project was stalled last year as Maguire Thomas’ Robert Maguire sought to line up financing to get the development moving forward. But Katzenberg, whose company will be the major tenant and will have a partnership stake in the overall development, groused publicly that Maguire was unable to come up with new investment because he was unwilling to give up control.
In fact, putting pressure on Maguire, DreamWorks said it was looking for alternative sites, and once even floated the idea that it would move to CBS Studio Center, although the Eye web insisted that it would not sell the property.
City officials also have had a lot riding on the project. Mayor Richard Riordan, Councilwoman Ruth Galanter and a majority of the rest of the City Council backed a plan to give the project $70 million in incentives, provided that DreamWorks was on board.
Last month Jim Thomas returned to the project after having parted ways with Maguire last summer. He was said to be more favorable to an arrangement in which a partner took an equity stake in the development.
Since then, Maguire Thomas has spent the past two months going over proposals from potential investors. In addition to the Pacific Capital proposal, other finalists included Morgan Stanley and Goldman Sachs, according to sources.
The Winnick-led proposal, with its estimated $200 million investment, would represent the majority investment put into the project, according to Michael Steed, senior vice president of Union Labor Life Insurance. Exact breakdowns of ownership stakes were not disclosed. But the group has been DreamWorks’ hand-picked choice to enter the project all along.
“Playa Vista represents unprecedented cooperation between union capital and private entrepreneurship translating into thousands of much-needed jobs and solid economics,” Winnick said in a statement.
The project would be overseen by a board of directors, with representatives from each of the principals. The Rouse Corp. also is a partner in the project.
“We have proven through this process that we can reach a consensus, and that is critical,” said Steed, whose insurance company is putting up the lion’s share of the money. “We know that there will be ongoing issues, but there is a good solid relationship (among) the parties.”
The project’s debt is a $150 million first mortgage plus interest, with Chase Manhattan the leading lender. Sources say that the proposal has the debt being paid for about 60¢ to 70¢ on the dollar.
Meanwhile, DreamWorks will be lining up its own financing to build its studio lot, although it still is planned for the company to hold a partnership stake in the entire project.
It remains to be seen whether other potential tenants, such as IBM and Digital Domain, show renewed interest in the project. They had either bowed out or put their plans on hold while the financing was being worked out.