Katzenberg fires missive at property owners
Expressing frustration with obstacles in the way of DreamWorks’ proposed studio at Playa Vista, Jeffrey Katzenberg has given owners of the property an ultimatum that could end up scuttling the studio’s plans to move there.
In a seven-page letter to principals at investment houses Morgan Stanley Dean Witter & Co. and Goldman, Sachs & Co., Katzenberg accused negotiators for the owners of repeatedly reversing their positions, saying they have been “disingenuous and lacking in good faith.”
The letter concerning the property — at the site of the former Howard Hughes aircraft plant, near the L.A. airport — was copied to Gov. Pete Wilson, L.A. Mayor Richard Riordan and other officials.
Katzenberg, who founded DreamWorks with Steven Spielberg and David Geffen four years ago, stressed “the value DreamWorks brings to the project.” He also said that if Playa Capital — the entity that controls the property on behalf of the various owners — fails to agree to terms already set, “DreamWorks will have no choice but to begin working with the city to secure a new home elsewhere.”
Katzenberg said both sides had settled on a price for the plot, only to have the owners “more than double the agreed-upon amount to over $48.7 million.”
“You had agreed to $20 million. We agreed to $20 million. Playa Capital cannot seem to take yes for an answer. This new reversal of position is completely unacceptable to us,” Katzenberg wrote.
As a result, he went on, DreamWorks is insisting that Playa Capital stick to the terms of the deal, with the clear implication that otherwise the deal is off.
“DreamWorks has given all that it can give,” Katzenberg wrote. “We are truly at a point where we cannot, and will not, give any more.”
Officials in Riordan’s office and that of L.A. City Council president John Ferraro did not respond to calls. However, people close to the matter said both men reacted to Katzenberg’s letter by calling Owen Thomas, managing director of Morgan Stanley’s real estate division, urging him to accommodate DreamWorks in any way possible in order to salvage the studio’s role in the 1,087-acre commercial and residential development.
Thomas and Daniel Neidich, president of Goldman, Sachs’ Whitehall Street real estate funds, could not be reached for comment. Questions were referred to Playa Capital president Peter Denniston, who acknowledged to Daily Variety that negotiations to bring DreamWorks to the proposed Entertainment, Media & Technology campus near Marina del Rey “have reached a critical stage.”
“We hope that they are expeditiously concluded so that we can announce an agreement on a term sheet very soon,” Denniston said. “If DreamWorks cannot agree to come to Playa Vista, we will move aggressively to bring another studio or studios to the project.”
Denniston said Katzenberg’s “reputation as one of the toughest negotiators in the entertainment industry has not been diminished by these negotiations.” Nonetheless, Denniston said, “we seriously contest some of the propositions he advances” in the missive to the principal investors.
Declining to be drawn into specifics, Denniston would say only that “entirely different interpretations can be drawn from the same set of facts.” He said Playa Capital “will make an agreement only if it is in the best interests of the local community, our owners, stakeholders, future tenants, and the Playa Vista community as a whole.”
The project’s fortunes have gone through contortions since DreamWorks, lured by an offer of $70 million in city subsidies and visions of a high-tech campus near the ocean, came on board in 1996. Financial setbacks for the initial developer, Maguire Thomas Partners, enabled Morgan Stanley and the others to step in and raise the stakes.
In addition, the project has been stymied by lawsuits from environmentalists, who fear it will destroy the last coastal marsh in Los Angeles County.
DreamWorks has kept its options open regarding other sites. The studio’s real estate attorney, George Mihlsten, recently had lunch with developer J. Allen Radford, who is close to acquiring rights to a 43-acre plot in North Hollywood for a proposed studio complex with as many as 15 soundstages.
“My lunch was to bring him up to speed on the scope of our development,” Radford said Wednesday. He and his partners had already made a presentation for DreamWorks reps, Radford said, “in the spirit of letting them know that there was a viable backup to Playa Vista that would enable DreamWorks to stay in Los Angeles.”
Asked if the DreamWorks partners might purchase the proposed studio, Radford said he would be “more than willing to sit down with them and do everything in our power to make them comfortable.”