D'Works, Playa Capital come to terms
Developers of Playa Vista, the sprawling tract near LAX that includes the former Hughes Aircraft plant, have agreed to most of DreamWorks’ terms to move the studio to the site.
The deal was reached late Thursday, five weeks after DreamWorks co-founder Jeffrey Katzenberg wrote a letter to the property’s Wall Street owners threatening to pull out of the project because of their “unacceptable” negotiating tactics (Daily Variety, Aug. 27).
Katzenberg’s threat brought intense pressure on developer Playa Capital Co. to capitulate, with everyone from California Gov. Pete Wilson to MPAA chief Jack Valenti weighing in.
During a face-to-face meeting Thursday at DreamWorks’ current digs on the Universal lot, Owen Thomas, real estate director for Morgan Stanley Dean Witter & Co., and Playa Capital president Peter Denniston agreed to the most crucial of Katzenberg’s demands, a source close to the matter revealed Monday.
A major component of the pact, which runs more than two-dozen pages, is the developer’s agreement not to get into the soundstage business at the Hughes site, where several hangars still stand. Playa Capital, a consortium that took over the property a year ago, had wanted to split the backlot with DreamWorks, a notion that Katzenberg considered impractical.
The developer also proposed retaining ownership of the soundstages and leasing them to DreamWorks and other production entities; Katzenberg refused.
He and his partners, Steven Spielberg and David Geffen, say they made clear from the beginning that they had always wanted an autonomous studio and that sharing the lot or leasing stages from Playa Capital was out of the question.
Katzenberg was also incensed at what he said was the developer’s seemingly arbitrary reversals of position, particularly over the price of a small but crucial parcel that included the mammoth hangar in which Howard Hughes built the legendary Spruce Goose plane during World War II. Initially, Katzenberg said, the agreed-to price for the 12-acre parcel was $20 million; on Aug. 4, Playa Capital increased the price to $48.7 million.
“DreamWorks has given all that it can give,” Katzenberg wrote in his Aug. 12 letter to principals at Morgan Stanley and Goldman, Sachs & Co.
A source close to the negotiations said Monday that the price for the parcel was once again $20 million.
Three for one
On Friday, the two sides tinkered with a statement announcing that they had agreed to the basic terms under which the four-year-old studio would establish its headquarters on the site. Some fine-tuning still needs to be done to the agreement, and meetings will begin immediately to reach a final pact, DreamWorks corporate affairs chief Andy Spahn said Monday.
“We are excited and happy to have reached this agreement,” Spahn said. “We think it’s a win-win, and we look forward to completing the definitive agreement and to getting started.”
Construction could begin as early as January, with opening contemplated 18 months later. DreamWorks will occupy about 48 acres of the 100-acre Entertainment, Media & Technology campus, part of a much larger commercial and residential development proposed for the site.
“We are pleased to have taken a major step closer to a final agreement that will bring DreamWorks to Playa Vista,” Katzenberg said in a statement released by his office. “There is still a lot of work to be done to complete this transaction. Playa Vista’s principals have assured me personally that they will commit the time, energy and resources necessary to bring this to a rapid conclusion.”
Cheers all around
At midday Monday, Playa Vista president Peter Denniston addressed about 25 staff members at the firm’s offices near the site and, to ringing applause, announced the pact with DreamWorks.
“We’re pretty thrilled — extremely thrilled,” Denniston said later by phone. “Achieving a deal with DreamWorks has been one of our highest priorities and one of my personal priorities at Playa Vista.”
Asked about the rancor that characterized negotiations in recent weeks, Denniston implied that it was almost inevitable.
“Any major negotiation tests the limits of both sides,” he said. “But it’s only been 11 months since the new ownership took over. Given the magnitude of the needs DreamWorks has, and the complexity of the deal, the timeline for the negotiations was not that extraordinary.”
But Denniston was clearly aware that DreamWorks’ ultimatum last month was not just saber-rattling. In the interview Monday, Denniston alluded to Spahn’s comment that, “They know what’s required to bring us to Playa” (Daily Variety, Sept. 14).
“We’ve said yes,” Denniston conceded. “The material issues have all been resolved. We will not be in the business of owning sound stages. We just wanted to make sure those stages were available to all. ”
In addition to Wilson, Valenti, some sources point to Los Angeles City Councilwoman Ruth Galanter, in whose district Playa Vista lies, as pressuring Playa Capital to work out a deal with DreamWorks.
“We are cautiously optimistic,” said Niki Tennant, a spokeswoman for Galanter, “that this agreement will signal a new home for DreamWorks at Playa Vista.”
Nor is the deal likely to please environmentalists, because it brings construction in the area that much closer to the last coastal marsh in L.A. County. The project has been the subject of numerous lawsuits, some still pending.
The studio’s intention to move to the proposed development southeast of Marina del Rey was announced in December 1995 during a ceremony in the Spruce Goose hangar that was attended by Gov. Wilson, L.A. Mayor Richard Riordan, Galanter and other local officials. At the time, the 1,087-acre property was owned primarily by Maguire Thomas Partners, who bowed out of the project when they ran into financial trouble.