Winnick/feb17/bc-bb/ inches/MARK2ND

BENJAMIN MARK COLE Senior Reporter

BRAD BERTON Staff Reporter

With a new $200 million capital infusion, the long-stalled Playa Vista is now expected to break ground this summer and Gary Winnick, not Rob Maguire, is the one in charge.

“I feel like I went out fishing for trout, and ended up landing a whale,” said Winnick in an interview last week with the Business Journal.

Winnick, the 49-year-old chairman of Beverly Hills merchant banking firm Pacific Capital Group, earlier this month cut a deal to take control of the $8 billion, 1,087-acre project. The agreement, formally announced earlier this month, is expected to close in May.

Winnick’s team which is comprised of union pension funds and a major real estate investment company is taking control from the troubled Maguire Thomas Partners development firm.

And in perhaps the most critical part of the plan, DreamWorks SKG remains the star tenant.

Michael Montgomery, DreamWorks’ point man on the new studio project, confirmed that the fledgling entertainment company expects to purchase about 20 acres of the Playa Vista site and develop a studio anchoring the planned 100-acre media-technology campus there. It will be the first full-fledged studio developed in Southern California in more than half a century.

Sources close to the negotiations also confirmed that DreamWorks will hold an equity stake in the overall Playa Vista project.

It was Winnick’s connections at DreamWorks that ultimately led to his controlling all of Playa Vista.

According to well-placed sources, DreamWorks wanted to hook Winnick as much as he hoped to land Playa Vista.

Winnick initially came into the Playa Vista picture last summer as DreamWorks executives were starting to lose patience with Maguire, who for nearly a decade has been the principal in charge of Playa Vista.

Abbott Brown, an executive at Winnick’s Pacific Capital Group, was working with DreamWorks last summer on a matter unrelated to the entertainment company’s search for a studio campus. In the process, Brown introduced Winnick to key DreamWorks officials.

The timing was right for Winnick because DreamWorks officials were becoming increasingly frustrated with Maguire’s lack of progress on Playa Vista.

Another factor in Winnick’s favor was his close relationship with veteran financier Llewellyn Werner, who has longtime ties to huge union pension funds. (Werner is now a partner in Pacific Capital.)

Winnick’s relationship with Werner and his good chemistry with DreamWorks proved to be a potent one-two punch that helped him beat out rival bidders to control Playa Vista. Those included Morgan Stanley & Co. and Goldman, Sachs & Co.

Through Pacific Capital, which he formed more than a decade ago, Winnick has focused on investing equity capital and arranging debt financings for a variety of high-growth companies, many of which have gone public.

As a major shareholder and director of Guber-Peters Entertainment, Winnick initiated and negotiated that movie production company’s $250 million-plus acquisition by Sony Corp. He is currently among the biggest shareholders of OrNda Healthcorp, one of the nation’s largest for-profit hospital companies. OrNda is in the process of being acquired by Tenet Healthcare Inc.

Winnick’s family foundation has made numerous philanthropic contributions, supporting the California Special Olympics, the L.A. Music Center, the Holocaust Museum and the Simon Weisenthal Center for Humanitarian Studies, and other institutions.

And while Playa Vista is anything but a charitable non-profit endeavor, Winnick referred to it in somewhat philanthropic terms.

“Playa Vista is the largest urban development project in our nation’s history, and carries with it a special responsibility to be developed in a first-class style and to the benefit of all residents of Los Angeles,” he said.

Winnick emphasized that Playa Vista, under his leadership, will “live at night,” but he was vague on details, other than to say he has no concrete plans for a Santa Monica-style Promenade or Universal CityWalk.

Winnick’s new controlling partnership includes his Pacific Capital Group, the Washington, D.C.-based Union Labor Life Insurance Co. (ULLICO, a company owned by AFL-CIO member unions), and Virginia-based real estate investment firm J.E. Robert Co.

Under the deal, Playa Vista’s current owners led by Maguire Thomas and longtime landowner Howard Hughes Corp. will pay an additional $15 million to retain a minority equity stake of 15 percent.

According to a knowledgeable source, Playa Vista’s existing $150 million mortgage debt held primarily by Chase Manhattan Bank and Bank of America is being retired for about 65 cents on the dollar.

Neither Maguire Thomas nor Howard Hughes responded to the Business Journal’s requests for comment last week.

Winnick acknowledged that Playa Vista still faces a host of challenges before work gets underway on the first phase which includes a 100-acre DreamWorks-anchored media campus and some 3,200 new multifamily residences.

Among the key tasks to be addressed over the next several months:

– finalizing arrangements with the current landowners and their many creditors;

– determining the specific stakes various investors and participants will ultimately hold in the development including the arrangement through which DreamWorks will buy and develop about 20 acres;

– finishing Phase One’s design and construction plans and contracts;

– formalizing an incentive package the City of Los Angeles has offered DreamWorks to build its campus within the city limits;

– lining up tenants to join DreamWorks at the media campus; and,

– dealing with two pending lawsuits challenging Playa Vista development plans on environmental grounds.

One aspect of Winnick’s new team is that ULLICO’s participation in Playa Vista mandates that all construction be handled by union shops.

While some real estate sources have privately expressed concerns about additional costs that union labor may entail, several experts said the union/non-union cost differential has been narrowing.

“Another thing to keep in mind is that, when union pension funds invest in a project, they have a strong fiduciary interest in the economy, quality and financial success of the venture not just a short-term interest in jobs,” said Terry Dooley, senior vice president with Morley Construction Co.

Michael Steed, senior vice president with ULLICO, added: “Winnick had the vision to marry together the power of union pension funds with private entrepreneurship to make Playa Vista a reality.”

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