No. 3
Playa Vista Secures Financing
This long-running real estate saga finally reached a turning point maybe.
After months of bitter infighting and heated negotiations, the parties in the Playa Vista development where DreamWorks SKG might build its studio secured much-needed financing in October, enabling the long-troubled project to proceed.
The deal marked a reversal of fortune for developer Rob Maguire, who emerged from a difficult year still in business and with new financing.
It’s been almost three years since plans for the 1,087-acre master-planned community were first announced. At that time, Mayor Richard Riordan touted the proposed seaside development as the “biggest business win that any city has ever had.” Entertainment and high-tech firms such as International Business Machines Corp. and Silicon Graphics signed up to be tenants in the proposed 3.2 million-square-foot commercial office park. Maguire Thomas Partners, one of Southern California’s most prominent development firms, was to develop the site near Marina del Rey.
But the $8 billion project’s momentum didn’t last long as it got mired in financing problems. Maguire missed payments on the property’s $150 million loan, and foreclosure proceedings were initiated against the developer in March.
While the fate of Playa Vista hung in the balance, Maguire’s empire teetered on the verge of collapse. Maguire lost his valuable MGM Plaza office complex in Santa Monica and fell behind on payments on his trophy Bunker Hill properties in downtown L.A.
But after months of intense negotiations, ownership of the property transferred to a deep-pocketed investment partnership. Real estate affiliates of New York investment banks Goldman Sachs & Co. and Morgan Stanley & Co., as well as Union Labor Life Insurance Co., Oak Tree Capital Management and Pacific Capital Group, agreed to put up $100 million to begin the first phase of development and bought out Playa Vista’s pre-existing $150 million mortgage for about 70 cents on the dollar.
In the end, Maguire lost controlling ownership of Playa Vista but retained valuable rights to develop its office and retail components.
Soon after the deal was announced, Maguire secured more than $1 billion in refinancing on his other properties including a $300 million loan to buy back the MGM Plaza complex.
Now Maguire is shopping for tenants for the Entertainment, Media and Technology District at Playa Vista, which will not break ground until significant commitments are in hand. Negotiations are underway with more than 40 tenants, according to Peter Denniston, Playa Vista’s president and acting chief executive.
Meanwhile, the project’s highest-profile potential tenant, DreamWorks, still has not signed a deal but continues to negotiate. The city has dangled an $85 million package of tax and permit credits as an incentive for the studio to locate at the site, and some real estate observers say the project’s credibility might depend on DreamWorks’ involvement.
Joyzelle Davis
