Sam Zell’s Equity Office Properties Trust has made a $4 million nonrefundable downpayment toward becoming a major equity partner in the Frank Gehry-designed studio office campus at Playa Vista, according to sources close to the deal.
The 2.2 million-square-foot campus which initially had been envisioned as the headquarters for DreamWorks SKG is being developed by Maguire Partners, which has put up the other $1 million of a $5 million downpayment.
Maguire Partners’ principal Robert F. Maguire must come up with $100 million in cash to close escrow by year-end. If he fails to do so, the price his firm would have to pay current property owner Playa Capital LLC would steadily escalate, sources said.
Peggy Moretti, spokeswoman for Maguire Partners, said it was her understanding that the deal would fall out of escrow altogether if not closed by Dec. 31.
Beyond that, Moretti declined to disclose details of Maguire Partners’ negotiations with Zell’s firm, Equity Office Properties. Maguire declined comment, and Equity officials did not return calls.
Ultimately, Maguire may be forced to rely on Equity for all or most of the giant cash payment. In exchange, Equity likely would get a controlling equity stake in the campus, sources said.
“I don’t think it’s a question of if EOP will get a controlling stake, I think it’s a question of what role Maguire will play and what residual stake he’ll retain,” said one informed source. “That’s the crux of the issue Maguire needs to manage between now and the end of the year.”
Maguire and Zell went through a similar situation earlier this year when Maguire needed fast cash to close escrow on the Water’s Edge project site at Playa Vista. Ultimately, Equity supplied the necessary cash and ended up with an 87.5 percent ownership stake in the 450,000-square-foot office complex, now under construction and slated for completion next fall.
In recent months, Maguire has been trying to raise the $100 million he needs to close the campus deal by selling equity and/or assuming additional debt on his existing $1.3 billion property portfolio.
Those talks held with Equity, TrizecHahn Corp. and other major institutions as of late last week had not resulted in any deal. Such institutions largely have been averse to making any big investments in the wake of the Sept. 11 terrorist attacks, due to uncertainty in the capital markets.
As a result, time is running out for Maguire.
One source said that Equity’s willingness to be a major investor in the Playa Vista campus, independent of any stake in Maguire’s existing portfolio, suggests that the campus is viewed as a strong play in its own right.
Peter Denniston, president of Playa Capital, said, “We don’t comment on the specifics of any transaction. We’ll announce something when it closes. But we do remain confident that Rob Maguire will step up and complete this deal, and that whoever he brings forward as a partner will be absolutely solid.”
Nonetheless, some questioned Equity’s willingness to further increase its already substantial California commercial real estate holdings. Equity inherited a substantial portfolio of California properties, many of them in hard-hit Northern California, with its $7.3 billion acquisition of Spieker Properties this summer.
