ELIZABETH HAYES
Staff Reporter
The owners of the Playa Vista development have extended an offer to build the studio portion of DreamWorks SKG’s planned headquarters facility and then lease it back to DreamWorks, the Business Journal has learned.
The offer, which comes after DreamWorks was unable to obtain as much financing as it wanted for the studio portion, is the latest twist in the long-delayed effort to develop the sprawling Playa Vista development near Marina del Rey. DreamWorks would be the first L.A.-area entertainment studio developed in 60 years.
After acquiring 47 acres of land in April, the entertainment company apparently was able to obtain financing to build the less-risky office portion of its campus. But lenders generally view studio projects as risky because of their erratic cash flow and typically require the borrower to put up more equity for such loans.
DreamWorks, which is looking to build an especially elaborate studio to meet the specifications of principal Steven Spielberg, initially approached the Union Labor Life Insurance Co. for a loan, sources said. (ULLICO, a pension fund, is a partner in Playa Capital LLP, the entity that is developing the overall Playa Vista project.)
But an independent appraisal that DreamWorks had done on its studio site came in too low to justify the full loan amount it is seeking. At that point, Playa Capital proposed building the studio portion, then leasing it back to DreamWorks, which would have the right to purchase it after a certain amount of time.
DreamWorks spokesman Andy Spahn would only say that the company is “in discussions with Playa (Capital) and they are in the process of making proposals to us. That’s the extent of it.”
But sources close to DreamWorks said it has always wanted to own its studio, rather than merely be a tenant. DreamWorks already owns the land, for which it paid $20 million.
“We’ve been unable to reach a financing agreement that makes good business sense for the company. We’re continuing to talk, but we’re not optimistic,” Spahn said.
Sources close to DreamWorks said it is looking at other “very attractive alternatives,” including expanding its Glendale animation studio campus or its facility at Universal Studios. “It may be a case of, a lot’s changed and (the Playa Vista studio) may not be something we need to do,” a DreamWorks source said.
If DreamWorks were to opt against Playa Vista, that could jeopardize the $35 million in city subsidies promised to the project.
“The incentives were specifically tailored for an agreement with DreamWorks,” confirmed Dan Margolis, spokesman for L.A. Mayor Richard Riordan’s Office of Economic Development.
But another City Hall source characterized such talk as “much ado about nothing.” “It’s just another bargaining ploy and nothing is going to come of it,” the source said.
Meanwhile, Playa Capital’s spokesman sounded optimistic that DreamWorks’ financing dilemma would be resolved. “This is just a bump in the road. At the end of the day, we are confident they’re going to build their studio and headquarters here,” said David Herbst, vice president of corporate affairs.
Its campus is only a small portion of the 1,087-acre project. The development is designed to also include thousands of housing units and 2 million square feet of commercial space.
