With negotiations between DreamWorks SKG and Playa Capital Co. LLC on the verge of collapse, developer Robert Maguire is looking to deliver the final blow himself by buying the entire Playa Vista property.
Maguire has bid $270 million for the 1,087-acre site including the proposed DreamWorks studio campus and the housing, commercial and retail components, according to a source close to the development team.
The source said Maguire has secured financing from Credit Suisse First Boston, which came to Maguire’s aid under similar circumstances last year, when it financed his repurchase of MGM Plaza in Santa Monica after he had lost majority control in a distress sale.
Credit Suisse officials did not return phone calls last week, and both Maguire and Playa Capital declined comment.
Morgan Stanley Dean Witter & Co. and Goldman, Sachs & Co., the main investors in the partnership that owns the Playa Vista site, are serious about fielding a proposal, said the source, who has direct knowledge of the negotiations.
“The key is a quick and clean close,” the source said. “Maguire is infamous for putting offers on the table that are accepted, and then retrading the offers after everything’s tied up. I think the last thing Playa Partners want is to be in that situation.”
The source said two of Maguire’s bids for the site were rejected in the past 30 days, but that the developer is expected to sweeten his latest offer by at least $10 million.
Maguire’s efforts further cloud the prospect of a DreamWorks studio on the site, given the bitter and public feud between Maguire and DreamWorks principal Jeffrey Katzenberg.
The trouble began almost two years ago with complaints by Katzenberg that Maguire was taking too long to get the project underway. Maguire ultimately lost control of Playa Vista to a consortium of investors led by Morgan Stanley and Goldman, Sachs after coming near default on $195 million in loans.
Maguire retained a small equity stake in the project and rights to develop the commercial property, but was barred from participating in the DreamWorks part of the development.
Even with Maguire out of the picture, however, talks between DreamWorks and Playa Capital have reached a breaking point.
DreamWorks, which initially sought 20 acres for its studio campus, now wants to buy an additional 28 acres that had been planned for other sound stages, including a giant facility planned in the former Spruce Goose hangar.
Because DreamWorks is the key to $85 million in public development subsidies, Playa Capital had planned to give the studio the initial 20 acres at no cost. But Playa Capital has so far refused to accept DreamWorks’ offer of $20 million for the additional property, proposing instead that Dreamworks either split the property or pay $48.7 million for it.
In a letter made public last week, Katzenberg complained bitterly to executives of Morgan Stanley and Goldman, Sachs that the negotiations had fallen through and that “we are no closer to a deal now than we were a year ago.”
Katzenberg sent copies of the letter to Gov. Pete Wilson, Los Angeles Mayor Richard Riordan and City Council members Ruth Galanter and John Ferraro in hopes of putting public pressure on Playa Capital to deal.
“We made clear the terms of the deal on the table, and indicated our strong desire that they (Playa Capital) move ahead,” said Andy Spahn, head of corporate affairs for DreamWorks. “We are no longer negotiating.”
Playa Capital apparently confident it can succeed without DreamWorks wasn’t budging.
“If you are delivering an ultimatum to proceed forward under the terms presented in your signed term sheet, we reject the proposal,” Playa Capital President Peter Denniston wrote last week in a letter to DreamWorks.
Galanter, however, said the permits Playa Capital needs to develop housing will not be expedited until the dispute with DreamWorks is resolved.
“I’ve been trying to impress on (Playa Capital) that they need council approval for many aspects of this project,” she said. “They were complaining the other day that they needed additional permits from the Bureau of Engineering. They are not at the head of the line to get those permits. Now they have to wait in line like everyone else.”
Playa Capital said Thursday it was forced to stop work on the project because it could not get the needed permits.
The governor’s office also has gone to bat for DreamWorks, by threatening last week to withdraw $25 million in transportation funds slated to create roadways and freeway access to the site.
Even Motion Picture Association President Jack Valenti has weighed in on the matter.
“Construction of free-standing sound stages (at Playa Vista) in the absence of DreamWorks will not yield the same results for Los Angeles,” he said in a news release faxed to reporters.
Next week, Playa Capital’s two main players, Owen Thomas of Morgan Stanley Dean Witter and Daniel Neidich of Goldman, Sachs will be in Los Angeles to meet with Riordan, Galanter and Ferraro. A source said that Neidich and Thomas are coming to L.A. to “lay down the law” to city officials and “tell them Playa Capital can’t do the DreamWorks proposal in its present form.”
Katzenberg had addressed his Aug. 12 letter to Neidich and Thomas. In it, he complained that senior representatives of Goldman, Sachs had reneged on promises to participate in negotiations and had agreed to the $20 million purchase price, only to back away from that.
“Since mid-July 1998, we felt we had an agreement with you regarding the price of the land,” Katzenberg wrote. “You had agreed to $20 million. We agreed to $20 million. Playa Capital cannot seem to take yes for an answer.”
In response to Katzenberg’s letter, Denniston issued a statement pointing out that both sides had agreed to keep talks confidential. Denniston said he planned to continue honoring that agreement.
“We seriously contest some of the propositions he advances in that letter, but we will only say that entirely different interpretations can be drawn from the same set of facts,” Denniston said.
“If DreamWorks cannot agree to come to Playa Vista,” he said, “we will move aggressively to bring another studio or studios to the project.”
