With fresh capital and new management, Playa Vista is just months away from breaking ground on one of the largest housing developments in L.A. history.
Playa Vista’s owners are negotiating with several home builders being considered to develop the first phase on a for-fee basis. Their selection is expected to be announced within the next few weeks.
The first phase calls for 3,246 housing units a mix ranging in price from about $150,000 to well above $1 million. Playa Vista’s owners are currently conducting market research to determine how many apartments, townhomes and single-family homes to include in the mix.
The first 500 to 700 units are expected to be ready for occupancy by May of the year 2000, with the entire first phase slated to be sold by 2004.
Peter Denniston, Playa Vista’s president and acting chief executive, said the project is unlike any U.S. housing development ever undertaken.
Denniston envisions a community where a resident walks to a neighborhood bookstore, takes a shuttle to his or her office in the proposed business park, visits a museum and strolls through one of the development’s 40 neighborhood parks.
“The idea of jobs-housing balance has long been thrown around,” Denniston said. “No one has ever had the chance to do this in an urban environment before.”
Infrastructure work is scheduled to begin in June, with site excavation to start by late 1998, he said.
The development team intends to eventually build 13,000 residential units, although the remaining 10,000 units do not yet have entitlements. The first phase will be constructed on a for-fee basis by residential builders, while a joint-venture developer might be brought in for the next phase.
The timing of Playa Vista’s huge seaside housing project couldn’t be better, industry experts said.
The average price of a West Los Angeles home is 22.5 percent higher today than a year ago, according to the California Association of Realtors. The volume of Westside home sales is also up markedly this year, more than 50 percent higher than in 1996.
Meanwhile, the inventory of available Westside homes for sale is depleting.
“The market is ready for this project,” said Alan Horwitz, a partner at E & Y Kenneth Leventhal who analyzes the L.A. housing market.
Horwitz said the Playa Vista units will hit the market at a time when the home-buying frenzy will be even more intense. Current forecasts project continued economic growth for Los Angeles, Horwitz said, which means people won’t be selling their homes to relocate to other job markets.
And with no other major planned housing developments and Los Angeles’ population projected to steadily increase, housing will be in greater demand.
G.U. Krueger, deputy chief economist for the California Realtor’s Association, said Playa Vista might ease the supply pressure slightly, but won’t cause Westside home prices to drop because the $8 billion development will generate jobs and fuel the demand for housing on the Westside.
Playa Vista is being touted as one of the biggest master-planned communities in the city of L.A.’s history. In terms of size, the nearest comparable project would be the 1,000-unit Palisades Highlands development, which has been in the works for the past decade. The last 100 units of that project are under construction, Horwitz said.
Getting to this stage has been tortuous. But after months of internal power struggles and financial problems bringing the project to the brink of collapse, Playa Vista gained new life in October by securing fresh financing.
A partnership led by Morgan Stanley & Co., Goldman Sachs & Co., Pacific Capital Group Inc., Union Labor Life Insurance Co. and Oak Tree Capital Management agreed to invest $200 million in the project.
Since then, construction crews have begun work on creating a 25-acre freshwater marsh. Remediation work on the environmentally sensitive Ballona Wetlands site has been the subject of several lawsuits and construction injunctions. The courts have cleared construction crews to continue their work, but a coalition of environmental groups intends to file a lawsuit under the Endangered Species Act by the end of the year, according to Marcia Hanscom, a member of the steering committee of the Citizens United to Save All of Ballona.
“At every turn the law allows, we intend to file injunctions against construction,” she said.
Playa Vista’s Denniston dismissed the potential impact environmentalists could have on the project and said his team is pressing ahead with its timeline for development.
Meanwhile, negotiations are underway for the proposed 3.2 million-square-foot Entertainment, Media and Technology District. More than 40 tenants are interested in leasing space there, with the smallest space requirement at 50,000 square feet, Denniston said.
He declined to name potential tenants, but said “a good one-third of the who’s who in the entertainment world is interested in taking space here.”
Negotiations also continue with Playa Vista’s best-known potential tenant, DreamWorks SKG, which announced in 1995 that it intended to build a $200 million high-tech filmmaking facility on the site. Both parties have agreed not to discuss their negotiations in the media until a deal is reached.
Denniston said he expects to have plans for the first phase of the commercial office portion ready by fall 1998. Then construction on the Entertainment District will begin.
Once that component is complete, a 400,000-square-foot office project would be built at the corner of Lincoln and Jefferson boulevards, he said.
Early next year, the Playa Vista team intends to begin historic restoration of the 11 buildings on the site, including the original Spruce Goose hangar. The hangars have become popular filming locations, and the developers are waiting for the final productions “Godzilla” and “Mighty Joe Young” to wrap next month.
At the same time, Playa Vista is building its development team. Denniston, the acting CEO, is expected to be named permanent chief executive soon. The team also expects to bulk up its 23-member staff to 40 people as it moves into the implementation phase of the project.
