Concerned that the much-touted Playa Vista project involving the DreamWorks SKG studio will fall apart, Los Angeles City Councilwoman Ruth Galanter on Friday had a strongly worded letter delivered to developer Robert Maguire that notes that valuable city tax and permit incentives hinge on DreamWorks' involvement.
The letter is part of a stepped-up effort to put pressure on Maguire, who has been at odds with DreamWorks over what it will take to get the stalled $8-billion studio lot, office and residential project off the ground.
Frustrated at the slow pace, DreamWorks--founded by director Steven Spielberg, music mogul David Geffen and veteran studio executive Jeffrey Katzenberg--has been considering other potential sites and has gone so far as to begin consulting financiers on other options.
Sources said other pressures on Maguire may come soon from IBM, which is said to have put $500,000 into the project, as well as Chase Manhattan Bank, one of the primary Playa Vista lenders. One highly placed source said Chase is so frustrated that it is considering selling its loan.
Los Angeles officials have offered about $70 million in incentives to lure the studio as a glamorous anchor to the development near Marina del Rey.
In her letter, Galanter says the incentives were made strictly to lure DreamWorks.
"If DreamWorks does not locate its studio at Playa Vista, I will not support, nor is the City Council likely to support, granting these incentives," Galanter wrote.
In an interview, Galanter said she is "frustrated that it's taking as long as it is taking to resolve this business stalemate."
DreamWorks contends Maguire is discouraging potential investors in the project by refusing to cede either control or much equity in it. DreamWorks is known to favor an offer from a group led by financier Gary Winnick's Pacific Capital in Los Angeles that also includes Virginia-based real estate giant J.E. Roberts Co. and Union Labor Life Insurance Co.
Maguire says a legal dispute with environmental and community groups is slowing the project and that no work can proceed until that is resolved. In an interview, he denied that he is the problem, adding that he is aware of all of the points Galanter is making. He also continued to deny persistent talk in real estate circles that the project's problems stem from a cash squeeze, saying, "We pay our bills."
John Goolsby, who oversees Rouse Co.'s Howard Hughes Properties, which is a partner in the Playa Vista land, supported Maguire, saying he believes the problems stem from the complexity of financing such a large project as well as the legal hurdles.
But both Galanter's office and DreamWorks partner Katzenberg said legal issues aren't the problem. Galanter aide Adi Liberman called Maguire's legal problems a "smoke screen" for covering the real reasons why the project isn't moving ahead.
Added Katzenberg: "This is about self-interest and ego. We have no major appetite for this. We must find a home."