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WALL STREET, CALIFORNIA

DreamWorks, Playa Vista Agree on Terms

September 22, 1998|JAMES BATES and JESUS SANCHEZ | TIMES STAFF WRITERS

The long-stalled DreamWorks SKG studio lot moved closer to getting off the ground with the disclosure Monday that the studio and the developers of Playa Vista have finally agreed to basic terms that would bring the studio to the massive project near Marina del Rey.

The agreement is significant because it marks the first commitment on paper between the two sides, which in the past have operated with little more than a loose understanding.

Final details are still being worked out and could be another month or so away. Because the project has been marked by numerous false starts, skepticism remains that the infighting and financing problems that have plagued Playa Vista could surface to again torpedo the most recent progress.

One question is whether original Playa Vista developer Robert Maguire, who is, in effect, being shoved aside in the deal, will try to put up any legal roadblocks. Another is whether opposition from environmentalists, who strongly oppose the development, will prove effective.

But people involved in the project expressed confidence that the agreement puts the project more on track than ever, adding that major details have already been agreed on.

"This should get it to a place of doing a deal," one insider said.

In a statement, DreamWorks partner Jeffrey Katzenberg called the document "a major step closer to a final agreement that will bring DreamWorks to Playa Vista." Although there is still a lot of work to be done, he said, "Playa Vista's principals have assured me personally that they will commit the time, energy and resources necessary to bring this to a rapid conclusion."

Playa Vista President Peter Denniston added in an interview: "We are confident that we have . . . resolved all the major issues. We will be in the position to convey property to DreamWorks in the first quarter of next year."

Denniston would not comment on Maguire's plans for Playa Vista. He said negotiations will continue with DreamWorks, despite Maguire's opposition.

"Rob has been making public statements that he doesn't agree that Playa Vista should do a deal with DreamWorks," Denniston said. "We are going forward."

A spokeswoman for Maguire said he was not available for comment Monday.

The deal comes after DreamWorks last month threatened to pull out of the project and also after intense pressure from city officials, who made it clear that they want DreamWorks to be part of the Playa Vista development.

DreamWorks is the 4-year-old studio founded by director Steven Spielberg, veteran studio executive Katzenberg and entertainment mogul David Geffen. Among its projects are the films "Saving Private Ryan," the TV show "Spin City" and the upcoming animated films "Antz" and "Prince of Egypt."

Sources said DreamWorks would get 47 acres at the location. The studio would pay $20 million--$13 million in cash and $7 million in notes--and make available the city and state tax and permit incentives it would get, which hinge on DreamWorks' locating its studio at the site.

If all goes according to plan, DreamWorks could start construction next year. The company will still have to secure financing for the project. Sources said it will be given 180 days to do so.

The project, first announced nearly three years ago, has been stalled several times, in particular by early, bitter fighting between Maguire and DreamWorks.

Last October, Playa Vista was transferred to investment banks Morgan Stanley, Dean Witter, Discover & Co. and Goldman, Sachs & Co. They were able to force Maguire into a secondary role in the project because of leverage that came when they purchased the bank debt on the property from a group of lenders. But DreamWorks and the new group also found itself at odds in trying to negotiate a deal.

Included in the land that would go to DreamWorks is property Maguire had once hoped to develop, raising the possibility that he could still seek to overturn the agreement in court.

Sources said one option being considered is for Morgan Stanley and Goldman Sachs to sell to a friendly investor 51% of the designated commercial property that Maguire is still involved in, which would then allow them to push Maguire out of the picture. Among the parties said to be interested in making that investment are Los Angeles-based Pacific Capital and Union Labor Life Insurance Co., an investor in the project.

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