After more than three years of delays and frustrations, DreamWorks SKG is expected to announce this week that it has finally purchased 47 acres at Playa Vista, the biggest step in the company's efforts to build Hollywood's first major studio lot since the Great Depression.
The $20-million purchase--paid with $13 million in cash and a $7-million note--could be announced as early as today or Tuesday. Sources said the sale closed late last week, but some minor technical delays have prevented it from being legally recorded and announced.
DreamWorks, formed by director Steven Spielberg, longtime studio executive Jeffrey Katzenberg and entertainment mogul David Geffen, first announced in 1995 that it planned to build a studio home on the same industrial site south of Marina del Rey where Howard Hughes built his infamous "Spruce Goose" airplane in the 1940s.
But the project--the highest-profile segment of a larger 1,087-acre commercial and residential development--quickly became bogged down and numerous times appeared close to unraveling, due mostly to such factors as infighting among the various interests and financial difficulties.
At one point last year, DreamWorks threatened to pull out of the project when talks hit a standstill. But in November, DreamWorks and Playa Capital Co. disclosed an agreement that paved the way for the formal sale of the land this week.
Sources said the buyer of the property will be Studio Land, a partnership formed by the DreamWorks principals to handle the land deal. In addition to Spielberg, Geffen and Katzenberg, sources said billionaire Paul Allen--the largest investor in DreamWorks--will be a partner as well.
The seller is Playa Capital--developer of the overall Playa Vista project. Its partners include Los Angeles-based financier Pacific Capital Group, the Union Labor Life Insurance Co., financial company Oak Tree Capital Management and two top Wall Street investment banks--Goldman, Sachs & Co. and Morgan Stanley, Dean Witter & Co.
The next step will be for DreamWorks, which has said it hopes to move into Playa Vista in 2001, to finish its final plans and get needed government approvals, as well as to line up financing for building the studio. One source close to the project estimated the cost to build the studio at $275 million, although another source close to DreamWorks said that projection was a little high.
Sources said two possible methods of financing include a consortium of banks or funding from two of the Playa Vista project partners, Pacific Capital and the union pension fund.
One outstanding issue that has apparently been resolved involves original developer Robert Maguire. He had been feuding with DreamWorks and eventually was removed from his central role in the development by Playa Capital's partners. Sources said Playa Capital has worked out a deal to placate Maguire and allow him to develop the commercial portion of Playa Vista unrelated to DreamWorks.
The overall Playa Vista project has been championed by Los Angeles city officials, who have pledged more than $70 million in tax breaks and transportation improvements if DreamWorks could be attracted to the site because of the high-paying jobs the entertainment company would bring.
But the project has also met with strong resistance from some community and environmental groups who believe it could damage the nearby Ballona Wetlands.
Restoration work on 16.1 acres of wetlands--required of the developers--has been temporarily stopped by a court order now under appeal that stemmed from a lawsuit brought by opponents.