DreamWorks’ Playa Vista Site Is Put on the Block

Increasing the pressure on the embattled developer of the troubled Playa Vista project where DreamWorks SKG wants to build its studio, two Wall Street firms holding the bulk of the property debt on Friday recorded a notice of sale as part of ongoing foreclosure proceedings.

The move by affiliates of Morgan Stanley Real Estate Fund and Goldman, Sachs & Co.’s Whitehall Street Real Estate Fund means that the property near Marina del Rey is now scheduled to be sold out from under developer Robert Maguire on July 7.

Maguire can prevent the sale by reaching a satisfactory financing arrangement with the investment banks, or by seeking refuge in U.S. Bankruptcy Court for the partnerships owning the property.

Bankruptcy proceedings would delay the $8-billion, mixed-use project indefinitely while legal matters are sorted out. If that happens, sources have said, DreamWorks--founded by Hollywood moguls Jeffrey Katzenberg, David Geffen and Steven Spielberg--would probably seek an alternative site.

Recording the notice with Los Angeles County is the latest development in what has become a game of brinkmanship between parties in the deal. The Playa Vista project, much hyped when first announced, is in danger of unraveling. Its future could be decided in the next month.

The Wall Street firms bought the majority of the defaulted $150-million mortgage, which is secured by the Playa Vista site, last month from Chase Manhattan Bank and have attempted to negotiate a deal with Maguire. The investment banks said discussions with Maguire are continuing.

Maguire, who declined comment, is said to be seeking a deal guaranteeing him substantial developer fees--said to be from $50 million to $100 million--for handling the residential and commercial part of the development. He is embroiled in a bitter feud with DreamWorks over delays in the project and would not develop the studio portion of the project.

He also is seeking a way to carve out a significant chunk of the profit, sources said. As it stands now, Maguire partner Howard Hughes Corp., an affiliate of real estate giant Rouse Co., is first in line to get its share of the profit before Maguire would get any, sources said.

In recent weeks, Los Angeles financier and supermarket baron Ron Burkle indicated he would like to become part of the Playa Vista project. But those talks have been only preliminary, sources said.