Ven-Mar Neighborhood Association

Hughes Property at Playa Vista Might Go Back on Block

Los Angeles Business Journal , August 26, 2002 - by Danny King

Heralded as one of the crown jewels of the vast Playa Vista site, the
former home of Hughes Aircraft Co. could again be for sale.

Steve Soboroff, president of Playa Vista, the development arm of
property owner Playa Capital LLC, said Playa Capital is trying to lease the package of buildings on the site, but that if no tenant is found over the next six months it would put the 114-acre Centinela Avenue property on the market.

"There are a few major questions on people's minds in L.A.," Soboroff
quipped. "When is the interchange of the San Diego and Ventura freeways going to be fixed, who's going to win on 'American Idol' and who's the lucky guy that's going to sit in Howard Hughes' office?"

By actively marketing the property, Playa Capital is signaling that
developer Maguire Partners had been unable to close its intended purchase of the site, the second deal to have fallen through in many years. Maguire had an agreement to buy the site in March 2001 for $90 million and was expected to close escrow on about 70 percent of the site as of the end of last year, having signed on Frank Gehry as the
development's architect.

While not commenting on specifics of a potential deal or the reasons why no previous agreement was completed, Maguire Partners could still buy the property, according to Tony Morales, a partner at the firm.

"We still anticipate being actively involved in the property," said
Morales. "It is our goal to complete what we had started several years
ago."

Soboroff declined to comment on Maguire's role in development the Hughes site.

Maguire's interest followed DreamWorks SKG's plans to develop a $250
million studio on the site in 1998. The following year, it walked away
from the project.

The Hughes site includes 11 buildings built between 1941 and 1953 totaling 569,000 square feet, the most notable of which are the
administration and cargo buildings. The latter, a 742-foot by 248-foot
hangar where the Spruce Goose was built, has been used as a studio sound stage in recent years.

The two-story, 37,000-square-foot administration building includes
Howard Hughes' hardwood clad office and, in an architectural nod to the
noted eccentric's fear of hallways, a bizarre set of doorways designed to cut through the adjoining suite of offices.

In 1941, the founder of Hughes Aircraft relocated his company from Burbank to what was commonly referred to as the Culver City facility (despite the site actually residing within the city of Los Angeles), installing a 9,600-foot-long runway and growing the company to 15,000 employees by 1952.

His most notorious creation at the site was the Spruce Goose, the
150-ton all-wood seaplane built in the 249,000-square-foot all-wood
hangar in 1946. The administration building was built four years later by frequent Hughes contractor and then-New York Yankees owner Del Webb.

The offices includes a screening room and a wall-sized global
aeronautics chart, although the latter will be taken down and shipped to the Smithsonian Institution, according to Soboroff.

Establishing Value Soboroff said it's unlikely the site would be developed by Playa Capital, whose ownership entities include Morgan Stanley, Goldman Sachs & Co., Oaktree Capital Management LLC., Pacific Capital Group and Union Labor Life Insurance Co.

The Playa Capital partners were not interested in developing or holding the property, but in gaining entitlements and selling of the asset, he said.

The entitlements for 2.2 million square feet of commercial office
space and entertainment production space are in place, he said.

During an Aug. 9 interview, Soboroff threw out a $45 million price tag for the Hughes site, although when later pressed to elaborate on what was included in that figure, he was less than specific.

"I can't figure out how I came up with that number," said Soboroff, who
said a number of studios and universities had shown interest in both
leasing and buying the property. "The price depends on what's in the
basket...Comparable land in West Los Angeles is $90 to $100 a square foot, but I'm not ready to have this discussion."

Patrick Walsh, partner at Culver City-based real estate brokerage
Commercial Property Group, said values for entitled land in the area start at $50 a foot, pegging the ground value at $250 million.

But Walsh noted that aside from the hangar, the buildings would add little value.

"The main hangar is 100 feet high - it's invaluable shooting space,"
said Walsh. "The (rest of the) stuff over there is junk."

Another variable is the cost of remediation needed to clean up the
property. The combination of 45 years of industrial use and the
underground methane and butane deposits make the site hazardous for
development and expensive to fix.

"We are doing whatever environmental remediation that needs to be done on an old airport," responded Soboroff. "The people that are buying
residential portions now - those properties are clean as a whistle."

Additionally, the buildings, made eligible for the National Register of
Historic Places in 1991, cannot be torn down and would require extensive retrofitting and renovation, according to Ken Bernstein, director of preservation issues at the Los Angeles Conservancy.

"The conservancy reached an agreement with (then-developer)
MaguireThomas Partners that those structures would be preserved and that new construction guidelines would be compatible with the historic buildings on the site," he said.