Developers plan to turn H'wood Galaxy into City Walk-like center.

Two entertainment/development companies are in negotiations to jointly purchase the failing Hollywood Galaxy shopping mall and transform it into a retail entertainment center similar to Universal City Walk.

The Business Journal has learned that Raleigh Studios of Hollywood and Phase Two Developers Corp. are quietly talking with lender Citicorp Real Estate Inc. about acquiring the property to develop a center with interactive rides and attractions, plus retail businesses. Raleigh Studios is owned and operated by developer Raleigh Enterprises of West Los Angeles, and Phase Two is a relatively new company formed to develop and operate "participatory" entertainment centers.

Citicorp filed a notice of default about one year ago on $37.8 million in loan debt on the Galaxy property at 7021 Hollywood Blvd. The property is currently owned by K&F Hollywood Galleria, a limited partnership. The Galaxy was developed by Kornwasser & Friedman Shopping Center Properties.

If combined with neighborhood redevelopment, the proposed Hollywood Galaxy Studios could become a cornerstone of efforts to revitalize the deteriorating community.

Plans kept quiet

Barry Wexler, president of Los Angeles-based Phase Two, said those involved in the deal have been keeping "a very low profile" because they believe that if the plan is publicized and falls through, it will be another blow to the already disappointed Hollywood business community.

"There have been many false starts in Hollywood," he noted.

He pointed out that the Galaxy was developed at a time when Hollywood was eagerly anticipating two announced major, mixed-use redevelopment projects that were never built.

"The Galaxy was all alone. It was all dressed up with no place to go," said Wexler.

Kornwasser & Friedman has also blamed the City of Los Angeles for some of the Galaxy's woes, noting that the city and its Community Redevelopment Agency slowed down the development process and failed to help the developer when the project fell on hard times.

So that the proposed Hollywood Galaxy Studios project won't have to go the redevelopment path alone, as did the shopping mall, those involved in the Galaxy negotiations are also in talks with Los Angeles City Councilwoman Jackie Goldberg's office about establishing a business improvement district in Hollywood. Business owners would tax themselves to pay for such things as street cleaning, security and promotional events.

Assessment district proposed

Leron Gubler, executive director of the Hollywood Chamber of Commerce, said the chamber is "generally supportive" of the improvement district proposal.

He noted that Goldberg's office has favored the establishment of such a district for some time but wanted the proposal to be "business-driven, not council-driven" because that would improve its chances for success.

The chamber also supports the plans for the Galaxy.

Gubler said Hollywood Galaxy Studios is planned to include live shows and make-believe filming in which shoppers could participate.

Additional locations explored

Wexler said Phase Two has been exploring the possibility of similar developments in "several cities." Phase Two is "months away" from officially announcing any plans for the Galaxy, he said.

"We incorporated this company to develop a specific concept -- a particular entertainment product," said Wexler. "There is no assurance that (the Galaxy project) is going to come to pass."

He agreed that if the project does go forward, it could "act as a lift" for Hollywood revitalization.

Executives at Raleigh and Citicorp could not be reached for comment. However, sources at Raleigh and at Kornwasser & Friedman confirmed the negotiations are ongoing.