The future of San Francisco’s Oceanwide Center is once again up in the air as a second buyer has failed to close following repeated delays.
Oceanwide Holdings’ plans to sell the project to Beijing-based private equity firm Hony Capital have been terminated, according to a late December filing on the Shenzhen Stock Exchange. On Wednesday, the San Francisco Business Times reported that the general contracting joint venture behind the the 2 million square foot mixed-use project has backed out, while several groups are now working to assemble acquisition financing.
The project has accumulated more than $40 million in mechanics liens in the past year, which is likely to complicate a sale. At the same time, the challenges facing the property could work in a potential buyer’s favor.
“The thinking is, ‘Get a deal now,’” Colliers International’s Jeremy Thornton told the Business Times. “There is obviously still a significant amount of risk. There is a lot of money that needs to go into development. If they can pick it up at a decent discount, by the time the project is completed the market will be ready for it.”
Beijing-based Oceanwide first announced that it would sell its flagship San Francisco development for $1 billion last January, taking a $276 million loss after tightening capital controls in China had hampered the project.
The coronavirus pandemic soon presented new roadblocks to the sale, first in China and then in the U.S. The original buyer, asset manager SPF Group, was replaced by Hony in March, and the closing deadline was extended in June and September amid due diligence difficulties.
Oceanwide’s latest struggles come at a time when San Francisco’s tech-heavy office market has found itself hit particularly hard by the pandemic. The city’s office vacancy rate hit 14.1 percent in the third quarter, nearly tripling year-over-year, with sublease vacancy accounting for more than half of the total. The residential market has also suffered, with the median monthly rent falling 35 percent as of November, to $2,100.
The taller of Oceanwide Center’s two towers would be San Francisco’s second-tallest building at 910 feet, with 1.2 million square feet of office space and 109 residential units. The other tower, with a 169-room Waldorf Astoria hotel and 155 residential units, would reach 600 feet.
The developer also faces an uncertain future at the Downtown Los Angeles megaproject Oceanwide Plaza, a $1 billion-plus condominium, hotel and retail development, as well as 80 South Street in Lower Manhattan.
[SFBT] — Kevin Sun