Name your price for three partially built skyscrapers slathered with graffiti in Downtown Los Angeles.
China-based Oceanwide Holdings, which sank $1.2 billion to develop Oceanwide Plaza before abandoning it to the whims of taggers, has put the complex up for sale at Figueroa, Flower, 11th and 12th streets, Bloomberg reported.
The asking price for the 49- and 40-story eyesores that cast L.A. under an international spotlight for Downtown blight was not disclosed.
Colliers and Hilco Real Estate have been hired to sell the property, subject to bankruptcy court approval, according to a statement. Lenders and other creditors need around $400 million to recoup their money.
“We are determined to run a disciplined and orderly process to identify the right developer to finish the project in time for the 2028 Summer Olympics,” Mark Tarczynski of Colliers said.
Oceanwide broke ground in 2015 on what was foreseen as a $900 million hotel and condominium complex in the heart of Los Angeles, turning Downtown from “an in-and-out destination to a place to dwell,” according to its architect.
But in early 2019 the development stalled, leaving in the lurch a 2 million-square-foot hotel, condo and retail complex without roofs. Estimated costs to complete the abandoned project grew to $2.3 billion.
China Oceanwide had poured $3.5 billion into projects in Los Angeles, San Francisco, New York and Hawaii, none completed.
Then the pandemic and a shift to remote work hammered commercial values in Downtown L.A., which grew worse with higher borrowing costs. The city’s third tallest office building sold in December for nearly half its 2014 price.
In January, intrepid graffiti artists then scaled the abandoned Oceanwide towers, leaving their mark and a $3.8 million bill to taxpayers to secure and clean the project site. Some intruders parachuted off a tower.
In February, contractors on the project, led by Lendlease, filed an involuntary bankruptcy petition against the limited liability company for Oceanwide Plaza.
The project now has debtor-in-possession financing for payroll, security, repairs to comply with the city order and to assist in a sale process, according to Sharon Weiss, lead counsel for the debtor with Bryan Cave Leighton Paisner.
“I think this is a good opportunity for this building to come back alive, and to show how a bankruptcy case can fix a lot of problems,” Weiss told Bloomberg.
Oceanwide Holdings owes creditors nearly $400 million, including $180 million to EB-5 visa investors, $175 million to construction contractors, $18 million for back taxes to L.A. County and money to repay the city for security, Weiss said.
An April appraisal by Colliers submitted in the bankruptcy court estimated the as-is market value at nearly $434 million. The brokerage projected a cost of $865 million to complete the project, now 60 percent complete.
The appraisal report also noted “two serious buyers with pricing negotiated at $850 [million]” in its current condition, numbers attributed to Ken Choi, an attorney for Oceanwide. The names of the buyers are confidential, the appraisal said. Choi didn’t respond to requests for comment.
“We did not place any weight on these offers,” the appraisers, Jay Kwong and Brian Tankersley, wrote in their report.
Completing Oceanwide Plaza and selling its condominiums would be an uphill challenge for any prospective buyer, according to Alexander Shing, CEO of Cottonwood Group.
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Apartments in downtown Los Angeles are 9.8 percent vacant, the highest of any submarket in the region, according to CoStar Group. Asking rents fell 1.5 percent in the 12 months through March, while the average sale price per unit dropped to $520,000, down 20 percent from early 2022.
More than 500 “outsized condos is no longer the right product for this market cycle,” Shing told Bloomberg in an email. “It would be challenging for someone to get the necessary financing, in this environment, to complete the construction and project in a profitable manner.”
— Dana Bartholomew