Stalking horse offers $500M for abandoned Oceanwide Plaza in DTLA

A stalking-horse buyer has offered $500 million for the abandoned Oceanwide Plaza in Downtown Los Angeles.

An unidentified Los Angeles developer is in talks to buy the trio of half-completed condo and hotel towers at 1101 South Flower Street, the Wall Street Journal reported.

The parlay comes as the graffiti-covered plaza developed by Beijing-based China Oceanwide Holdings heads for auction on Sept. 17. 

Project contractors, including Australia-based Lendlease, forced the 1.4 million-square-foot  development into bankruptcy. The project now includes three partially built towers of 40 and 49 stories, abandoned since 2019, their stacks of unfinished floors covered with graffiti.

The project, as envisioned by Oceanwide, was to contain 504 condominiums, a 184-room Park Hyatt hotel and 160,000 square feet of indoor shops and restaurants across a city block bounded by Figueroa, Flower, 11th, and 12th Streets.

Now brokers representing the building’s owners in bankruptcy court are in advanced talks with an unidentified local developer to acquire Oceanwide Plaza, according to the WSJ.

The developer would act as a stalking-horse bidder and pay about $500 million to assume ownership if no higher bid emerges by a bankruptcy-bid deadline scheduled for mid-August, or at the Sept. 17 auction.

Whoever acquires the Downtown eyesore will likely spend another $800 million to complete the project, Jeff Azuse, of Hilco Real Estate, told the newspaper. Hilco, which specializes in bankruptcy sales, is working with Mark Tarczynski of Colliers on behalf of the project’s owner.

“This project’s going to be completed,” Azuse said, adding that Oceanwide spent years and more than $1 billion securing zoning and building permits as well as constructing more than half the complex. “Now somebody can come in and essentially take over from where the previous ownership stopped and finish it.”

The value of the as-is project stands at $434 million, according to an appraisal from Colliers filed with the bankruptcy court.  A new owner would also have to spend at least $865 million to finish the job, now 60 percent complete.

China Oceanwide estimated it would need to spend $1.2 billion to finish construction, in addition to the $1 billion it has already poured into the development, according to 2022 financial filings.

While some potential buyers and construction experts say completing construction is financially unfeasible, others say it’s the only way forward.

Downtown L.A. residential occupancy has rebounded to 90 percent, and average asking rents are above pre-pandemic levels, suggesting the market can support and needs more housing, according to Suzanne Holley, CEO of the Downtown Los Angeles Alliance, a coalition of property owners.

While office vacancy rates have reached record highs, foot traffic in the neighborhood has mostly sprung back to levels before 2020.

The hotel, which is expected to include both hotel rooms and condominiums, will be a welcome addition as the nearby convention center is expected to expand, she said. Los Angeles is also scheduled to host the World Cup, Super Bowl and Olympics, starting in 2026. 

“While this building has become a very visible symbol of the challenges we’re facing, it’s a superficial one,” Holley told the Journal. “Under the current conditions, this project is well-poised to be a very successful development.”

— Dana Bartholomew

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