Beijing-based private equity firm Hony Capital has signed a framework agreement to acquire the Oceanwide Center project for up to $1.2 billion, the developer disclosed Sunday on the Shenzhen Stock Exchange.
Oceanwide’s prior deal, to sell the project to Beijing-based asset manager SPF Group for just over $1 billion, was set to close Tuesday following an extension. But “the transaction partner expressed that it was unable to complete due diligence on time,” Oceanwide noted in another disclosure. SPF delivered a notice of termination on Mar. 25, ending the deal.
Singapore-based DealStreetAsia first reported the news.
As reported in January, the sale to SPF would have represented a 28 percent haircut on Oceanwide’s valuation of the property, which comprises two under-construction towers and a pair of historic buildings on First Street. Under the new deal with Hony, Oceanwide will receive $700 million on closing, and up to $500 million three years later, provided that the internal rate of return on the development comes out to more than 20 percent.
A new due diligence deadline has been set for June 30, with closing to take place within 15 days after that. After the parties sign a purchase and sale agreement, Hony will be responsible for management, operation and development costs at the site as budgeted. Oceanwide retains the right to seek out other buyers until due diligence is completed.
In a sign of the times, the framework agreement includes “force majeure”-like provisions allowing the deal to be extended or terminated if the coronavirus crisis causes major disruptions.
The sale of the San Francisco project, slated to be completed in 2021, will be “advantageous to the Company’s overseas asset distribution, and will effectively reduce overseas operation risk,” the disclosure notes.
The company is reportedly seeking to sell Oceanwide Plaza in Los Angeles and a development site in New York’s Seaport district as well.
Founded in 2003, Hony Capital has assets under management of more than $12 billion and is a major backer of WeWork’s Chinese subsidiary, alongside Singapore sovereign wealth fund Temasek and Shanghai’s TrustBridge Partners. Hony CEO John Zhao is one of just two long-standing board members remaining on WeWork’s board following upheaval in recent months.