China Oceanwide Strikes Out on Sale of Stalled San Francisco Mega-Project

China Oceanwide Holdings has failed to sell its halted $1.6 billion San Francisco mega-project for the third time, in another blow to the cash-strapped developer after the troubled site was seized by creditors last year.

In a filing to the Shenzhen Stock Exchange last week, the Beijing-based builder announced that its search for new investors and development partners for the mixed-use, two-tower project, Oceanwide Center, had stalled.

Oceanwide decided in an extraordinary board meeting on December 14 to dissolve the fund through which an Oceanwide unit wholly owns the project company, the filing reveals. The receiver now has control over the project and Oceanwide’s interest in the project will no longer be reflected in its books.

The filing appears to indicate that Oceanwide has given up on its attempts to sell the property and is effectively letting the receivers take control of its fate. Oceanwide announced in October 2021 that overseas credit holders of the company’s two offshore units had taken over their holdings in the project and could sell or appoint receivers over the pledged assets.

The news comes after Oceanwide announced it had found a potential buyer for another problematic property, the developer’s unfinished, $1.2 billion Oceanwide Plaza in downtown Los Angeles. Oceanwide said in a filing to the Hong Kong stock exchange last week that it had entered into a non-binding letter of intent with the unidentified company and was still negotiating the terms of the potential sale.

No Takers for Dormant Site

The San Francisco project went up for sale in January of this year amid failed sales and soaring costs, three months after creditors seized it from Oceanwide following the developer’s failure to repay about HK$2.5 billion ($320 million) in notes on which the project had served as collateral.

New York-based real estate investment bank and brokerage Eastdil Secured was hired to market the property, the San Francisco Business Times reported, citing a marketing brochure.

Located at 50 1st St., nearby Market Street and the financial district, Oceanwide Center is designed to feature 1.35 million square feet (124,490 square metres) of office space and 650,000 square feet (60,387 square metres) of residential units across two high-rise towers. The project would include a 61-storey skyscraper, the second tallest in the Bay Area, as well as a 54-storey neighbour.

Construction on the Foster + Partners and Heller Manus Architects-designed project began in 2016 but was put on hold in October 2020. Foundation work was complete as of last year, according to a report by SF YIMBY.

Oceanwide Center was first listed for sale in 2019, with Chinese investment fund SPF Group entering into contract to buy the property for about $1 billion, but the company walked away from the deal in March 2020.

Oceanwide then struck a tentative agreement with Beijing-based private equity firm Hony Capital to sell the unfinished project for $1.2 billion, but that deal fell through in January 2021.

Oceanwide Slims Down

With a prospective buyer in the mix, the outlook seems brighter for Oceanwide Plaza, the Los Angeles project, which is designed to include 504 homes, 184 hotel rooms and 153,000 square feet (14,214 square metres) of retail space.

Oceanwide bought the site in 2013 but halted construction on the development in early 2019, citing a need to recapitalise the project. As of August this year, the developer had spent $1.2 billion on the project, which remains unfinished.

Once among China’s most ambitious investors in overseas real estate, Oceanwide has struggled since Beijing clamped down on cross-border capital flows in 2018. The company announced a corporate shake-up in July of last year, amid mounting liquidity problems following China’s tightening of domestic credit in 2020.

Oceanwide said in March that it planned to sell its three sites in Hawaii and its proposed supertall development in New York City this year so it could focus on the under-construction complex in Los Angeles, having suffered a loss attributable to shareholders of HK$5.36 billion ($680 million) in the 12 months to last December.

The Hawaii projects include a 484 acre (196 hectare) residential site along with two other sites on the island of Oahu, none of which have progressed past the design phase since the company bought them in 2016.

In August, Oceanwide reached a forbearance deal with lenders on its development site at 80 South St. in Lower Manhattan, after announcing in May it had defaulted on a $165 million loan from DW Partners. Oceanwide revealed in its filing on December 2 that it was in discussion to extend the forbearance period up to the end of this year. The developer had planned to build a mixed-use residential and commercial tower approaching 1,500 feet (457 metres) tall on the site.