Out-of-Funds Chinese Property Developer Oceanwide Tries to Shed its Mega-Money-Pits in San Francisco, Los Angeles, and Manhattan at a Loss, But it’s Hard
At first, capital controls cut off funding. Now the coronavirus gets in the way of the money-losing sale it could finally line up.
By Wolf Richter for WOLF STREET.
The twisted saga of Chinese money in US commercial real estate takes on another twist; this time the coronavirus is blamed.
Back in October, after months of rumors about funding problems, property developer Oceanwide, a division of Chinese conglomerate Oceanwide Holdings Co. Ltd., admitted that it had halted construction indefinitely on a 54-story 605-foot tower in San Francisco’s Transbay district. This is the shorter of two towers in the same project. Two years behind schedule and way over budget, it may no longer be commercially viable.
At the time, the company said that construction of the other tower, at 910-feet the second tallest in San Francisco, would continue. The project – the largest currently under construction in the City, with 1 million square feet in office space, a 169-room Waldorf Astoria, and 265 condos – was already two years behind schedule. At the time, Oceanwide said it was looking for an investor.
Then on January 23 this year, Oceanwide disclosed in a regulatory filing with the Shenzhen stock exchange, reported by the San Francisco Chronicle, that it had made a deal to sell the unfinished project to SPF Capital International, an affiliate of Beijing-based SPF Group, for $1 billion. But the sale came at a price: Oceanwide disclosed in the filing, according to The Real Deal, that it would take a loss of $276 million on the $1 billion sale.
San Francisco’s Oceanwide Center was the second mega-project by Oceanwide in California where, after Oceanwide ran out of money, construction was halted.
The first one was Oceanwide Plaza in Los Angeles, an even larger three-tower project of with over 500 condos, a 184-room luxury Park Hyatt, and another desperately needed 166,000 square-foot, you guessed it, brick-and-mortar mall. In January last year, Oceanwide abruptly halted construction. The unfinished and way-behind-schedule project, which is mired in scandals and tangled up in an FBI corruption investigation, is now apparently for sale.
Oceanwide also has a project in lower Manhattan, at 80 South Street, a planned condo tower as high as 1,436 feet. Work hasn’t even started yet. Oceanwide acquired the site from the Howard Hughes Corp. in 2016 during the heyday of Chinese money in US commercial real estate, for $390 million. Last June, Oceanwide put it up for sale, with pricing talk at around $300 million. If it can get this price, it would mean another big loss. But no sale has been announced yet.
And Oceanwide’s current major project in China is in the Central Business District of Wuhan….
Alas, the $1 billion sale of Oceanwide’s San Francisco project, on which Oceanwide would lose $276 million, has now run into trouble – and this time, the coronavirus got blamed.
Oceanwide disclosed in a filing with the Shenzhen Stock Exchange, reported by The Real Deal, that it and the buyer, SPF Capital, have agreed to delay the deal by about a month due to issues related to the coronavirus lockdowns in China. The deadline for due diligence would be pushed from February 19 to March 25, and the delivery deadline would be pushed from March 5 to March 31.
Oceanwide just can’t catch a break. At first, China’s capital controls and crackdown on fund-flows to foreign real estate projects made funding of its US projects impossible. And these projects ran out of money. But selling these unfinished far-behind-schedule and over-budget projects – San Francisco’s Oceanwide Center may require another $1 billion – is tough. And now the coronavirus is not only getting in the way of its Wuhan project, but also tangling up the sale of its San Francisco project.
The real fear in San Francisco and in Los Angeles has been for a while now that these mega-money-pits will remain unfinished lifeless construction eyesores in prime spots in the center for years to come.
The charts are brutal. Read… China’s Non-Manufacturing & Manufacturing PMIs Show to What Unfathomable Extent the Economy Has Collapsed
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