U.S. Real Estate Struggles Mount for Chinese Developer Oceanwide
(Bloomberg) -- China Oceanwide Holdings Co.’s real estate troubles are mounting in the U.S., with credit holders taking control of a stalled skyscraper development in San Francisco.
Overseas credit holders of Oceanwide’s two offshore units have taken over their entire holdings in the project, the developer said in a Shenzhen stock exchange filing. The two notes, in dollars and worth a combined HK$2.6 billion ($334 million), have matured.
While investors around the world are watching to see how the crisis around cash-strapped China Evergrande Group is resolved, Oceanwide has also run into trouble with real estate projects in New York, Los Angeles and Hawaii. All together, the company has spent roughly $3.5 billion on U.S. investments that are idle or nowhere near finished.
After a series of failed talks with potential partners, Oceanwide has been trying to extend its loans and free up cash amid mounting tumult. Now that the San Francisco project has been possessed by creditors, there could be added urgency for Oceanwide to extract whatever it can from its U.S. projects.
“Someone’s going to come in and get it at a great price and be a happy camper,” said Nick Griffin, executive director of the Los Angeles Downtown Central Business Improvement District. “They won’t just take a haircut. It’ll be a crew cut.”
Founded in 1985 by Lu Zhiqiang, Oceanwide started as a property developer and grew into one of China’s largest conglomerates, with investments in banking, insurance, energy, media and technology. Over the past decade, it joined the rush of Chinese investors pouring more than $235 billion into overseas acquisitions, ranging from trophy hotels to Hollywood film studios.
Oceanwide’s Hong Kong-based development subsidiary has been warning in regulatory filings this year that if it can’t complete plans to bolster its finances and that it might not be able to continue to “operate as a going concern.”
On Manhattan’s Lower East Side, an Oceanwide site at 80 South Street is being marketed by real estate brokerage Colliers, according to a person with knowledge of the offering. After pumping more than $400 million into the project, the sale is expected to be “a big loss” for Oceanwide, the person said. A Colliers spokesman declined to comment.
The Real Deal first reported that was the site was for sale.
Deals this year to refinance a project in Los Angeles and sell its Hawaiian developments either fell through or failed to cross the finish line, according to company filings.
China Oceanwide Holdings also has been trying to sell its main office complex in Beijing to raise cash after Oceanwide Holdings International Development III defaulted in May.
In San Francisco, a unit of Oceanwide hoped to build a two-tower hotel, office and residential development that was set to be the city’s second-tallest skyscraper. The project, called Oceanwide Center, is stalled. The company’s $1.3 billion investment has left a gaping hole in the ground near First and Mission streets.
Oceanwide said last December that it scrapped a $1.2 billion sale of the project because the pandemic had impeded due diligence.
Holders of the notes can appoint receivers over the pledged assets, and can file litigation or sell the assets, according to this week’s filing. Majority owners of the shares of an affiliate, Oceanwide Holdings International Financial Development Co., also appointed a receiver for their stake, according to a separate announcement.
Oceanwide is assessing the impact of the share and project collateral takeover on its operations and finances, and actively negotiating with the holders, the filing says.
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A deal reached in March to sell properties on Oahu in Hawaii, where the developer plans an 800-room Atlantis-brand resort, ultimately fell apart because Oceanwide “could not agree to the legal structure and consideration,” the company reported in September.
A $900 million refinancing plan for the Los Angeles project collapsed in June after due diligence. Oceanwide pumped $1.2 billion into three new apartment block towers and a planned luxury Park Hyatt Hotel in Los Angeles that topped out in 2018 before work stalled.
Oceanwide agreed to buy that site in 2013 before pursuing deals in San Francisco, New York and Hawaii over the next three years.
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