China Oceanwide Posts $680M Loss, Plans to Focus on Los Angeles Project

China Oceanwide Holdings achieved something many of its rivals could not — the on-time release of its 2021 financial results — but the feat was cold comfort as the mainland developer announced widening losses and a further rollback of its overseas property empire.

Oceanwide suffered a loss attributable to shareholders of HK$5.36 billion ($680 million) in the 12 months to last December, ballooning from a year-earlier deficit of HK$926.6 million, the cash-strapped group said late Tuesday in a filing with the Hong Kong stock exchange.

The increase in losses was mainly due to the provision for impairment of HK$3.77 billion incurred by Oceanwide’s stalled US projects in New York, Los Angeles and Hawaii, the Beijing-based builder said. Oceanwide plans to sell its three Hawaii projects and its South Street Seaport supertall development in New York City this year so it can focus on the long-delayed Oceanwide Plaza mixed-use project, which remains under construction in Los Angeles.

“Although the group will dispose assets which will not generate immediate revenue, the group intends to continue to maintain its existing businesses not being disposed or under receivership and reserve resources to develop the LA project,” chairman Han Xiaosheng said in the filing.

Salvage Operation

Just two weeks ago, Oceanwide announced that it had agreed to sell its Kapolei West residential site on the Hawaiian island of Oahu to a local firm for $92.9 million.

The 484 acre (196 hectare) expanse comprises unimproved lots that Oceanwide bought for $103.4 million in 2016 with the intention of developing 2,500 homes, a golf course, an elementary school and a transit hub. The buyer is a company managed by Honolulu-based Tower Development.

Oceanwide continues to market two other Oahu sites comprising a total land area of 176,311 square metres (about 1.9 million square feet) — including the spot for a planned Atlantis resort — with an eye towards disposal during this year. All three Hawaii projects have failed to progress beyond the design stage of development since Oceanwide purchased them more than half a decade ago.

On the US mainland, the 80 South Street skyscraper project in Lower Manhattan was the subject of a default notice in January when New York-based lender DW Partners demanded the immediate payment of $165 million outstanding on a $175 million loan against the property.

The project, with a land area of 1,367 square metres and a development area of 75,975 square metres, remains in the design stage and has no estimated construction time or completion date, Oceanwide said this week.

The company is currently advertising 80 South Street for sale, aiming to dispose of the project this year, according to the filing. Based on an appraiser’s valuation, along with the company’s estimate of the discount required to sell the property, Oceanwide recorded an impairment of $214.9 million on its 2021 books for the project, after having invested $409.9 million in pursuit of New York riches.

The $1 billion Oceanwide Plaza in downtown Los Angeles, meanwhile, has seen construction suspended since October 2020 after the work on all the main structures was completed in 2018, according to the developer.

The southern California project, consisting of upscale condominiums, a five-star Park Hyatt hotel and a large-scale shopping mall, has been saddled with nearly $240 million in claims by contractors who say they haven’t been paid, according to an August 2020 news article. Australia’s Lendlease, a key contractor on Oceanwide Plaza, reportedly pulled out of the project last year after winning a $42 million court judgement.

Righting the Ship

Oceanwide’s woes took on a new urgency last October after creditors foreclosed on the developer’s unfinished San Francisco mixed-use project, Oceanwide Center, which had served as collateral for about HK$2.5 billion ($320 million) in notes that Oceanwide failed to repay.

With its liquidity crisis mirroring the plight of other debt-saddled mainland developers, Oceanwide announced a corporate shake-up last July. In a filing with the Shenzhen exchange, the group said CEO and executive director Zhang Xifang and chairman Song Hongmou had resigned, along with the chief risk control and legal officer, the supervisory board chairman and a vice president.

Since that overhaul, Oceanwide has continued to seek buyers for various holdings, with distressed-asset specialist Sunac China Holdings agreeing in late July to acquire two finished developments in Hangzhou for RMB 2.2 billion ($340 million).

The two parties closed a similar deal in 2019, when Hong Kong-listed Sunac bought a pair of mixed-use projects — one in Beijing’s Chaoyang district and the other in Shanghai’s Huangpu district — from Oceanwide for RMB 12.6 billion.

Last November, Oceanwide completed the $1.3 billion sale of tech media and investment firm International Data Group to private equity giant Blackstone. The Chinese company had acquired IDG from the estate of late founder Patrick Joseph McGovern in 2017.