China Oceanwide Selling San Francisco Project at $276M Loss

Five years after purchasing the site of what was planned to be San Francisco’s second-tallest office tower, China Oceanwide Holdings has agreed to sell the unfinished project at a $276 million loss, according to a statement filed by the developer yesterday with the Shenzhen Stock Exchange.

China Oceanwide is selling the project once called First and Mission to a little-known Beijing fund manager for just over $1 billion, according to the statement, with the company indicating that the asset disposal would help to improve its cashflow.

The sale of the partially completed project comes after the mid-sized mainland developer was forced to halt construction on one of the two buildings in the complex during October last year, after stopping work on its $1 billion Los Angeles development in January of 2019.

In a separate announcement to the Hong Kong stock exchange today, China Oceanwide said that its chairman and CEO Han Xiaosheng was relinquishing his role as the company’s chief executive.

Little-Known Beijing Fund Manager Picks Up $1B Asset

Oceanwide, which acquired a flurry of US development projects in 2014 and 2015, is selling what was to be called the Oceanwide Center to a unit of Beijing asset manager SPF Group, which is said to count among its directors Joshua Fink – son of BlackRock founder Larry Fink.

SPF, which in 2018 teamed up with Shenzhen-based China Merchants Group and the UK’s Centricus to set up a RMB 100 billion ($14.5 billion) technology investment fund, will be paying RMB 4.4 billion to China Oceanwide upon closing of the sale and purchase agreement, which is expected on 5 March.

The remaining consideration is to be paid over the next three years, subject to the financial performance of the development. In a statement today, credit agency S&P Global said that the proposed transaction, “would provide much needed liquidity relief if completed, and help the China-based developer manage its significant upcoming debt maturities in 2020.”

Choking on a West Coast Mega-Project

The Oceanwide Center, which the Beijing-based firm agreed to acquire for $296 million in January 2015, was the largest project in the company’s set of US investments. In 2017 the developer paid an additional $32.5 million to add an adjacent historic shop to the project in the South of Market street area of one of North America’s most valuable real estate locations.

The 910 foot (277 metre) paramount building at First and Mission Streets when completed would be second only to the Salesforce Tower in San Francisco’s skyline, while the second block in the two tower complex would reach 605 feet. The Foster and Partners-designed mixed-use complex, which had earlier been scheduled to reach completion in 2023, is planned to include one million square feet (92,903 square metres) of office space, 265 homes and a 169 room Waldorf Astoria hotel.

Oceanwide, which purchased projects in Hawaii and New York City, in addition to sites in California, has never completed a US development.

Oceanwide Faces RMB 40B in Debt Obligations

Citing “the company’s persistent strained liquidity and weak operating cash flow for debt servicing,” S&P said that it expects Oceanwide to sell off more assets in the near future, as the developer faces maturing debts of over RMB 40 billion this year.

In January 2019 the Oceanwide’s financial challenges already forced the developer to sell a pair of projects in Shanghai and Beijing to Hong Kong-listed Sunac China for RMB 12.55 billion.

Later that same month, the developer was forced to stop work on Oceanwide Plaza in Los Angeles, five years after acquiring the mixed-use project formerly known as Fig Central.

With Han Xiaosheng stepping down as CEO, Oceanwide’s deputy CEO, Wu Chen will step up to the chief executive role, in a move which the company said will allow Han to focus on overall strategic planning and management while Wu will be responsible for overseeing business operations.