China Oceanwide Holdings suffered another blow to its shrinking real estate empire on Thursday as creditors foreclosed on the cash-strapped developer’s unfinished San Francisco mixed-use project, which had served as collateral for about HK$2.5 billion ($320 million) in notes that Oceanwide failed to repay.
Oceanwide’s offshore units issued HK$1.1 billion in notes to Spring Progress Investment Solutions in 2018 and HK$1.4 billion to a Singapore unit of Haitong International Financial Services in 2019, according to a filing with the Shenzhen Stock Exchange. Both sets of notes have expired with the principal unpaid.
The Beijing-based group had put up its Oceanwide Center in downtown San Francisco — one of several struggling projects in key US cities — as a security for the borrowing. Once the asset is taken over, the creditors’ options include possession, sale, replacement or disposal, as well as possible litigation against Oceanwide.
“The company is currently actively discussing with the above-mentioned two holders of notes to seek solutions,” Oceanwide said Thursday in the filing.
Coast-to-Coast Troubles
The $1.6 billion Oceanwide Center project, which envisions twin towers of 54 and 61 storeys, 1 million square feet (92,903 square metres) of office space, 265 residences and a 169-room Waldorf Astoria hotel, broke ground in San Francisco’s Transbay district in 2016 and originally had been scheduled for completion this year.
The San Francisco Chronicle reported in October 2019 that construction had been halted on the shorter of the two towers amid rising construction costs. Oceanwide’s attempts to sell the property, including a tentative $1.2 billion deal with Chinese private equity firm Hony Capital in 2020, have come up empty.
The developer’s overstretched US portfolio isn’t limited to the City by the Bay. In downtown Los Angeles, the $1 billion Oceanwide Plaza is saddled with nearly $240 million in claims by contractors who say they haven’t been paid, according to an August 2020 report. The three-tower development, which began construction in 2015, had been expected to include a Park Hyatt hotel, 504 condo units and a 166,000 square foot shopping mall upon completion.
In New York, Oceanwide is looking to sell a development site at Manhattan’s South Street Seaport for $200 million after plans for a supertall luxury skyscraper stalled, according to US media reports, which cited sources familiar with the offering. Oceanwide had paid $390 million for the property in 2016.
Fire Sale Continues
With its cash crisis mirroring the plight of China Evergrande and other debt-saddled mainland developers, Oceanwide announced a corporate shake-up in 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 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.
Bloomberg reported last month that Oceanwide was seeking to offload its main office complex in Beijing. According to a source cited by the news agency, the developer and China Taiping Insurance Group were discussing a potential price tag of RMB 20 billion for the property, known as Minsheng Financial Center.
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