As the City of Los Angeles prepares to clean the long-abandoned Oceanwide Plaza towers of its stacks and stacks of graffiti, its developer and lenders are still looking to shed the place once and for all.
Colliers (CIGI) and advisory firm Hilco Real Estate have been tapped to market the 1.5 million-square-foot property, subject to bankruptcy court approval, with its lenders and creditors requiring some $400 million to redeem their losses on the massive project, according to Bloomberg, which first reported the news Tuesday.
SEE ALSO: WeWork Files to Keep Yet More Leases in SoCal, DC, Elsewhere
“We are determined to run a disciplined and orderly process to identify the right developer to finish the project in time for the 2028 Summer Olympics,” Colliers Executive Vice President Mark Tarczynski said in a statement.
An appraisal conducted by Colliers in April concluded the current market value of the development to be roughly $434 million. The firm also estimated that completion of the project would cost $865 million.
Beijing-based developers China Oceanwide Holdings Group began construction on the towers in 2014 amid a flurry of Chinese investment in U.S. real estate. But the project ultimately came to a dead stop in 2019, as China’s domestic real estate bubble burst, leaving the developer cashless, and the Chinese government cut off financing for international deals.
The plaza, which takes up an entire city block on South Flower Street in Downtown L.A., has sat half-finished ever since. Yet it made headlines earlier this year after graffiti artists thoroughly tagged nearly all of the property’s 49 stories level by level, and base jumpers parachuted off the half-built tower for social media stunts
Due to the developers’ inaction, the Los Angeles City Council voted to allot nearly $4 million in mid-March to clean and secure the site. The city will seek repayment for the cleanup and security costs from the developer, according to the L.A. Times.
In February, a group of contractors for the project filed a petition for involuntary bankruptcy against Oceanwide Plaza’s limited liability company. At the moment, the plaza has debtor-in-possession financing for repairs, security and payroll to help with the sale process, according to Bloomberg, which cited an attorney for the debtor.
The project’s owner owes to its lenders roughly $400 million: $180 million for EB-5 visa investors, $175 million to construction contractors, $18 million for back taxes to L.A. County and repayment to the city for cleanup and security costs, per Bloomberg.
Representatives for China Oceanwide did not immediately respond to a request for comment.
Finding a buyer for the troubled property may prove easier said than done these days. Office deals around the country are still suffering, particularly in large coastal cities. L.A. recorded just $131 million in such sales in the first quarter of this year, down 62 percent from last year, according to a real estate data aggregator CommercialEdge.
Office leasing in L.A. is also suffering. Although the city saw an uptick in activity in the first quarter of 2024, most of that activity was driven by lease expirations, according to a quarterly market report from Savills. At the same time, availability rates in the city have hit another all-time high at a staggering 27.6 percent, per Savills.
Nick Trombola can be reached at [email protected].
