Bankrupt Oceanwide Plaza slated for auction block in September

An auction is scheduled to sell Oceanwide Plaza, the 1.4 million-square-foot bankrupt boondoggle sitting unfinished in Downtown Los Angeles. 

The project, developed by China Oceanwide, could be up for grabs on Sept. 17, according to a U.S. Bankruptcy Court filing. Colliers and Hilco Real Estate will run the auction for 1101 South Flower Street, which will be conducted in person and online. 

The court still needs to approve the auction date and bidding procedures. 

A group of contractors on the development, including Lendlease, forced the development into bankruptcy. The project is currently an empty hulk of two towers with 40 and 49 stories, covered with graffiti. The eyesore has sat idle since 2019.

The as-is market value of the project stands at $434 million, according to an appraisal from Colliers filed with the bankruptcy court. 

Any new owner would also have to be ready to spend at least $865 million to finish the project. In 2022 financial filings, China Oceanwide estimated it would need to spend $1.2 billion to finish construction, in addition to the $1 billion it already spent on construction. 

Oceanwide owes about $400 million to creditors, according to court filings, including $180 million to EB-5 visa investors, $175 million to contractors and $18 million to pay off county taxes. 

Any bidder on Oceanwide Plaza will be required to sign a purchase and sale agreement, provide evidence of prior development experience plus a financing plan and wire a 3 percent deposit into escrow. 

Colliers and Hilco will both see a 0.75 percent commission on the sale, according to court filings. 

Major developers including Related, Brookfield and Shvo have all looked at buying the property since it was first marketed for sale by JLL in 2019, according to sources familiar with the matter. 

One source said the project would only make sense if a new buyer could come in at a negative basis — even acquiring the project at $0 would not make sense, given how much it would cost to finish construction. 

Under China Oceanwide’s ownership, the project also struggled to score financing. 

In 2019, Oceanwide tried to close a $1 billion loan from JPMorgan. To finish the deal, Oceanwide needed a mechanic’s lien from concrete contractor Webcor to be released, but Webcor refused, according to court filings. Litigation ensued, and Oceanwide never got the financing. 

In May, Oceanwide obtained a $10 million lifeline from Steve Gozini’s BH Properties to help the bankrupt project stay above water for the next few months — but at a hefty price. 

Oceanwide will pay a minimum interest rate of about 8.5 percent, according to a financing term sheet filed with the court. If it defaults, Oceanwide will have to pay 18 percent in interest on the loan.