Chinese developer Oceanwide's San Francisco project seized

[NEW YORK] China Oceanwide Holdings' real estate troubles are mounting in the US, with credit holders taking control of a stalled skyscraper development in San Francisco.

Overseas credit holders of Oceanwide's two offshore units have taken over their entire holdings in the project, the developer said in a Shenzhen stock exchange filing.

The two notes, in dollars and worth a combined US$334 million, have matured. While investors around the world are watching to see how the crisis around cash-strapped China Evergrande Group is resolved, Oceanwide has also run into trouble with real estate projects in New York, Los Angeles and Hawaii.

All together, the company has spent roughly US$3.5 billion on US investments that are idle or nowhere near finished. China Oceanwide Holdings also has been trying to sell its main office complex in Beijing to raise cash after Oceanwide Holdings International Development III defaulted in May.

In San Francisco, a unit of Oceanwide hoped to build a two-tower hotel, office and residential development that was set to be the city's second-tallest skyscraper. The project called Oceanwide Center is stalled. The company's US$1.3 billion investment has left a gaping hole in the ground near First and Mission streets. Oceanwide said last December that it scrapped a US$1.2 billion sale of the project because the pandemic had impeded due diligence.

Holders of the notes can appoint receivers over the pledged assets and can file litigation or sell the assets, according to the filing. Oceanwide is assessing the impact of the share and project collateral takeover on its operations and finances and actively negotiating with the holders, the filing says.

Founded in 1985 by Lu Zhiqiang, Oceanwide started as a property developer and grew into one of China's largest conglomerates, with investments in banking, insurance, energy, media and technology. Over the past decade, it joined the rush of Chinese investors pouring more than US$235 billion into overseas acquisitions, ranging from trophy hotels to Hollywood film studios.

With its projects struggling, Oceanwide's Hong Kong-based development subsidiary has been warning in regulatory filings this year that if it can't complete plans to bolster its finances and it might not be able to continue to "operate as a going concern."

A deal reached in March to sell properties on Oahu in Hawaii, where the developer plans an 800-room Atlantis-brand resort, ultimately fell apart because Oceanwide "could not agree to the legal structure and consideration," the company reported.

A US$900 million refinancing plan for the Los Angeles project collapsed in June after due diligence. Oceanwide pumped US$1.2 billion into three new apartment block towers and a planned luxury Park Hyatt Hotel in Los Angeles that topped out in 2018 before work stalled.

BLOOMBERG