Oceanwide Default Puts $2B Los Angeles Project on Selling Block

In 2021, when the naming rights for Staples Arena, home to the Lakers and Clippers NBA franchises, were sold to Crypto.com, looming over the arena were a trio of towers under construction that were part of the Oceanwide Plaza mega-development.

Cryptocurrency and Oceanwide both had a tough year in 2022.

Beijing-based China Oceanwide Holdings, the developer of Oceanwide Plaza—its last US asset and the largest project under development in DTLA—has defaulted on $157M it owes to a group of EB-5 lenders as of January, according to a notice of default filed with Los Angeles County and first reported by TheRealDeal.

According to the notice, a sale of Oceanwide Plaza can be scheduled after August 8.

Oceanwide Holdings was planning to build a 184-room Park Hyatt hotel, 500 condos and 153K Sf of retail and restaurants in the towers at Oceanwide Plaza.

In filings with the Hong Kong Stock Exchange, the Beijing firm said it would need more than $1.2B to finish construction after spending $1.1B on the project thus far.

According to the notice, Oceanwide failed to complete construction as specified in the loan agreement with the EB-5 lenders, had failed to obtain a senior construction loan for the project and had allowed mechanic’s liens to be filed against the project, also a violation of the loan agreement, and failed to keep all risk insurance on the development.

The EB-5 Immigrant Investor Program, created in the 1990s, provides visas for investors and their spouses who invest a minimum of $900K in a commercial enterprise.

After Oceanwide Holdings ran out money to complete Oceanwide Plaza, several legal claims were filed to determined who was first in line to claim the property in the event of a default on what was then a $1.8B project.

In February, the foreign investors who backed the project in EB-5 investments convinced California Superior Court Judge William Highberger that construction on Oceanwide Plaza hadn’t started in July 2015 when they recorded the deed of trust for their loan.

Contractors, led by Lendlease Construction, failed to persuade the judge that the excavation and shoring that had been done before that data wasn’t generic site improvement but was part of the construction, which would have given them lien priority, according to a report in Courthouse News Service.