Oceanwide Plaza Foreclosure Sale Blocked by Court

A California state court of appeals has temporarily blocked a foreclosure sale of Oceanwide Plaza, an unfinished $2B project in Downtown Los Angeles, in order to determine which of the lien holders get paid first.

Lendlease, Oceanwide’s general contractor on the massive project, and subcontractor Webcore filed suit claiming priority in the lien payout from a sale.

In June, Beijing-based China Oceanwide Holdings, the developer of Oceanwide Plaza—its last US asset and the largest project under development in DTLA—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. 

The notice said a sale could be scheduled after Aug. 8, but a panel of three appellate justices have announced they need more time to review Lendlease’s claim that it should be first in line for payment in a foreclosure sale.

Lendlease also is asking the appeals court to invalidate the EB-5 group’s loan, claiming fraud and misrepresentation, according to a report in TheRealDeal. 

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, failed to persuade the judge that the excavation and shoring that had been done before that date 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.