Lender Seeks to Block Sale of Unfinished Oceanwide Center

Oceanwide Center was a mega-project that was supposed to include the second-tallest office building in San Francisco when the ground was broken in 2016, aiming to be a new $1.6B icon of the city’s skyline across the street from Salesforce Tower.

The plans called for two adjacent skyscrapers at the corner of Mission St. and First St., including a residential tower filled with luxury condos, a Waldorf-Astoria hotel and a 1.3M SF office building.

After the foundation was poured, the project halted when the pandemic started and never resumed. Now, eight years later, it remains what the San Francisco Standard calls “a money pit” that is the center of a festering legal dispute.

In the latest chapter of the saga of Oceanwide Center, a settlement reached last year between the former developer, Oceanwide Holdings, the entity has started the largest unfinished project in Los Angeles, the graffiti-covered Oceanwide Plaza. Several contractors have been challenged in court by a Chinese lender with a stake in the project.

Earlier this month, Hong Kong-based Haitong International Equity Investment Management filed a brief in the San Francisco Superior Court alleging that the settlement, which set the stage for a judicial foreclosure and sale of the Oceanwide Center project site at 50 First Street, was improperly negotiated.

The Hong Kong investment bank, which aims to recoup a $43M mortgage on the project, is seeking to block the sale until a Superior Court judge can rule on its claim that it should be first in line to be paid if and when the site is sold, the San Francisco Chronicle reported.

The judge has yet to sign off on last year’s settlement, which called for the project’s sale and the payment of about $50M plus interest to the project’s former general contractors, Swinerton Builders and Webcore Builders, as well as 12 of the joint venture’s subcontractors and four direct contractors, the report said.

Swinerton and Webcor recorded a $108M mechanic’s lien in 2021 and subsequently sued to enforce the lien, a precursor to foreclosure, the report said. A total of $150M in mechanic’s liens were filed against the project.

Haitong told the court the settlement should be “denied in its entirety,” claiming that the contractors did not follow proper procedures in recording the liens—including naming the bank in the complaints, which is required under California law. Haitong claims that the failure to notify the bank of the liens excluded it from the settlement negotiations.

“The proposed judgment would deprive Haitong of its due process rights as an alleged junior lienholder, and improperly reduce the amounts available to satisfy Haitong’s Deed of Trust by paying sale proceeds first to lienholders who likely are junior to Haitong,” Haitong alleged in its brief.

Oceanwide Holdings, U.S. arm of Chinese conglomerate, China Oceanwide Holdings Group, paid $296M for the 1.2-acre Oceanwide Center site in 2015 with plans to finance the project itself.

Oceanwide Holdings lost control of the project in 2021 after two of its subsidiaries missed debt payments on loans backed by Oceanwide Center. Haitong stepped in and appointed receivers to manage the shuttered project.