More trouble is on its way to Downtown Los Angeles. China Oceanwide Holdings, a developer based in Beijing, has defaulted on an EB-5 loan associated with the Oceanwide Plaza project, an unfinished development in the city’s downtown core just across the street from the Crypto.com Arena. As of January 2023, the company had a debt of $157.4 million owed to a group of EB-5 lenders, as stated in a notice of default filed with Los Angeles County. The notice specifies that a potential sale of Oceanwide Plaza can be scheduled after August 8, according to a recent report by The Real Deal.
Oceanwide Plaza, the only remaining U.S. asset of Oceanwide, has been left incomplete since 2019. In filings with the Hong Kong Stock Exchange, the company acknowledged that it would require over $1.2 billion to complete construction on the project. The firm would need these funds in addition to the $1.1 billion it has already spent on the development of the asset. The initial plan for Oceanwide Plaza included the construction of a Park Hyatt hotel and 500 condominiums across two towers.
The notice claims that Oceanwide has failed to fulfill the construction requirements outlined in the loan agreement and obtain a senior construction loan. Additionally, a number of mechanic’s liens have been filed against the project, which violates the loan agreement, and the company has failed to maintain comprehensive risk insurance for the development.
The EB-5 investors, along with a limited partnership named L.A. Downtown Investment, have alleged that Oceanwide has not made interest payments amounting to at least $11.8 million and has also neglected to pay $56 million in principal. In 2015, the EB-5 group recorded a loan of $325 million with Los Angeles County; however, contractors working on the Oceanwide project have claimed that the EB-5 lenders were only able to raise $138 million for the project, as per court records.
In February, a Los Angeles Superior Court judge ruled in favor of the EB-5 lenders, determining that they held a higher priority in the debt stack than unpaid contractors. This ruling implies that in the event of a default, the lenders would receive payment before the companies that had been working on the project.
Oceanwide has disclosed the signing of a letter of intent to sell Oceanwide Plaza to a “potential buyer,” although no further details have been provided regarding this transaction.
