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Oceanwide Center’s struggle to find a fourth owner

If the walls of the Oceanwide Center could talk, they would confess to hoping, fingers crossed, that their current suitor will see through a deal to buy the complex.

At the end of March, Beijing-based private equity firm Hony Capital agreed to purchase the property for $1.2 billion from fellow Chinese real estate developer Oceanwide Holdings shortly after another Chinese firm, SPF Capital International, had backed out of the deal. SPF was just the latest Chinese investor to have walked away from buying the complex, which is due to be completed next year.

When finished, the complex, sitting in the Transbay area of San Francisco, will comprise two million square feet across two mixed-use towers, a 605-foot residential tower and a 910-foot hotel, residential and office tower, including a 169-room Waldorf Astoria hotel. On completion, the taller tower is expected to be the second-tallest building in the city after the Salesforce Tower. The complex provides 1.35 million square feet of office space and 650,000 square feet of residential units overall.

Originally owned and developed by developer David Choo, the project was first approved in 2012 as part of the city’s redevelopment plan known as the Transit Center District Plan. However, Choo was forced to sell the property for $122 million in 2013 to a joint venture between TMG and Northwood Investors after he defaulted on a loan following the global financial crisis of 2008. In 2015, Chinese developer Oceanwide Holdings acquired the property for $296 million as part of its real estate expansion in the US.

Unfortunately for Oceanwide, its ambitions too faltered as the developer found itself financially challenged alongside many Chinese real estate investors which had overstretched themselves with their international acquisitions in 2018, leading to capital controls being asserted by their government.  To alleviate its financial burden, Oceanwide decided to sell the complex to compatriot Chinese firm SPF Capital International for approximately $1 billion, despite this meaning a loss of $276 million.

Then, just when the complex was about to change hands, the transaction was postponed in March due to the outbreak of coronavirus. Just as investors have pulled out of transactions all around the world in the face of the resulting economic uncertainty, SPF has done the same with this deal.

Finally, another Chinese buyer has come along. Private equity firm Hony Capital has become the white knight and agreed to take over the building for $1.2 billion, subject to due diligence and various approvals. Under this agreement, however, Hony will pay up to $700 million in cash and the remaining $500 million according to the future financial performance of the asset.

The walls of the Oceanwide Center will be hoping that this time will be different – for the better.

Timeline

2007  A development plan is floated

2012  Developer David Choo receives approval for the project

2013  TMG and Northwood Investors purchase the site from Choo for $122 million

2015  Oceanwide Holdings buys the site from TMG and Northwood for $296 million

2020  Oceanwide Holdings agrees to sell the complex to SPF for $1 billion in January

2020  Coronavirus declared a global pandemic and the sale is delayed, then cancelled

2020  Hony Capital agrees $1.2 billion, two-part deal to buy the complex