From CoStar:
Los Angeles Skyscraper, Unfinished and for Sale, Draws Potential Buyers — And New Ideas
Partially Built Oceanwide Plaza Near Crypto.com Arena Sits on Market for Over a Year
Construction officially halted on the Oceanwide Plaza project in downtown Los Angeles in late 2020 after the developer said it ran out of cash. (CoStar)
By Jack Witthaus
CoStar News
August 2, 2023 | 4:05 P.M.
Potential buyers are mulling a different future for an unfinished skyscraper project — considered an eyesore by some as it looms over downtown Los Angeles — that's years away from completion and may cost hundreds of millions of dollars to finish.
Some investors looking at buying Oceanwide Plaza see the project needing a different design because real estate demands have shifted since construction began in 2015, four people with knowledge of sales talks said. Oceanwide Plaza, on the market for more than a year, was expected to feature upscale condominiums, a five-star hotel, a mall and the largest LED sign on the West Coast. Instead, the vacant building's shell displays tarps in some places and exposed beams in others to hundreds of thousands of motorists driving past downtown daily on Interstate 10 and Interstate 110, among the nation’s busiest highways.
So far, nothing is set about the project's future and no buyer has been identified for the high-profile site at 1100-1198 S. Flower St. near Crypto.com Arena and the Los Angeles Convention Center. Construction halted after China-based developer China Oceanwide said it ran out of cash for the project, featuring a 53-story tower, that has no asking price but that property professionals say could fetch hundreds of millions dollars.
The unfinished structure looming over the downtown of the nation's second-biggest city reflects the economic struggles some property owners across the United States are trying to shake more than three years after the pandemic struck. For Los Angeles, it's also a tangible sign of a pullback in financing among some investors from China in a cooling global economy as the city needs residential housing.
"It can't sit there as blight — especially since we're in a housing crisis," said Hal Bastian, a property broker and former director of development for the Los Angeles Downtown Center Business Improvement District.
Potential investors have speculated about a range of new uses they'd want to see at Oceanwide Plaza, with some buyers suggesting the condos need to be converted into apartments, and the multifamily units need to be smaller than the current size plan for the condos, the people familiar with the talks said. The retail component, too, has been mulled for different uses, including residential, by potential investors after demand shifted for that property type as more consumers turned to online shopping in the pandemic.
Some buyers have even more dramatic ideas about the project, including the outright demolition of at least parts of Oceanwide Plaza that they say could be less expensive to rebuild than to retrofit, according to three of the real estate professionals with knowledge of the sales discussions. Concerns mentioned include parts of Oceanwide Plaza suffering wear and tear and materials no longer being on site after construction stopped in October 2020.
A representative for China Oceanwide didn't respond to an email and a phone call requesting a comment. A representative for Lendlease, the project's contractor, declined to comment, citing litigation with the developer. Lawsuits and liens have been filed against the developer since 2019, further complicating a construction restart, according to a filing with the Hong Kong Stock Exchange.
Structural Reassessment
Meanwhile, a representative for the Los Angeles Department of Building and Safety said in an email that the department is not aware of any safety issues within its purview and there are no outstanding orders to comply with that would require a new owner to demolish any part of the project. Changes to the project would require permits from the city and inspections after construction.
Any demolition, if it happened, could be historic in the city of Los Angeles. The city building and safety department said it doesn't have records of any buildings demolished exceeding Oceanwide Plaza's height and size, the department's representative said in the email.
China Oceanwide said in March it has received letters of intent from several potential purchasers of its three-tower Oceanwide Plaza development, according to the filing with the Hong Kong Stock Exchange.
At the time, the developer had no definitive agreement to sell Oceanwide Plaza, but said it expected the property's disposition to occur by the end of 2023. China Oceanwide has not disclosed the identity of any potential buyers. The move toward a sale comes as some investors from China have been pulling money out of Los Angeles real estate.
Real estate professionals who aren't involved with Oceanwide Plaza had mixed feelings when asked whether they thought it made sense for any parts of Oceanwide Plaza to be taken down. The property's next owner still will need to inject a substantial sum to complete the development, said Sonnet Hui, vice president and general manager of real estate consultant Project Management Advisors.
China Oceanwide has said in filings the project may need two years to wrap up construction. Hui estimated that as of November 2022 it would have cost $1 billion to finish Oceanwide Plaza, a high price that complicates financing efforts.
Oceanwide Plaza also has sat exposed and unprotected for several years and certain aspects of the building may be in need of repairs or replacement, Hui said. However, it may behoove the new owner to look at fixing the property's issues individually instead of looking at disassembling, he said.
The next owner may also want to reimagine the property's retail component and create smaller floor plans for the residential units that are now too large for the market, Hui said.
"While tearing down the building would allow for a fresh start, the building structure is so advanced that too much value would be lost," Hui said. "A more reasonable approach would be to remove everything except for the superstructure."
Assessing Costs, Demand
Deepansh Kathuria — principal of structural engineering firm Miyamoto International in Los Angeles and who isn't involved in the project — said he doubted there were structural concerns with Oceanwide Plaza.
Kathruia said that in general any talk of partial demolition may speak more to concern about an overall construction process that simply halted — for years. Kathruia said development and construction need to be a well-oiled machine with collaboration from everyone in order to find success and avoid having to go back and make any repairs.
Getting rid of the multifamily portions of the property, though, would be unusual and would come at a cost for Los Angeles because of the housing shortage, apartment brokers not involved in the development said. Oceanwide Plaza is planned to feature for-sale condo units, not apartments, but real estate analysts have long speculated those units could be converted into multifamily should condo demand not prove strong enough in downtown L.A. The developer of a nearby 56-story project converted its for-sale condos into multifamily when it opened in 2019.
David Evans, a senior multifamily associate of Kidder Matthews who isn't involved in the project, said from his day-to-day work buying and selling multifamily properties around greater Los Angeles he sees potential concerns for the building's future owner including insurance costs, a new sales tax that affects commercial properties and broader economic headwinds facing apartments in downtown Los Angeles. Since April 1, any property sold or transferred above $10 million in the city of L.A. is subject to a 5.5% mansion tax.
Downtown L.A.'s apartment market has seen vacancy rise from 6.4% to 11% in the past year, according to CoStar data. Meanwhile, average apartment asking rents in downtown L.A. have fallen to $2,793 from $2,830 one year ago.
Bastian said it wouldn't make financial sense to do a largescale rebuilding of Oceanwide Plaza, though it doesn't make sense for the project to just keep sitting.
"We sent men to the moon in July 1969," Bastian said. "We can figure this out."
Link:
https://www.costar.com/article/203021736...potential-buyers-%E2%80%94-and-new-ideas
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