Value Of Oceanwide Plaza Disputed By Creditors Seeking Repayment

Attorneys for LA Downtown Investment are contesting the value of the Oceanwide Plaza project that its developers have put forth, saying it relies on an outdated appraisal and suggesting that a sale price would have to take into account the fact that the property has been left out in the elements for more than four years and will likely cost $1B to complete. 

LADI, the EB-5 investing entity involved in the project and in litigation surrounding it, and at least one other creditor argue in court filings that the estimate of the Oceanwide Plaza project’s value comes from a 2017 CBRE appraisal. That determination does not reflect the project’s nearly five-year construction halt, the time that the incomplete project has spent sitting vacant or the costs that will eventually be incurred as a result of needing to clean graffiti it has collected, the filings state. 

“The Debtor’s views on value are grossly overstated,” a complaint LADI filed last week in bankruptcy court states. 

Lendlease, the general contractor on the project, and a handful of other creditors owed for their work filed to push the developer of Oceanwide Plaza into bankruptcy in February in the hopes of getting paid.

Litigation is ongoing with contractors and investors over money they say they are owed on the project. The parent company of the developer, Oceanwide Holdings, is also facing liquidation.

In its own court filings, Oceanwide Plaza’s developer seems to acknowledge that debts against it are at least $370M, including a $170M loan owed to LADI, $185M owed to Lendlease and $15M owed to the LA County Tax Collector.

An updated 2021 appraisal also done by CBRE indicates that the “as-is” value of the project is estimated to be $313M, an amount already potentially less than the amount owed on the project. 

That same appraisal estimated that the stabilized value of the project once complete would be about $1.4B and that the cost to complete the project could be about $1.2B. 

“A prospective buyer would be hard put to pay anything close to $200 million for the Project in its ‘as is’ condition, let alone the $370 million that the Debtor says presently encumbers the property,” the document states. 

The discussion of the project’s value came into play as Oceanwide argued that it needs debtor-in-possession financing, a kind of funding that is only available to bankrupt companies. 

“The Debtor is in desperate need of funds to pay for continued maintenance and preservation of the Property, including funds to safeguard the Property, insurance coverage for the Property, and payroll for employees,” Oceanwide states as it makes its case for why the court should approve its request for such financing. 

But those who are owed by Oceanwide, including the county and LADI, are voicing concerns about the financing and are looking for assurances that nothing will hold up a sale of the property, which theoretically provides for their repayment. 

One of the issues LADI raised a red flag about was that the term sheet for the financing didn’t specify what would constitute an event of default.

“The DIP lender must agree that none of the existing conditions of the project and no reasonably foreseeable events (i.e., Oceanwide’s failure to pay taxes or to fully insure the Project) will constitute events of default by Oceanwide under the DIP loan,” LADI’s attorneys said in court filings.