Downtown LA’s ‘Graffiti Towers’ Headed to Foreclosure Auction This Fall
By Nick Trombola June 20, 2024 11:56 am
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Downtown Los Angeles’ “Graffiti Towers” are one step closer to getting whitewashed (that is, unless its future owner is really into nonconforming artforms).
Oceanwide Plaza — a set of half-finished husks tagged by street artists up and down their 49 stories — is headed to foreclosure auction on Sept. 17, according to The Real Deal, citing a U.S. Bankruptcy Court document.
The official auction date and proceedings still need approval from the court, though Colliers (CIGI) and advisory firm Hilco Real Estate will oversee the potential sale, each taking home a 0.75 percent commission, per TRD.
China Oceanwide Holdings Group, a Beijing-based developer, was the original mastermind of the massive project at 1101 South Flower Street back in 2014, but ran into financial woes as China’s domestic real estate bubble burst a few years later. The 40- and 49-story towers have sat vacant and incomplete ever since.
The towers have since become something of a local attraction — if not an eyesore — with graffiti artists taking over, and even BASE jumpers parachuting off its apex for social media points earlier this year.
In February, a group of contractors working on the towers filed a petition of involuntary bankruptcy against the Chinese developers due to years of inaction and hundreds of millions in mounting debt. The plaza currently has debtor-in-possession financing to help with the potential sale, which is going toward repairs, enhanced security and payroll at the property.
Yet finishing or removing the towers is much easier said than done for its would-be buyers. China Oceanwide said that it had spent $1 billion on the project by the time construction halted in 2019, estimating that it would need another $1.2 billion to complete it, according to 2022 financial filings. It currently owes about $400 million to its various lenders, per court filings.
For the auction, any prospective bidder must provide evidence of development experience, sign a mandatory purchase and sale agreement, and provide a 3 percent deposit into escrow, and also be prepared to spend at least $865 million to complete the empty obelisks.
“The ownership has clearly not been responsive to the needs of this project downtown, so it’s a good thing that it’s in the process of moving forward,” Paul Rutter, an attorney specializing in real estate and construction for law firm Cozen O'Connor, told Commercial Observer. “I still see a vibrant residential portfolio downtown … but there needs to be a flushing out of certain projects at the end of market cycles, which is what we’re seeing now in Los Angeles with a number of other bankruptcies and foreclosures. That’s a good thing … from there people can start [reshuffling] their thoughts on development in those areas.”
The plaza was first marketed for sale by JLL (JLL) in 2019, with developers such as Related Companies, Brookfield (BN) and luxury developer Shvo expressing interest at one time or another, per TRD. But, up to this point, the costs associated with the towers have proved too steep a hill to climb.
Nick Trombola can be reached at ntrombola@commercialobserver.com.
