UPDATED JULY 25 at 3:30 p.m.:
A stalking horse bidder for Oceanwide Plaza has fallen through.
A group that was “identified” as a potential stalking horse bidder “did not meet deadlines” to submit a bid, according to lawyers for Oceanwide Plaza, speaking at a court hearing on Tuesday. The attorneys did not disclose the group’s name.
But the lawyers representing owner China Oceanwide and its two-tower, 2 million-square-foot bankrupt development, which sits opposite Crypto.com Arena in Downtown Los Angeles covered in graffiti, remain hopeful.
“We’re extremely optimistic that the sale process will be fruitful,” said Sharon Weiss at the firm Bryan Cave Leighton Paisner, who represents the development as it navigates Chapter 11 bankruptcy.
Mark Tarczynski of Colliers, a broker for the property, said in an email statement that negotiations with the potential stalking horse buyer continue and the marketing team “will update the court and interested parties when there is additional information.”
The Wall Street Journal previously reported that a local developer had emerged as a stalking horse bidder on the property, with a bid of $500 million. A stalking horse makes an initial bid on a bankrupt entity’s assets. If no higher bids emerge, the stalking horse bidder wins the auction.
Oceanwide Plaza also asked the court to introduce a breakup fee on the deal. Under the proposal, Oceanwide would pay a stalking horse bidder if it chooses to go with an alternative deal.
The breakup fee would come to 2.5 percent, according to court records.
“While the property is subject to extensive marketing, the allowance of the proposed break-up fee will likely encourage competitive bidding and result in further bidding,” Bradley Sharp, who has been hired as the chief restructuring officer for Oceanwide Plaza, said in a court filing last week.
The U.S. trustee handling the bankruptcy called the break-up fee unnecessary — any more costs distributed to third parties means less for the owner.
“There is $1 billion in equity that’s going to get squashed,” Peter Anderson, a U.S. Trustee for the Central District of California, said at the hearing.
Judge Deborah Saltzman, who is overseeing Oceanwide Plaza’s bankruptcy, was skeptical of approving a break-up fee without a stalking horse bid in place.
Attorneys for Oceanwide Plaza said the firm was still in discussions to nail down a stalking horse bidder.
One hiccup, attorneys said, was that Oceanwide is dealing with potential buyers “who are not used to the bankruptcy process.”
Bids on Oceanwide Plaza are due Aug. 15, according to court records. Bidders will then have to be qualified and invited to participate in an auction on Sept. 17.
Colliers and Hilco Real Estate will run the auction for 1101 South Flower Street, which will be conducted in person and online.
Contractors on the development, including Lendlease, forced the development into bankruptcy earlier this year, claiming Oceanwide owes about $400 million to creditors. The project has sat idle since 2019.
The as-is market value of the project stands at $434 million, according to an appraisal from Colliers filed with the bankruptcy court.
CORRECTION: Previous story indicated the stalking horse bidder had backed out of the deal, rather than missing the deadline as negotiations continue.
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