A Hotshot Developer's Abandoned Skyscrapers Become A Graffiti-Covered $1.5 Billion Mess

The real estate industry is replete with stories about "big-time" developers who breeze into town with big plans that come to nothing, but even by those standards, downtown Los Angeles's Oceanwide Plaza is a failure of epic proportions. Originally, Oceanwide Plaza was planned as three 53-story towers overlooking the Crypto.com Arena and L.A. Live entertainment attractions.

The original builder, China Oceanwide Holdings Group Co. Ltd., was a Hong Kong-based firm that envisioned Oceanwide Plaza as the centerpiece of downtown Los Angeles's numerous mixed-use luxury landmarks. Unfortunately, Oceanwide Holdings lacked sufficient financial resources to complete the project, and it abandoned the Oceanwide Plaza in 2019.

In the years since, the buildings, which stand as half-completed hulks menacing the L.A. skyline, have become a blank canvas for graffiti artists. Significant portions of Oceanwide Plaza's signature concrete frame and giant windows have been painted over with every type of graffiti.

Perhaps more troublingly, another group of interlopers has repurposed Oceanwide Plaza. The building's 53 stories make Oceanwide's roofs an ideal place for BASE (buildings, antennas, spans and earth) jumping. While this makes for some entertaining YouTube footage, it's a safety hazard because it's only a matter of time before some BASE jumper's parachute doesn't deploy and they crash to the ground.

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A City Council Forced To Act And A Massive Bill

The fact that Oceanwide Plaza's only real security is a metal chain-link fence makes it a sitting duck for both the graffiti artists and the BASE jumpers. Downtown L.A. is also the epicenter of the city's homeless crisis, which means Oceanwide Plaza is also a very attractive location for potential squatters. Even in its half-completed state, Oceanwide Plaza offers squatters a roof, intact windows and reasonable protection from the elements.

Add these factors together and you come up with an absolute nightmare for the L.A. city government. The City Council recently approved a $3.8 million emergency measure to beef up the fencing and security at Oceanwide Plaza. Councilman Kevin de Leon, whose district includes the property, says that the massive outlay is only the beginning.

De Leon was quoted in an Associated Press story as telling the council the only way out of this mess was to find a developer to buy the building. The estimated cost of buying and completing the project is $1.5 billion. Considering the state of the commercial real estate market and today's high interest rates, a buyer coming forward looks less likely every day. Until it happens, Oceanwide Plaza will be the city's problem.

The Lesson And Takeaway

It's easy to look at this fiasco in hindsight and wonder why the city didn't learn more about the developer's finances before approving the project, but assessing developers' finances is not the traditional function of city government when it comes to projects like Oceanwide Plaza. City governments review the plans from a building safety and zoning perspective, but it's mainly commercial lenders and investors who evaluate the developer's financial footing.

There is probably not too much the L.A. city government could have done to prevent this from happening. Developers run out of money and leave half-completed projects behind more often than most people realize. In years past, this Oceanwide Plaza would have been gobbled up by another developer long before it became a public eyesore. It would have opened under a different name, and no one would be any the wiser.

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However, the struggles in the commercial sector, high interest rates and tightened lending standards are all limiting developers' ability to access capital. If public debacles like Oceanwide Plaza become more common, it's not inconceivable that city governments may try to devise a mechanism to ensure developers pay for the fallout when a mega project goes sideways. In the meantime, graffiti and BASE jumping are still prohibited at Oceanwide Plaza.

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