(Bloomberg) -- For sale: Steel skeletons of three towers in downtown Los Angeles, erected by a Chinese developer that spent $1.2 billion before running into financial troubles.

The site, called Oceanwide Plaza, became famous this year when graffiti artists covered the 49-floor-tall structures. Now, the property is going on the market, with lenders and other creditors needing about $400 million to recoup their money.

The brokerage Colliers and advisory firm Hilco Real Estate have been hired to market and handle a sale of the property, subject to bankruptcy court approval, according to a statement. 

“We are determined to run a disciplined and orderly process to identify the right developer to finish the project in time for the 2028 Summer Olympics,” said Mark Tarczynski, an executive vice president at Colliers.

The project got off the ground in 2014 as Chinese investors were in the midst of a US buying spree, scooping up properties from trophy hotels to Hollywood studios. By 2018, that boom went bust when Beijing tightened capital policies and cut off financing for international ventures. China’s domestic property market bubble later burst as developers struggled with overbuilding and high leverage.

China Oceanwide spent about $3.5 billion on projects in San Francisco, New York, Hawaii and LA, none of which were completed. Construction in LA, the biggest project, ground to a halt in 2019. China Oceanwide reported efforts to find a buyer or new financial partners for the LA project, deals that never came to fruition.

Commercial-property values in downtown Los Angeles spiraled downward after the pandemic emptied offices. The distress has only increased in recent years as borrowing costs rose. LA’s third tallest office tower sold in December for 45% below its 2014 price.

Earlier this year, daredevil graffiti artists began sneaking onto the China Oceanwide property, scaling its towers and tagging its windows. Even bolder intruders parachuted off a tower. The invasions and graffiti prompted outrage from officials, including City Councilman Kevin de Leon, who demanded that the city enact measures to safeguard the property to prevent people from getting hurt or killed.

“We’ve obviously ignited a fire under Oceanwide to begin to take action — and the debtors as well,” Peter Brown, a spokesman for de Leon, said in an interview. 

Contractors on the project, led by Lendlease Corp., filed an involuntary bankruptcy petition against the limited liability company for Oceanwide Plaza in February. The project now has debtor-in-possession financing for payroll, security, repairs to comply with the city order and to assist in a sale process, according to Sharon Weiss, lead counsel for the debtor with Bryan Cave Leighton Paisner.

“I think this is a good opportunity for this building to come back alive, and to show how a bankruptcy case can fix a lot of problems,” Weiss said. 

The owners owe almost $400 million to creditors, including about $180 million to EB-5 visa investors, $175 million to construction contractors, $18 million for back taxes to LA County and money to repay the city for security, Weiss said.

An April appraisal by Colliers that was submitted in the bankruptcy case estimated the as-is market value at nearly $434 million. The brokerage also projected a cost of $865 million to complete the project, which is currently 60% finished.

The appraisal report also said there are “two serious buyers with pricing negotiated at $850,000,000” in its current condition, numbers attributed to Ken Choi, an attorney for Oceanwide. The names of the buyers are confidential, the appraisal said. Choi didn’t respond to requests for comment.

“We did not place any weight on these offers,” the appraisers, Jay Kwong and Brian Tankersley, wrote in their report.

While the market will set a price for the project, any new development on the site will face some hurdles, according to Alexander Shing, chief executive officer of real estate investment firm Cottonwood Group. The project has faced vandalism and sat around unoccupied for years, and the market has changed in the intervening time.

Apartments in downtown Los Angeles have a 9.8% vacancy rate, the highest of any submarket in the region, according to CoStar Group Inc. Asking rents fell 1.5% in the 12 months through March, and the average sale price per unit dropped to $520,000, down about 20% from a recent peak in early 2022.

More than 500 “outsized condos is no longer the right product for this market cycle,” Shing said in an email. “It would be challenging for someone to get the necessary financing, in this environment, to complete the construction and project in a profitable manner.”

Weiss was working in LA Live, an entertainment complex near the Oceanwide site, when the project started a decade ago. She was excited to see something that showed downtown’s growth. Instead, the project became a symbol of that neighborhood’s post-pandemic decline.

“It was supposed to be the building,” she recalled. “To me, it’s heartbreaking.”

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