Another Chinese Mega-Construction Project in California Is Halted, this one in San Francisco. List of Troubled or Scuttled Chinese Projects in California Grows

How China’s crackdown on debt and capital flight pulls the rug out from under mega-real-estate projects.

After months of rumors and speculation amid apparently failed efforts to secure a short-term loan and find an equity investor, property developer Oceanwide, a division of Chinese conglomerate Oceanwide Holdings Co. Ltd., said that it has stopped construction indefinitely on a 54-story 605-foot tower across from the Salesforce Tower and across from the infamously leaning Millennium Tower (thankfully built by US developers) in San Francisco’s Transbay district.

The tower – which was planned to include 156 high-end condos and a Waldorf Astoria hotel – is the shorter of two towers in the same project.

Construction of the taller tower – at 910 feet (when or if completed), the second tallest tower in San Francisco – is further advanced and will continue, the company said; two years behind schedule, it’s currently expected to open in 2023. The whole project, the Oceanwide Center, is one of the largest construction projects in San Francisco.

“In light of local market changes and economic uncertainties, Oceanwide has determined that a realignment of the work scope on the Oceanwide Center project is necessary to keep the project sustainable,” the company told the San Francisco Chronicle.

In 2014, Oceanwide Holdings’ Tohigh Investment Co. acquired the development site from TMG Partners for $296 million. Groundbreaking took place in December 2016. Oceanwide has tried to develop this project on its own and does not have a US partner.

And with impeccable timing: By about the time of groundbreaking, Chinese authorities started cracking down on capital flight from China. By 2017, they started particularly targeting money flows by Chinese companies to overseas real estate investments. And they have since tightened the noose on money flows to overseas real estate projects.

Oceanwide has not disclosed the project’s ballooning budget – amid ballooning construction costs in San Francisco – or how much money it has already sunk into it, but estimates of the budget are now at $1.6 billion.

San Francisco’s Oceanwide Center is the second mega-project by Oceanwide that has run into out-of-money problems and where construction was halted.

The first project is Oceanwide Plaza in Los Angeles, an even larger three-tower condo, hotel, and retail development, one of the largest in downtown Los Angeles. But in late January, Oceanwide ran out of funds and abruptly and without notice halted construction.

Later, Oceanwide said in a statement that construction was “temporarily” halted “while we restructure capital for the project.”

Construction would resume in mid-February, it said. But other than some sporadic minor work here and there, construction has reportedly not resumed as of yet. Funding appears to be hard to come by these days for Chinese conglomerates with foreign real estate ambitions.

Among other Chinese developers that have run out of money for their mega-projects in California recently is Z&L Properties, a US entity that was privately funded by Zhang Li, co-founder of R&F Properties in Guangzhou, China. Z&L Properties had gone on a California buying binge in 2014 and 2015, as they all had done, acquiring 12 properties for a planned 3,400 high-end condos in the Bay Area and Los Angeles.

“Destined to become California’s premier condominium developer,” it still says on Z&L Properties’ website:

The projects:

  • Four sites in San Francisco, in the Transbay area, Hayes Valley, Mid-Market, and South of Market.
  • Five projects in Silicon Valley and San Jose, including the human-trafficking-tainted 643-unit project formerly known as Silvery Towers at 188 West St. James St. in San Jose; and two towers in San Jose that the developer has since been kicked off for violating its development contract, and that it has removed from its website.
  • One more site in the Bay Area’s Marin County (just north of the Golden Gate Bridge).
  • Two sites in Los Angeles.

None of the projects have been completed. One project was halted because it was deemed to be not economically feasible, according to the SF Chronicle. Construction on another project, which had started in late 2017, was suddenly shut down after the excavation work. Several have been tangled up by building code violations, lawsuits, cost overruns, allegations of using substandard materials, disputes with contractors.

And there was the US Department of Labor’s human-trafficking investigation at 188 West St. James St. in San Jose (Silvery Towers), which found that, under a contractor, workers were “forced to work without pay” and “lived in captivity in squalid conditions in a warehouse.” The case was settled in July 2018. In June this year, a jury convicted the contractor to eight years in the hoosegow and to pay the workers back-wages of nearly $1 million. The construction project is now at least two years behind schedule.

The City of San Jose booted Z&L Properties from two other stalled projects – the 305-unit North San Pedro Towers and the 221-unit Park View Towers – because Z&L Properties had broken the terms of its development agreement. City officials are now trying to line up other developers to take over the projects.

And bills aren’t getting paid: The Park View Towers’ architectural and design firm DLR Group Kwan Henmi has filed a mechanic’s lien against the property over $847,000 in unpaid invoices. And Civil Engineering Associates has filed a mechanic’s lien against the property of $4,900.

The tsunami of Chinese money that washed ashore on the West Coast, and particularly in real estate in California, between 2014 and 2016, and that has done so much to inflate the commercial real estate bubble and the housing bubble, has now receded. And what is left to do is to sort through it all and figure out how to go on from here.

Ironically, house prices dropped the most in Silicon Valley. ReadHousing Bubble in Silicon Valley & San Francisco Bay Area Turns to Bust Despite Low Mortgage Rates & Startup Millionaires

 

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate “beer money.” I appreciate it immensely. Click on the beer mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

 

  81 comments for “Another Chinese Mega-Construction Project in California Is Halted, this one in San Francisco. List of Troubled or Scuttled Chinese Projects in California Grows

  1. qt
    Oct 18, 2019 at 1:34 pm

    Can someone say Japan wannabe like in the 80s?

    • David Hall
      Oct 18, 2019 at 3:38 pm

      The South China Morning Post (Hong Kong) reported: “China’s housing market showing signs of bubble similar to that seen in Japan in 1980s…” May 2019.

      There has been an increase in China’s non-performing loans and rumors of small banks nearing insolvency. They may have failed to notice a San Francisco real estate bubble forming.

      • Trinacria
        Oct 18, 2019 at 4:27 pm

        Add this to all the empty cities in China and the empty South China Mall (apparently an enormous place from what I’ve seen on videos) … so, does this mean the chickens are starting to come home to roost? Expansions can’t go on forever and, I just get the feeling that this particular expansion has been artificially pushed along. Gird your loins on this one!

        • Joan of Arc
          Oct 18, 2019 at 8:50 pm

          Expansions can go on forever as long as money printing can go on forever. When they actually printed money there was a physical limit…trees. Now the money is digitally printed in cyber space so there is only an energy limit. All’s well that ends well. It didn’t end well for the dinosaurs 66 million years ago but that is a different story.

        • pogohere
          Oct 19, 2019 at 12:39 am

          The truth about China’s futuristic ghost cities

          July 27, 2018

          Are they really as empty as they seem?

          In 2015, the Chicago-based photographer Kai Caemmerer decided to see for himself what all the fuss was about and pay some of these cities a visit. What he encountered there was not at all what he expected. “I was originally inspired by some of the (almost sensationalist) reports and articles that I had read about the new ‘ghost cities of China,” says Caemmerer. “Digging a little bit deeper, it became fairly clear that many of these ‘ghost cities’ were not at all abandoned or defunct, as they had been depicted, but rather just very new.”

        • Debt Wazoo
          Oct 19, 2019 at 6:53 am

          > It didn’t end well for the dinosaurs 66 million years ago

          Yeah they definitely went extinct because they printed too much money.

          Also, you are smoking crack.

      • Unamused
        Oct 18, 2019 at 6:48 pm

        They may have failed to notice a San Francisco real estate bubble forming.

        If they had come to this web site and bought some Beer Mugs (or shot glasses, depending on how the markets are doing) they wouldn’t have these problems.

        They could have gotten a running play-by-play on all the CA property booms and busts and exercised their livers at the same time. Now that’s efficiency.

      • James Rowen
        Oct 19, 2019 at 8:58 pm

        In Santa Clara, residents are faced with a mega project supported by a corrupt group

      • Michael Fiorillo
        Oct 20, 2019 at 10:26 am

        I’m old enough to remember when the Japanese were going to own everything in this country; it turned out they were played for rubes by their American counterparts (USA! USA!).

        Is the same going to be true of the Chinese?

    • Oct 20, 2019 at 5:39 pm

      my first thought also!

  2. 2banana
    Oct 18, 2019 at 1:55 pm

    And add in the massive bubble in CRE in general and the “WeWorK” debacle – seems like a yuuuuge CRE implosion coming.

    “The tsunami of Chinese money that washed ashore on the West Coast, and particularly in real estate in California, between 2014 and 2016, and that has done so much to inflate the commercial real estate bubble and the housing bubble, has now receded. And what is left to do is to sort through it all and figure out how to go on from here.”

    • Oct 18, 2019 at 7:00 pm

      In early 2007 I just got into commercial construction (Los Angeles) and it seemed promising. A year later, you could tell that new contracts weren’t coming in.

      I’ve signed on some big CRE projects in the last couple weeks. We’ve got projects going out through 2022, and I don’t see any signs of a slowdown in projects to bid.

      If CRE does collapse, we’re at least a couple years out in my opinion. I understand the potential leading edge of SoftBank and WeWork and whatnot, but don’t hold your breath while it plays out. It could take some time, and the rules can be changed along the way if you consider massive QE and massive infrastructure spending as possibilities.

      • Lance Manly
        Oct 19, 2019 at 6:33 am

        LA is not the entire county. The Architecture Billings Index is generally a leading indicator for CRE. It seems the west is holding on for now

        https://www.aia.org/press-releases/6201773-substantial-decline-in-architecture-billin

        “AIA’s Architecture Billings Index (ABI) score of 47.2 in August showed a significant drop in architecture firm billings compared to the July score of 50.1. Any score below 50 indicates a decrease in billings. The design contracts score also declined to 47.9 in August, representing a rare dip for this indicator. Billings in the West stayed modestly positive while all other regions remained in negative territory.”

      • Brutus
        Oct 19, 2019 at 3:22 pm

        CRE, which stands for carbapenem-resistant Enterobacteriaceae
        for those of you from Rio Lindo.

  3. Pedro
    Oct 18, 2019 at 2:04 pm

    China’s population has PEAKED. It will sustain its 1.4 B people for 20years because of advances in healthcare alone. It’s birth rate is in terminal decline despite lowered restrictions on babymaking. By 2040 the population will decline by 25million people a Year! AND will be dramatically older with over half the population over 50! This is not a consumer nation in the making, it is a nation that will be barely able to keep the lights on as social costs spiral out of control with no workers to support the crumbling empire.

    So you see.. China’s rise is about to hit a brick wall… and their government already sees this coming. By cutting down on capital flight the Chinese are hoping to lock their people into their declining asset bubble to prevent less worse collapse.

    India and Africa are the new China. Place your bets accordingly.

    • nick kelly
      Oct 18, 2019 at 3:52 pm

      The trend in all developed countries, although with China’s experiments with the ‘one child’ plan their graph is different.

      ‘Hamilton and group found that the total number of births in 2018, at 3,788,235, was down 2 percent from 2017. The general fertility rate for 2018 was 59.0 births per 1,000 women aged 15 to 44, another record low for the U.S.May 14, 2019’

    • char
      Oct 18, 2019 at 6:49 pm

      East Asia has problems with getting children. Even the more liberal countries like China but the claim that China’s population has peaked is only true if there is no mass emigration to China. But that is what i expect will happen in China. Those factories need cheap workers so get them from India, Bangladesh and Africa.

      • Javert Chip
        Oct 18, 2019 at 7:19 pm

        Factories need buyers before and during the time they need workers, and lots of the world (free & totalitarian alike) are quickly learning dealing with China is hardly a fair commercial transaction.

        Recently read an article on “The Sounding Line” (BTW, lots of Wolf’s stuff gets re-posted here) discussing China is currently owed about 10% of global GDP (10% of $80T = $8T) by the remainder of the world.

        That’s a lot of “belt & road”, and the bad debt collection process has not yet been seen…

        • Javert Chip
          Oct 18, 2019 at 7:48 pm

          ooops…6% of global GDP (6% of $80T = $4.8T)

        • char
          Oct 18, 2019 at 8:35 pm

          You make the wrongful assumption that the US is the main buyer. It isn’t. In order of importance it is China, rest of the world, and a shared fourth place for EU and US. It is more a question if America will find factories than if China will find buyers

          Lots of the World has already learned decades ago that fair commercial transactions with the US, EU, Japan, India is something no intelligent man can expect.

        • Javert Chip
          Oct 18, 2019 at 9:21 pm

          Char

          I expressed no assumption about who was biggest buyer. The general consensus seems to be China screws everybody.

          My 2nd observation dealt with huge loans China is making, primarily to non-USA nations (depending upon how you count US government securities). When these “client” nations default on Chinese loans secured by oil wells (Venezuela), or the local diamond mine (African countries), it’ll be interesting to see how China collects on the bad debt.

        • Bruce
          Oct 19, 2019 at 11:00 am

          Javert – I’m going to reply here to your questioning of my reply below to Petunia, regarding shoddy construction. Wolf’s system didn’t put a Reply button by your comment so I figured here was the next best thing.
          No problem with argumentative, as one thing I like about Wolf’s site is generally all are well behaved. The sinking condo you mention is Millenium Towers, and I mention it in my post. The other two (Bay Bridge and Transit Center) are non-high rise and thus not something I was addressing.
          One of the problems with government projects such as the bridge and center, is that they are a jumble of problems and headaches typically. You start with boilerplate government specs that may or may not be correct, and may or may not actually be the best material / method / procedure for the job. Add in huge amounts of red tape and paperwork, political agendas, huge bureaucracies (I may have mis-spelled that), and some contractors gaming the system, and they are just one big stinking mess. A fast, correct, quality build is about the last thing on the agenda. So while it doesn’t apply to high rise construction, you are dead on when you highlight these two public jobs as an example of shoddy construction.

      • Ook
        Oct 18, 2019 at 8:26 pm

        The real solution is to lower the cost of having children. If you could have children without thinking about expensive private schooling and maintain a middle-class standard of living without forcing both parents to work 60 hours a week, there would be a lot more children forthcoming.

        • char
          Oct 18, 2019 at 8:39 pm

          It is not a cost issue but the fact that people see investing in their children as a status issue.

        • Javert Chip
          Oct 18, 2019 at 9:25 pm

          Uhh…no.

          With the average cost to raise a child to 18 (excluding college cost) estimated at $23,610, I’m guessing it’s cost.

          https://www.usatoday.com/story/money/personalfinance/2018/02/26/raising-child-costs-233-610-you-financially-prepared-parent/357243002/

        • Unsk
          Oct 19, 2019 at 4:55 pm

          No. The real solution is to lower the cost of living. The cost of having children will then take care of itself.

          In LA County, the average cost of a single family dwelling is now about 25 times what it was in 1970, several times over the improvement in wages. But housing is not the only thing that increased significantly over the rise in income. Education costs, health care costs, food costs, insurance costs and energy costs all have risen markedly faster than incomes. The Culprit is the same – our government that is restricting supply and raising costs in a multitude of ways.

          Some people have claimed that California has half the nation’s homeless. I can’t verify that but it doesn’t seem that far off. California for the last 40 some odd years has restricted the construction of single family housing, has restricted manufacturing in all sorts of ways, has refused to build infrastructure to support it’s growing population which is 2 1/2 times what it was then, has gutted it’s school system into an indoctrination system, has helped increased dramatically the number of kids born out of wedlock, thoroughly increasing many fold the number of mentally ill and has encouraged the importation of millions upon millions of illegal immigrants that have taken jobs away, have increased State and Local Welfare and Education costs and have increased dramatically the need for housing, all the while increasing crime and bringing the Cartel and Mexican Mafia to almost every city. Dramatically increased homelessness is the only possible outcome of those policies.

          Since I am now an old fart, I remember the days in California of the 50’s ,60’s and 70’s before the deluge of Progressive policies. Life was inexpensive. LA until the microchip had the most dynamic economy on the planet. Housing was inexpensive. Schools were good so you didn’t have to send you kid to an expensive private school. College also was inexpensive so it didn’t wipe out a family’s savings to send your kid to college. Infrastructure worked and California had the best transportation system in the country.

          Don’t talk to me about too many people and the problems of keeping up with growth. From the mid 1880’s onward for one hundred years, LA doubled in size and still by the late 70’s had the best infrastructure. It’s just back then the government planned for growth and cared about the people it served rather than funding the mega life styles of those associated with the Public Employee Unions and other Government boondoggles.

        • TXRancher
          Oct 19, 2019 at 7:26 pm

          Javert – What about the price of operating a vehicle for 18 years, or supporting a spouse for 18 years or going to the casino for 18 years (oh wait that is just me) or any number of other expenses to fund what we call living. Biologically our two jobs are to survive and propagate.

        • Javert Chip
          Oct 19, 2019 at 8:40 pm

          TXRancher

          Ook’s point (which I agreed with) dealt with proximate cause for not having more children (ie: cost).

          Your comments about vehicles, spouses & casinos may be accurate, but those are not in-scope for direct costs of child-raising.

        • Morty Mc Mort
          Oct 20, 2019 at 9:46 am

          Sorry dudes children costs:
          $233,610

      • nick kelly
        Oct 19, 2019 at 2:23 pm

        With its birth rate in the last 2 decades (and still dropping), the US also needs immigrants. The alternative is cutting SS for its aging population.

        And no, robots will not fill the gap.

        • phergus
          Oct 19, 2019 at 8:40 pm

          Nick ; I respectfully disagree . The amount and quality of “immigrants – especially illegal aliens in the construction industries are a big problem. Typically you can have only two of these at any one time , quality , accuracy and speed. You pick which two you can make do with .The problem I have encountered for several years now is the appalling lack of common sense in citizens entering the construction trades , and the severe lack of skill and language barrier in the vast majority of illegals in these trades. It has caused my industry a lot of downtime & problems on both counts.
          There was a time when immigrants wanted to assimilate and be American…not so anymore , and coupled with left prog state gruberments even encouraging them not to assimilate just compounds the problems.
          There was a time in America when youth came into a trade understanding they had to work their way up. Youth in America seems to want it all and want it now selfishly. And they have not the skill set to demand such.

        • Petunia
          Oct 20, 2019 at 7:39 pm

          Phergus,

          I’ve been following the collapse of the Hardrock Hotel in New Orleans, a freaking disaster. There are already workers from there in immigration detention. Last time I was in NOLA I saw a crew repairing the trolley tracks and they were all Latinos. I would feel comfortable betting most/all were illegals.
          This is a city with high black unemployment. A democrat controlled city.

  4. Oct 18, 2019 at 2:07 pm

    Do they ever sell these projects in midconstruction? Wonder how much dollar worries drive the business decisions, not capital controls. The event in NO brings up issues as well, civil engineers casting aspersions, throwing cold water on the high rise construction industry. Bob Prechter did a study on high rise buildings and a correlation with major market tops. Twin Towers opened in 1973.

    • GrassRanger
      Oct 18, 2019 at 2:29 pm

      Prechter is probably right. The first notable one was the Empire State Bldg announced in August 1929. After the ’29 market crash, they started construction in early 1930 and finished it in just over a year, an achievement that would be impossible in the US today.

      • Oct 18, 2019 at 3:12 pm

        Prechter’s stories are a real pleasure to read. As long as you don’t use it to time the market :) He published At the Crest of the Tidal Wave in 1997 and the 1st edition of “Conquer the Crash” in 2002.

    • sunny129
      Oct 18, 2019 at 2:41 pm

      Wonder how much Billions of ‘Money laundering’ is involved underneath in all these projects! Isn’t potential ‘loss’ already figured in these RE dealings?

      The middle men are snarled in for lack of payments while the top elites consider these losses as ‘part of doing business’ with nothing actually at risk! Going on all over the World!

    • Petunia
      Oct 18, 2019 at 4:42 pm

      NOLA, San Fran, Sydney, London — quality control is nonexistent in the building trades now. There’s a video out of the support columns visibly bending in the NOLA hotel collapse. I wouldn’t be buying any new high rise construction now.

      • Bruce
        Oct 18, 2019 at 5:49 pm

        Petunia – I can’t speak for other areas, but high rise construction in SF Bay Area is pretty reliable. Most of the contractors, whether they be general contractors, HVAC, Plumbing, Fire, or Electrical, are the bigger, established firms. They are used to projects like that, and you don’t find a whole lot of shoddy construction.
        May be some minor things here and there, but the big things they tend to get right.
        Some building projects even have their own separate Inspector of Record that is a private entity separate from any government officials. Add in the city inspectors for the various trades, and you have reasonably good results.
        The Millenium (Leaning Tower of SF) was more of a design screwup rather than shoddy construction. Other than that the high rises have been pretty good the last 40 or 50 years.
        I’ve run into the fly by night / shady contractors more on the smaller jobs, non high rise, so under 75 to 90 feet tall. Yet even then it’s still a somewhat small percentage. There are good outfits doing these small jobs as well.

        • Javert Chip
          Oct 18, 2019 at 7:24 pm

          Bruce

          Not being argumentative, but how do you square that with cracks in the TransBay building, the leaning/sinking SF condo and the problems with structural beams on the east bay bridge?

        • Unsk
          Oct 19, 2019 at 5:35 pm

          As I understand it, the Millennium Tower was designed with a “friction pile” foundation, rather than taking the caissons down to bedrock ( normal standard of care and practice is to take the caisson down into bedrock a calculated depth for stability). This was done in an area of reclaimed highly saturated fill that was reclaimed from the bay that would be prone to subsidence.
          Allegedly the designers even knew there was going to be a problem so they had this complex system in their design where various parts of the building would adjust to the foundation moving over time.
          In the California Building Departments I am familiar with, such a design would never be allowed. There must have great pressure from someone to pass this joke of a design.
          San Francisco like many of more extreme major cities has a “Pay to Play” system of development where a certain amount of “influence ” is necessary to get a development through because the code is generally really tough to comply with and to get something through “influence” is often need to make that project happen. That influence system benefits the connected and well to do, and hammers the Average Joe.

          SF for instance, allegedly now has a mandated seismic retrofit program for all those turn of the Century Queen Anne dwellings that give SF much of its defining Architectural character and charm. Sounds like a sensible idea to most people, but the way the California Building Code works now such a retrofit would be either enormously expensive or possibly not even structurally possible. One would have to strip down these houses literally to their studs and literally almost rebuild them piece by piece because the typically cutesy little shaped posts and tiny potential shear walls wouldn’t cut it with the code, and would be a mess for some sort of wrapped moment or steel braced frame.

          The idea is a simply financially depleting nightmare for most of the people who own those houses. Oh and btw, most of those house were built as one residence originally , but because of the cost of living, most of them have been split, floor by floor , into several units, which makes the idea of getting the whole group together to pay for this retrofit even more problematic.

          But that is the kind of regulation that is happening. But then of course, since I was once a minor elected official in LA, these kind of developments happen all of a sudden and you can’t figure out how they made it all work. Funny how that all happens.

      • polecat
        Oct 19, 2019 at 10:52 am

        de-Faulty Towers indeed …

        I can’t help but wonder as to the viability of these project as they purtain to earthquake standards, where grift and possible construction related ‘shortcuts’ are concerned …
        Of course no one really knows what the rates of failure will be, when either the SF Bay area, and/or the LA basin get knocked around by the next 8-9.0 … be they Chinese or American. Stay grounded everyone !

        • Unsk
          Oct 19, 2019 at 6:00 pm

          The Millennium Towers were allegedly built in a reclaimed fill area which is subject to liquefaction. Since the they used friction piles, which work by resisting the vertical or horizontal force solely by friction, the problem with subsidence that the towers are experiencing from the vertical load would likely be a similar problem with a horizontal seismic load, unless there was some sort of really advanced high tech seismic system used in the design. Since I believe those towers are something like 60 floors high, the seismic forces will be enormous in the next big earthquake.

          San Francsico is one the most seismically exposed city’s in California because it is really near the San Andreas fault. Most of the other major cities like LA or San Diego are not that near the San Andreas but are near lesser faults that are capable of a 7.5 quake on the Richter scale.

          Also the most seismically exposed area in the continental US in not California; it is Pacific Northwest cities from Portland north ( actually Mendocino to Vancouver). These cities are near active volcanoes along the Cascade Range and are also near the Cascadia Subduction Zone which in the year 1700 had a quake that was allegedly is thought to be well above a 9 where huge chunks of the coast actually are thought to have slid into the sea and where there was a huge destructive Tsunami was generated that hit Japan. There is nowhere in California where such a earthquake threat exists.

        • Javert Chip
          Oct 19, 2019 at 9:00 pm

          Just a wild guess: if any area gets hit by a 8.5-9.0 quake, you don’t want to be there; the numbers of whomever was there before the quake, will be a lot smaller after…

          I lived & worked in SF for 30 years; not frequently, but multiple times during that period, small-ish quakes provided the totally disorienting experience of looking out your hi-rise window to see other hi-rises slightly moving. A a spectacularly eerie feeling.

    • Out of Brooklyn
      Oct 18, 2019 at 5:32 pm

      I remember as a kid growing up in NYC in the early 80’s we’d pick a floor in the twin towers at night and find whether it had been built out yet. It took many years for us to worry about security. The hangover from the construction metastasis seen during easy credit times can take many years to clear. I did have some great views for a while there though.

  5. Oct 18, 2019 at 2:12 pm

    A company that buys land to build a skyscraper in an earthquake zone during a tech bubble… is called Tohigh Investment Co.

    This is a satirical novel.

    • Jack3
      Oct 18, 2019 at 4:19 pm

      “Oceanwide Holdings’ Tohigh Investment Co”, ha, ha, ha,… can’t accuse them of not having a sense of humor when they named their company. Now all that’s needed is the earthquake to restore the land.

    • Nat
      Oct 18, 2019 at 4:49 pm

      I noticed that too, seems too ironic to be true.

      • Oct 18, 2019 at 5:18 pm

        Tohigh Investment Co. and Oceanwide show up in other deals, including here in this legal document in Virginia. Check Oceanwide’s “simplified” organizational chart on page 3. Then also check out the non-simplified organizational, which is many pages long. It’s obviously designed to be totally opaque.

  6. Paulo
    Oct 18, 2019 at 2:38 pm

    For those who live there, what happens to the building sites? Are they just fenced off and the rebar left to rust away? Are there completion deposits held in trust? In BC, when the mineral markets collapse and miners try and abandon their mines they forfeit a large cleanup deposit for shut down and remediation. Lawsuits don’t work as well because there are too many loopholes to hide behind. Money in trust is just confiscated and spent as needed. Thanks in advance.

    • Mike G
      Oct 18, 2019 at 5:24 pm

      I’ve never heard of a half-constructed high rise demolished except in rare cases of structural malpractice, so someone must buy and complete them, likely at a hefty discount to cost.

      • Oct 18, 2019 at 9:14 pm

        Mike G,

        OK, I’ve got one for you. Back during the late 1970s or very early 1980s – if I get the years wrong, forgive me, I’m operating on memory here – the oil company Cities Service started building a new headquarters tower in Tulsa. It went down into the ground a dozen or more floors, and was supposed to rise to, you know, the sky. The building was oval and was supposed to be clad with black granite. Oil boom stuff.

        In 1982, Occidental Petroleum bought Cities Service. And then the oil bust hit, and construction on the building stopped at the eighth floor. And remained stopped by the time I moved back to Tulsa in 1986. Eventually, the building was capped at the eighth floor but was finished in black granite as planned. So now there is this black stump of a building in downtown Tulsa of what was supposed to have been the highest tower in Tulsa. We joked about it for years (black oil-bust humor).

        • DawnsEarlyLight
          Oct 19, 2019 at 4:20 pm

          A shame it wasn’t built to at least 30+ floors. It is a beautiful reddish color, and the curved ends of the building are striking!

    • Bruce
      Oct 18, 2019 at 6:00 pm

      Paulo – In the past, it seems that the projects were either halted before steel came up out of the ground,or they completed the shell of the building and let it sit. When I say shell, that means windows and roof installed so your building is not exposed to the elements. Don’t remember any going up with steel and concrete a few stories and then being halted as is. That would leave too much exposed and at risk for damage from the elements. I know they’ve started steel up on the first tower in SF, but don’t think the second one has come up above ground yet.

      • Paulo
        Oct 18, 2019 at 9:46 pm

        Thank you. Yes, the exposed rebar will wick water and start up spalling within the concrete and then demolition is in order. I am reminded of the buildings in Mexico, where columns and rebar stick out of roofs for that elusive to be built next floor, all to lower taxes by being ‘under construction’. Forever.

        I was wondering if builders actually cut their losses and just walk away? Regardless, an empty building is a deteriorating building for sure. We have a local version in our rural paradise where a lady from Victoria inherited a bunch of cash and bought up some properties. Some have been empty going on two years. Rumour has it she spent her wad and there they sit, wasting away. Plus, thieving from building sites is a time honoured tradition to say nothing of vandalism and tagging.

        Maybe the homeless will move in too.

    • MC01
      Oct 19, 2019 at 2:08 am

      I apologize in advance for the incoming ultra-long post.

      When the Asian Tigers collapsed in 1997 literally dozens of high rise buildings in Bangkok were abandoned while under construction.
      In some cases construction stopped overnight, but more often than not the building site slowly ground to halt as money slowly ran out: contractors stopped reporting for work as they stopped being paid and/or rumors of an impending bankruptcy spread. Witnesses spoke to me of contractors trickling in to recover their equipment and as much unused material as possible before the area is fenced in. I’ve seen the same thing elsewhere.

      These Bangkok high rises just sat there unused and unfinished for years, or even more than a decade: there are still a few here and there which survived the present real estate bubble.
      What happened is always the same: initially the area was fenced in and a watchman appointed as the creditors looked for a buyer. Some building sites were sold speedily and that was about it. But for the rest a wholly different story unfolded.
      As watchmen stopped being paid or just kept collecting their paycheck without bothering making their rounds, high rises became no-man’s land. Some became a playground for parkour practicioners or urban explorers, but most were just squatted in. In most cases squatters tried not to attract too much attentions but there several cases in which unfinished walls were patched with corrugated iron and, the irony of it all, “no trepassing” signs placed everywhere.

      As land values exploded in Bangkok recently these “Ghost Towers” have mostly been reclaimed but… underneath the glitzy mirror glass and LED signs these buildings are stuff built in the 90’s by fly-by-night outfits desperate to close the building site while the party was still ongoing. Properly fixing them is too expensive and takes far too long. Bangkok is always in a hurry, especially when big money is involved.

      I know of several (relatively) high rise in Italy that were abandoned during construction. They have mostly been completed over the years, but either in “truncated” form (IE less than half the floors originally envisioned) or by bankrupting a series of developers.
      All these high rise buildings are considered “jinxed” or “snakebitten”: they have long proven to be extremely hard to rent out and rarely, if ever, break even and see nearly continuous changes of ownership.
      I will take a few pictures during my next trip there.

      There’s so much more to tell but I have already gone too long.

      • Mike
        Oct 19, 2019 at 9:55 pm

        Excellent description. Sometimes one has to spend 10 “gray” dollars to earn 5 “legit” dollars. :)

  7. Iamafan
    Oct 18, 2019 at 3:09 pm

    For a few decades, I rented from a commercial building in a good district in Queens, NYC. For location purposes, Anthony Weiner was our Congressman and he and his famous wife lived in the same street we rented.

    The original owners were from Hong Kong. Yes this was around 1990’s to 2000s. The building was maintained very well. Later when the business investment soured, and they sold to a Russian who has different ideas about service.

    Everything went downhill. My employees had many stuck elevator and overflowing bathroom issues. So with today’s building investment issues, be wary of upcoming poor services.

  8. Iamafan
    Oct 18, 2019 at 3:59 pm

    *** OFF TOPIC *** More on Repo.

    Dr Jekyll meets Mr Hyde.

    The NY Fed desk did $20.1b in Reverse Repo O/N RRP today.
    They also did $56.65b in OVERNIGHT (till Monday) Repos.
    Did you notice there was not the usual Friday Term Repo today?

    The last times this year they did more than $20b RRP were on 6/28, 6/19 thru 6/21.
    If you noticed, Reverse Repos are one of the factors in – Total factors, other than reserve balances, absorbing reserve funds.
    (Reverse Repo soaks cash from the banks)
    On the other hand, Repo is a factor in – Total factors supplying reserve funds.
    (Repos provide cash or reserves to the banks)
    If you are very concerned about Liquidity or Increasing the Reserve balances with Federal Reserve Banks; you’d wonder why the Fed bothers to do offsetting things. Maybe things are getting more normal again.

    • Oct 18, 2019 at 4:16 pm

      yesterday the Repo rate was again higher than the upper limit of the Fed target rate.

      • Iamafan
        Oct 18, 2019 at 5:48 pm

        GCF Treasury Repo was 2.17, 2.069, 1.974, 1.916 for 2/15-18, respectively.
        I wonder if the Fed has given up chasing the rate way down and realized the banks were just using the Repo as a much cheaper source of funds (beats the GCF and the FED discount window) without the stigma.

        • Oct 19, 2019 at 10:29 am

          Now they are using RRPO? I understand that RRPO is used when you want to keep a bid under rates? It is also a genuine tool of financial repression. I think they are throwing everything they have POMO, TOMO, REPO, RRPO, to see what sticks. They have been out of this line for a decade and it worked well enough at the time to keep liquidity circulating after the source of new money shuts off, which by my calculations is happening right now. The alphabet soup basically functions as debt monetization, banks get cash, Treasury gets their collateral back, counts the money they loan as revenue and spends it. Opening these lines means we are going back in time, (walking back the new financial paradigm, changing prius for edsel) and does that mean asset values will revert to 2007 prices??

  9. max
    Oct 18, 2019 at 4:45 pm

    “The tsunami of Chinese money that washed ashore on the West Coast, and particularly in real estate in California,”

    to buy anything in USA you need American dollars — blame is on FED.

    • Oct 19, 2019 at 9:57 am

      The parent company in China or some of its entities can issue dollar-denominated bonds offshore, and they can borrow in dollars from global banks. The dollar is the largest financing currency out there, no problem.

      • Norbert Keresztes
        Oct 19, 2019 at 4:26 pm

        Sure no problem just print em up jerome

  10. Petunia
    Oct 18, 2019 at 4:48 pm

    I wasn’t aware the Chinese were pulling out of real estate projects in California. I know they are big investors in the movie/entertainment business. Are they also pulling out of deals in Hollywood?

    • RD Blakeslee
      Oct 18, 2019 at 7:46 pm

      The Chinese have not invested in WV shale gas as they indicated they would in 2017.

      • Nash
        Oct 19, 2019 at 9:11 am

        I agree that this website is amazing source of knowledge but in no way did it prepare us for the rest estate implosion of Frisco. No one is predicting the ramification of this to ie Vancouver…and Canada .which is a bubble that really is starting to and will pop especially if a conservative government is elected and brings us to the reality of not spending.
        Hope Trudeau gets in ti spend us out if the carnage to come.

  11. Unamused
    Oct 18, 2019 at 6:58 pm

    One project was halted because it was deemed to be not economically feasible

    They should have figured that out before pissing away so many millions.

    Several have been tangled up by building code violations, lawsuits, cost overruns, allegations of using substandard materials, disputes with contractors.

    There’s no excuse for Bad Management. One suspects some of the in-laws needed a job, something they could boast about to their friends while flailing about helplessly.

    These people are in dire need of Management Consulting services. I am not available, and they couldn’t afford me anyway because I make a point of grossly overcharging utter nitwits.

  12. Brant Lee
    Oct 18, 2019 at 7:07 pm

    Meanwhile, the workers can’t have moved on to greener pastures, you don’t find much greener than the Bay Area, right? I don’t see how a common construction worker could afford to live there anyway, even with a job.

    • polecat
      Oct 19, 2019 at 11:18 am

      Those poor, maligned construction workers Wolf mentioned in his post above – who weren’t receiving recompense .. were actually held in protection from the plethora of walking death pin-cushions .. otherwise know coloquially known as ‘junkies’, who would rob them of the hard-earned undollars if they had any .. whilst simultaneously having to avoid all those other tall towers .. of sh!t. Yes, I know it’s San Jose, and not downtown SF, but still ….

      All for their own good, of course.

  13. Unamused
    Oct 18, 2019 at 7:10 pm

    List of Troubled or Scuttled Chinese Projects in California Grows

    That’s unfortunate. If there’s anything CA could really use it’s one of those Chinese ghost cities.

    The good news is that the invasion of the US by Red China has failed and nobody can claim (not honestly, anyway) that tariffs had anything to do with it. Maybe now Californians will be better able to afford their homes again.

  14. DR DOOM
    Oct 18, 2019 at 8:44 pm

    My cynical nature believes those workers will be screwed out of the 1 million by lawyers and the law. Taking advantage of people with no power is sickening.

  15. Tom Stone
    Oct 18, 2019 at 9:45 pm

    There will be some nice buys in a few years.

    • Frederick
      Oct 19, 2019 at 7:38 am

      No doubt I’m waiting impatiently as I’m not getting any younger

  16. JB
    Oct 19, 2019 at 9:21 am

    Was there any US funding sources for these projects?. The chinese don’t always “go it alone”

    • Oct 19, 2019 at 9:54 am

      Oceanwide does not have a US partner for the Oceanwide Center, which is somewhat unusual for Chinese developers working overseas. They usually take on local partners. That said, Oceanwide in China has borrowed offshore, issuing bonds in foreign currencies, including dollars, and those might be held by US investors.

  17. Iamafan
    Oct 19, 2019 at 11:18 am

    Chinese (and Asian) large scale builders rely on pre-construction sales and bonds for financing. If you have to live in Asia and want to live upscale, you know this already. This is widely the norm in Asia.

    Trying to do this out of China or Asia, is another thing. Add the nationalistic fervor that’s growing an you can already see that these Chinese guys in SF will probably have to sell to a distressed P.E. specialist or else have a white elephant.

  18. Just Some Random Guy
    Oct 19, 2019 at 12:53 pm

    Anyone who believes any data from either the Chines govt or a Chinese company is a fool. And anyone who invests in any of those companies is an even bigger fool.

  19. Just Some Random Guy
    Oct 19, 2019 at 12:58 pm

    I’d like to see the US impose some sort of restriction on real estate ownership by foreigners. Try buying a beach house in Mexico as an American as see how far you get. Yes it’s possible but there are several hoops to jump through which makes it really hard for the small time investor.

    Canada also imposed some restrictions recently.

    But like usual, the US just sits back and allows the rest of the world to abuse our system, to the detriment of American citizens.

    And if you dare question the genius of this, you’re a xenophobe, racist, blah blah blah.

    • Iamafan
      Oct 19, 2019 at 2:42 pm

      The person who sold to the rich foreigner is laughing all the way to the bank. He was paid a lot of CASH. How can this be bad for him? He needs it to retire, maybe. Depends on whose perspective. Who is abusing who?

  20. Iamafan
    Oct 19, 2019 at 3:02 pm

    ** OFF TOPIC**

    Check out the latest Primary Dealer Report

    https://www.newyorkfed.org/medialibrary/media/banking/reportingforms/primarystats/dealpdf.pdf

    Table III
    Positions in U.S. Government,… securities:
    (In Millions of Dollars)
    Treasury Bills:
    Net Outright Position 24,336
    Change from Previous Week 17,517

    They really backed up the truck and loaded up. Right in time for the front running of the Fed buying T bills.

Comments are closed.