FREMONT — A bankruptcy, mortgage default, and two federal legal cases have engulfed a big Fremont mixed-use development, a financial quagmire that has stalled construction on the prominently placed project.
Mission Hills Square, a housing, retail, and restaurant project near Interstate 680 and Durham Road in Fremont, faces an uncertain future amid multiple formal proceedings.
On paper at least, the project looks like a slam dunk with its high-visibility location perched next to busy Interstate 680 and residential component at a time when housing is in high demand.
Once complete, Mission Hills Square would total 148 residential units and include 54,000 square feet of retail and restaurant space.
However, Mission Hills Square now lies fallow. In recent days, this news organization observed no indication of current — or recent — construction on the 12.6-acre development at 2501 Comack Road. Debris blocked a construction entrance. Graffiti was prominent.
Among the proceedings affecting the Mission Hills Square development and property:
— The project’s principal owner, Fremont Hills Development, filed for bankruptcy on Oct. 9.
— At least one lender has filed a notice of default on a mortgage provided to Fremont Hills.
— Gadsden Properties, the owner of San Jose-based Fremont Hills Development, says it is the subject of a U.S. Justice Department criminal proceeding.
— The Securities and Exchange Commission has filed a civil complaint alleging fraud and other violations against individuals and entities associated with the property’s ownership. The defendants include Danghong “Jean” Chen, an Atherton resident and San Jose attorney, along with her business partner and ex-husband, Jianyun “Tony” Ye, who lives in Atherton.
— A federal grand jury has indicted Chen and Ye for alleged visa fraud and other violations.
Ye has pleaded not guilty in U.S. District Court. Federal prosecutors claim Chen has exited the United States and has become a naturalized citizen of Dominica, an island nation in the Lesser Antilles archipelago. Government attorneys say Chen has changed her name to Maria Sofia Taylor. Chen departed the U.S. soon after the SEC filed its complaint in 2018.
“The complaint alleges that Chen and Ye secretly acquired and operated an EB-5 regional center, Golden State Regional Center, and later advised clients to invest in the center’s projects without disclosing their ownership interest,” the SEC stated.
Mission Hills Square is one of Golden State Regional Center’s projects.
The EB-5 visa program enables immigrant investors to become lawful U.S. residents so long as they invest in a U.S.-based company that employed at least 10 people. EB-5 enabled the creation of regional centers to spur economic and job growth.
Golden State Regional Center officially was presented as the intermediary to help finance and develop Mission Hills Square as well as a residential project in Santa Rosa, SEC investigators claimed.
The SEC claimed that Chen and Ye told investors that the regional center and Fremont Hills Development were independent operations developing Mission Hills Square — yet Chen and Ye directly controlled the two enterprises and the project.
The SEC said Ye and Chen extracted project funds from investors and Chen’s legal clients and controlled the development’s cash. The alleged scheme, according to the SEC, extended to Hong Kong in China.
The bankruptcy attorney for development firm Fremont Hills didn’t return a message left with his colleague at his San Jose office. Gadsden Properties didn’t return phone calls. Gadsden’s spokesperson has blocked email delivery and didn’t return a phone call requesting comment.
Chen and Ye collected at least $40 million from investors in the company tasked with developing Mission Hills Square in the form of memberships in the enterprise that cost each investor $500,000, the SEC claimed. Investors were also obliged to pay $4 million, or $50,000 each, for administrative fees, the SEC stated.
In another twist, Gadsden Properties in 2019 announced it had bought the still-unbuilt Mission Hills Square complex and its owner Fremont Hills Development for $240 million — even though the assessed value is just $10.9 million.
In contrast, The Village Residences, a 330-unit apartment complex in a choice Mountain View spot, traded for $292 million, or $885,000 a unit, in 2019; The Lex apartment complex with 387 units in south San Jose was bought for $180.5 million, or $466,000 a unit, in 2019; 808 West Apartments in downtown San Jose, with 315 units, was bought in 2020 for $184 million, or $584,000 a unit.
It isn’t clear why Gadsden Properties was willing to pay $1.6 million per residential unit for the unfinished and unproven Mission Hills Square in February 2019.
In November 2019, Gadsden warned that it was in dire straits.
“Management has determined that there is substantial doubt about the company’s ability to continue as a going concern,” Gadsden Properties stated in a quarterly SEC filing.
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