Part 2: Oceanwide Husks NOT “China’s fault”
Sinking Oceanwide in the process of enriching themselves, Edward Chen and his wife “Jean” were already under DHS surveillance for scamming EB-5 investors when they apparently were able to do it again.
It has been brought to my attention that by splitting this into parts, my first article comes across as anti-foreign investment. I hope I clear up in this part that the problem is US, and Chinese investors appear to be victims in the Oceanwide situation.
Downtown L.A. Investments*
Kwok Yue “Mickey” Cheng is named on the 2021 Oceanwide complaint (it names L.A. Downtown Investments, Homewin, and “Mickey”, but not Oceanwide itself) and he now runs Downtown L.A. Investment/“DLAI”, according to an article in the Real Deal.
However, the CA Secretary of State’s online “bizfile” lists the LADI agent’s name as Leo Cheng. It also lists three additional DTLA investment entities, two of which are inactive.
Downtown LA Investments Corp
INACTIVE Downtown LA Investments, Inc.
L.A. Downtown Investment LP • Agent Leo Cheng
INACTIVE The Downtown LA Investment Group LLC
Edward Chen ran LADI until 2020, despite having been federally prosecuted and banned from the EB-5 program as a result of the 2017 complaint, according to Oceanwide’s general contactor, Lendlease.
Indeed, Edward Chen has already been caught scamming EB-5 investors before with his wife “Jean” Jianqiao Chen. The Chens are a local Chinese-American couple from Arcadia that scam foreign investors. All of the Chen’s’ assets were frozen and they were supposed to be under DHS surveillance. In that situation, they were collecting capital from EB-5 funders who wanted to invest in a licensed regional EB-5 center and a Koreatown condominium, and using the money to buy real estate for themselves.
While both the center and the condo were real, it is unclear what, if any, connection the Chens had to the condo developer. It appears Jianqiao still owns a nonprofit that claims to be HOA of the K-Town building, “Golden Galaxy”, that was used to attract investors. It is possible the Chens were simply aware of the development and used it to create the appearance of a legitimate project/investment opportunity for EB-5 funders.
Suspicious Lendlease
Lendlease, the Oceanwide Plaza contractors, were still owed over $100M for construction work as of September 2023. Lendlease was already granted around $50M from Oceanwide to resume construction after it took them to State Court a few years ago. Oceanwide paid and Lendlease resumed but halted again just before the Plaza was complete. Lendlease was demanding even more money to finish the job, which it knew Oceanwide did not have because they said so repeatedly in the prior court proceedings.
Why would Lendlease halt construction again and demand more capital? Was it because they knew Oceanwide would have no choice but to pay them or let the Plaza sink?
Sale, Foreclosure, or Bankruptcy?
Last August marked 90 days since Oceanwide had defaulted on Downtown LA Investments. The County had been notified and was prepared to schedule a forced foreclosure, but a State court of appeals blocked the foreclosure sale on behalf of the contractors, who wanted their lien to have priority.
Lendlease also wanted to be paid for digging the pit, which the court eventually ruled against, stating that the dig wasn’t specific to the project. Since the pit was dug before the actual work on the project began, the issue should have been settled in the 2020 court proceedings between Lendlease and Oceanwide. This strikes me as a bad-faith claim by the contractor.
If Lendlease halted construction despite getting paid nearly $50M to continue, because of the false impression that they were somehow still owed for the dig, which should have been addressed in court, they could be largely responsible for the project sinking. If construction had actually wrapped, instead of halting so close to completion, the Plaza would have been a success, or at least not standing as a husk today.
Eventually, it was determined by the Courts that the investors’ lien was senior to the contractors’ lien, and their dig debt was determined to be invalid, but by then a decent amount of time had elapsed, resources for securing the Plaza were drying up and damage was starting to occur.
Lendlease believes “Mickey” and the Chens have financial ties to Oceanwide and had asked the court for more time to investigate this suspicion. The obvious financial relationship between Oceanwide and the Chens is through the regional center, DLAI, which is how Edward and Mickey may have been able to divert funds away from Oceanwide and its EB-5 investors.
If this happened, I am not convinced Oceanwide was in on the scam. In fact, from what I can tell, the Chinese investors are definitely the victims here, and Oceanwide may be, as well. Oceanwide sold off all of its U.S. projects in an attempt to raise the capital to save Oceanwide Plaza. Other Oceanwide Plaza creditors besides the contractor include the investors and investment company, subcontractors, lending bank(s)…and now, the City has inserted itself into the list by putting up $3.8M to secure and un-paint the husks. The County assessor’s office may have also attempted to collect Business Improvement District assessments on the property.
While subcontractors may be victims if they did uncompensated labor, the City is definitely not a victim and should not be given lien priority over the contractors or investors. I think the contractors’ perceived debt for the pit dig may have informed their decision to halt prior to completion. Los Angeles and California don’t have many resources for people who become victims of wage theft. I haven’t heard of any wage claims stemming from Oceanwide, but I am aware of wage claims on the Cecil renovation and other projects.
More recently, creditors are again trying to force sale of Oceanwide and the City is trying to force Oceanwide to file bankruptcy. If a large investor like Rick Caruso steps in to buy the husks, the creditors may be made whole by the sale. But if a buyer had stepped up to buy Oceanwide at any other stage, the site would not have fallen into disrepair. Also, Oceanwide could have possibly retained ownership and the EB-5 investors’ liens would have gotten priority for repayment. Now that the City is a creditor, they might not.
Worldwide Oceanhusks
The L.A. Live! Plaza was Oceanwide’s first U.S. project and seems its last one remaining since getting into similar trouble in other cities. In addition to L.A.’s three, Oceanwide leaves behind two husks in San Francisco and another one in Manhattan. In both cities, the solution turned out to be selling, and yet another Oceanwide project in Hawaii sold at a loss in 2023. But in Los Angeles, no serious buyer has stepped up. One was announced in 2022, but the deal never went through.
In September 2023, yet another Oceanwide project in Bermuda was liquidated.
Sleazy Huizy
If this whole scenario sounds familiar in light of the José Huizar scandal (Check out L.A. Public Press’s SMOGLAND RADIO bonus podcast episode), for which the disgraced former CD14 (Downtown Los Angeles to Eagle Rock) councilman was recently sentenced to 13 years in prison, for which he will report by April 30th, that’s because Oceanwide was named in the FBI’s search warrant (on page 9).
CCALA blames neglect
The Greater South Park Business Improvement District, which includes L.A. Live!, is overseen by a nonprofit BID group, Central City Association “CCALA”. CCA CEO & President Nella McOsker’s February 1st statement about the state of Oceanwide Plaza seems to blame homeless people instead of graffiti artists/vandals, or, more appropriately, corrupt politicians and local scammers.
STATEMENT: CCA on the Vandalism of Oceanwide Plaza
Enhancing Downtown LA's vibrancy and increasing investment in the region.www.ccala.org
We are disturbed by the images of the vandalism of Oceanwide Plaza. This is a representation of the very real neglect that DTLA has gone through over the past decade.
The Greater South Park Business Improvemenr district was formed in 2017 and literally billions of dollars of investments and hundreds of millions in taxpayer subsidies have gone into L.A. Live since it was built 2005. The 2015 expansion with Oceanwide breaking ground was another >$1B investment, so I don’t know how CCALA can claim neglect with so many people around the world putting their money into it.
We see it every day with the number of unhoused Angelenos experiencing mental health crises in the streets, the shuttered businesses we walk past and lack of public safety that we hear of too often.
Speaking of homeless people, they (we) have an actual grievance with CCA because CCA was instrumental in blocking several pieces of legislation that were meant to protect the civil rights of unhoused people. The California Downtown Association (CDA) including CCA helped defeat:
SB 608 Homelessness “Right to Rest Act”
AB 5 Homelessness “Bill of Rights & Fairness Act”
AB 718 Local Government: Powers
SB 876 Homelessness
CCA specifically interfered or attempted to interfere in:
Mitchell v City of L.A.
L.A. Alliance v County & City of L.A.
LAMC 56.11
Also, CCA boasts on their website about erecting nearly 20,000 new un-affordable housing units and hotel rooms in a decade (<3% were “affordable” based on AMI), another reason why claiming “neglect” over the decade is laughable. Unhoused people actually experience neglect of their most basic, obvious needs and their renaming our condition “mental health crises” rather than “housing deprivation/denial” is gaslighting.
At CCA, we advocate for the vibrancy of DTLA, but part of that means having a clear view of the very real issues that exist here. We take this moment to call on our city’s leaders to give the heart of the city the proper attention it deserves. While we appreciate LAPD’s swift response, we urge the City to take steps to address this blighted property before it becomes a further nuisance.
How does CCA advocate for DTLA’s “vibrancy”, when they advocate against homeless peoples’ rights and paint everything beige? Aren’t the buildings going to have to be painted at some point anyway?
Graffiti-covered towers a 'disaster', LAPD sergeant says. Here's a look inside
City officials and the Los Angeles Police Department toured inside the failed Oceanwide Plaza development in downtown LA…www.nbclosangeles.com
Racist KDL blames China
On February 15th, CD14 Councilman Kevin De León, whose district includes both L.A. Live! and Chinatown, said to NBC4:
The clock is ticking. We’re waiting for Oceanwide developers, back in Beijing, China to step up.
The developers behind Oceanwide, Edward and Jean Chen, seem to live in Arcadia, CA. Their neglect of Oceanwide isn’t the fault of mysterious “Chinese developers” (or unhoused people in Skid Row and the DTLA area, of course). Corrupt American scammers are clearly to blame here. Kevin De León replaced one of them! He could easily put the blame on Huizar, who previously represented CD14, and is now beginning a 13-year prison bid. Huizar and his chief-of-staff took bribes from developers to approve a skyscraper that should not have been approved. It’s possible bribes were made to approve Oceanwide, too. The FBI probed about Oceanwide in their warrant about the new LA Grand hotel, but probably wouldn’t care about any bad-faith moves made by people who are not politicians. KDL instead chooses to incorrectly blame China.
Kevin De León’s racism was put on display when the “Fed Tapes”leaked in October 2022, so this is on-brand for the councilman who refused to resign, even after President Biden called for him to do so.
LA councilman who rebuffed Biden's call to resign after racism scandal is running for reelection
A Los Angeles councilman who was entangled in a City Hall racism scandal but resisted President Joe Biden's call to…apnews.com
Chernobyl? Okay…
LAPD Sargent Gordon Helper spoke on-camera to NBC Universal:
It was a canvas for everybody. It reminds me a lot of, you know, what happened in Chernobyl? It just looks like it’s been vacant for a long time. There’s a lot of vandalism that is in the stairwell. There’s a lot of paint and vandalism inside the rooms. There are some built-out rooms in there and it’s destroyed. It’s destroyed by graffiti.
In my opinion, it is dishonest to call Oceanwide Plaza “destroyed” because Oceanwide has never been anything but a construction site. The lot itself hasn’t held any housing for decades. If it was ever “destroyed”, it was decades ago when it was affordable housing that got razed for “redevelopment”.
And if Oceanwide Plaza had really been “vacant for a long time”, it would look untouched. The problems he names: damage from vandalism and graffiti are caused by occupation and corrupt approval of unaffordable projects infiltrated with scammers.
Notice the timing of the peoples’ move indoors, under a roof, during our worst winter storms. On Tuesday, February 6th, ABC7 reported:
Downtown Los Angeles saw 4.10 inches of rain on Sunday, breaking the old record for the day of 2.55 inches that was set in 1927.
As of noon Tuesday, the area saw a total of 8.13 inches of rain from the storm.
$3.8M to secure
City Council voted to approve $3.8M to fence and secure Oceanwide Plaza. According to LAist,
In January, the city declared the property was substandard "due to inadequate sanitation caused by general dilapidation or improper maintenance."
However the South Park Business Improvement District collects millions of dollars in assessments through the County assessor in order to carry out maintenance in and around L.A. Live!, so why wasn’t that sufficiently being carried out?
Other CCA BIDs in DTLA have no problem paying for their own sanitation teams to carry out private sweeps on public streets and sidewalks. Unhoused people on Skid Row must move all of their belongings around the block every two weeks. It’s hard to believe they accidentally allowed a sanitation situation grow to the point of condemnation even on a dead construction site.
BIDs were granted the right to remove graffiti and hire sanitation teams for public streets in 1994, and in 2004 they got the right to demolish or rehabilitate existing buildings, almost making BIDs into developers themselves. Is the Greater South Park BID trying to gain ownership of Oceanwide through nuisance abatement? Are they somehow blocking the potential buyer, or actually creating more favorable conditions for the prospective owner, like leaving the site open so it can be a short-sale?
Is the problem that Oceanwide is behind on paying BID assessments? Don’t businesses generally pay per square foot, and what’s the policy on assessing business that are still under construction or closed down?
Isn’t there some kind of insurance that BIDs can get on construction projects in their jurisdictions to avoid being stuck with a husk or three? Why do BIDs get to pass the buck to taxpayers while blaming China and why don’t LAPD care about financial crimes occurring in Los Angeles like wage theft as much as they care about victimless vandalism?
Is LAPD getting into the business of offering private, around-the-clock security at 10-100x the cost of regular security guards?
If you pay security guards $16/hour, and you hire enough to have teams of two security guards working at all times, $3.8M buys 13.6 years of 24/7 security teams, not including benefits (but you can just have them all working part-time).
Granted, regular, unarmed security guards may not be able to stop a determined group of artist from making a mural, but they can always just call 911 themselves if they need backup.
The best security for vacant husks is full-time occupants (cheaper, too!). I’m sure there exist thousands of potential residents who would be willing to reside at Oceanwide, if only their rents were subsidized to a reasonably sustainable amount.
There’s a reason foreign investments aren’t to enable affordable housing. The EB-5 requirements state that the new commercial enterprise must be “for-profit” development, and most affordable housing is done by “non-profits”. It might be worth considering allowing foreign investments on more practical projects to alleviate the very real housing problems corrupt development exasperates.
Thanks to the Center for Immigrant Studies for their detailed EB-5 coverage.
