Bankrupt Fremont village project is bought by lender
Construction was halted years ago on prominent mixed-use complex of housing and retail
FREMONT >> A big complex of homes and retail that's been snarled in loan default, federal legal proceedings and two bankruptcy cases has been bought by the property's lender.
Mission Hills Square, a housing, retail, and restaurant project near Interstate 680 and Durham Road in Fremont, was purchased by an affiliate of Los Angelesbased Parkview Financial, according to documents filed on Feb. 2 with the Alameda County Recorder's Office.
Parkview Financial, the project's lender that acted through affiliate 2501 Cormack, paid $40.2 million for the property, the county public records show.
Mission Hills Square, a housing, retail, and restaurant project near Interstate 680 and Durham Road in Fremont, faces an uncertain future in the wake of the lender's purchase.
At first glance, the project would seem to be a sure bet. The development boasts a high-visibility location next to busy Interstate 680 and a residential component at a time when Bay Area housing remains in high demand.
Mission Hills Square, if built, would consist of 148 residential units and include 54,000 square feet of retail and restaurant space.
The project is only partially completed, according to papers filed in August 2021 with the U.S. Bankruptcy Court as well as multiple
on-site observations by this news organization both in 2020 and in 2021. Fremont Hills Development, the principal owner and developer of the property, filed for bankruptcy twice, with the most recent bankruptcy court case launched in February 2021.
Construction began in 2017, but by sometime in 2019, construction halted and hasn't resumed.
In 2019, an appraisal of the partly completed mixed-use complex placed its value at $81.7 million with construction yet to finish. If complete and made available to residential and retail tenants, the project's value would soar to $164 million, according to the appraisal by Joseph J. Blake & Associates that was filed with a federal Bankruptcy Court.
But by March 2021, the project's value in its incomplete stage had plummeted to $24.8 million.
If complete, it would be worth $138.2 million, according to a new estimate by the Joseph Blake appraisal firm.
Yet because the project has lingered largely neglected for about two years, completion of construction might not be able to follow a smooth path.
Numerous new factors have emerged between the first appraisal and the present day, court papers show.
“Since the June 2019 appraisal, the property and market have changed, influenced by the following factors: (1) the COVID-19 pandemic, after which condominiums became disfavored over single-family residences; (2) a sharp increase in material costs and an increase in labor costs; (3) the need to renew permits; (4) apprehension regarding the future condominium market,” the court papers
stated.
Plus, questions have arisen regarding the present-day structures, the court papers stated.
“The condition of the existing construction resulting from potential deterioration related to exposure to the elements” is a fresh concern, the August 2021 court filing stated.
Fremont Hills Development obtained two construction loans for the project: $65 million from Parkview Financial, which recorded a deed of trust that uses the property as the collateral for the loan; and $40 million from Bay Area Investment Fund, which provided its loan without attempting to use the property as collateral.
Significant legal uncertainties loom over the principal executives of Fremont Hills Development.
In October 2018, the Securities and Exchange Commission filed a civil complaint that alleges 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, as well other individuals and organizations involved in the property's ownership or development, committed fraud and other violations.
Fremont Hills Development, the bankrupt real estate firm that launched the uncompleted Mission Hills Square project, stated in court papers that it believes the property sale provides multiple benefits.
“The sale exceeds the ($24.8 million) value of the property by a large margin and eliminates a significant amount of secured debt against the property,” Fremont Hills Development stated in the court papers.