California court blocks foreclosure of Oceanwide Plaza in DTLA

A group of EB-5 investors in China Oceanwide’s unfinished mega-project in Downtown L.A. can’t proceed with a foreclosure just yet. 

A California state court of appeals has temporarily blocked a foreclosure of Oceanwide Plaza from moving forward, according to a court order filed last week. 

A panel made up of three appellate justices announced it needs more time to review claims from Oceanwide’s general contractor on the project, Lendlease, over who would get paid first in the event of a foreclosure.

In June, a group of EB-5 lenders filed a notice of default with L.A. County, stating the Beijing-based developer had defaulted on an EB-5 loan tied to the project. Oceanwide owed $157.4 million under the loan, according to the notice, which also stated a sale could be scheduled after Aug. 8.

Lendlease and subcontractor Webcor are suing the EB-5 lenders and Oceanwide in an effort to gain lien priority over the EB-5 lenders, meaning in the event of a foreclosure or bankruptcy, the contractors would get paid first.

Lendlease also wants the court to invalidate the EB-5 group’s loan altogether, claiming fraud and misrepresentation. 

The lender group, called Los Angeles Downtown Investment, was previously run by Edward Chen, who was prosecuted by the U.S. Securities & Exchange Commission in 2017 for allegedly stealing $12.5 million from investors, Lendlease said in its complaint. 

A federal court ordered Chen to pay back $24 million in funds in 2018, according to court records.

“Although Mr. Chen was ordered to disgorge the funds and cease participation in EB-5 programs in 2018, Mr. Chen continued to run LADI until 2020 in violation of the federal judgment,” Lendlease said in a motion last month. 

Lendlease also alleges Chen and the LADI’s current manager, Mickey Cheng, have financial ties to Oceanwide, and have asked a state court for permission to gather further evidence on this, according to the motion.

Lendlease claims Oceanwide owes about $135 million, according to a source familiar with the matter. 

That’s in addition to the $42 million Oceanwide was ordered to pay Lendlease in 2021 — a sum Lendlease has still not received from the firm, the source added. 

Oceanwide’s Downtown L.A. project — the only U.S. asset Oceanwide has left — has sat unfinished since 2019. In filings with the Hong Kong Stock Exchange, the firm said it would need more than $1.2 billion to finish construction, in addition to the $1.1 billion it has already spent.

Under the federal EB-5 program, immigrant investors and their families qualify for permanent legal residence if they invest in a U.S. commercial enterprise.