Trail of bankruptcy and fraud charges adds twist to derailed Richmond housing development

The name of Richmond’s Miraflores development translates to “Behold the Flowers,” but it’s the turmoil around this market-rate and affordable housing complex that’s truly a sight to see.

Roughly seven years after the project originally promised to build 190 units on 7.3 acres of city-owned land next to Interstate 80, it has completely unraveled, city staff quietly revealed during a community presentation this month.

After the developer took out $10 million in loans against the property — without permission from the city — lenders are pursuing foreclosure, the property’s taxes are delinquent, the land has fallen into disrepair and Richmond has declared the developer to be in default.

Miraflores, which was set to be built near the Macdonald Avenue commercial corridor and two BART stations, was heralded for years as a key opportunity to revitalize the older residential community within Richmond’s Park Plaza neighborhood, representing the city’s attempts to transition away from a history dominated by industrial pollution and secure a healthier, greener future.

But as the project remains stuck in limbo, state business and federal court records show that beyond not meeting the community’s expectations, the developers involved are intertwined in a broader web of fraud, bankruptcy and immigration schemes, and appear to have been behind other now-defunct developments in the Bay Area.

State business records show that the principal executives of Miraflores Community Devco are the same people behind Fremont Hills Development — a bankrupt real estate firm that launched the uncompleted mixed-use Mission Hills Square development in Fremont, which was a project spurred by an organization called Golden State Regional Center.

Golden State Regional Center’s owners were indicted in March 2019 for running a fraudulent “golden visa” program, which offered U.S. residency to foreigners who invested at least $500,000 in American businesses that created at least 10 jobs, specifically in low-employment census tracts. The Securities and Exchange Commission accused the business of advising their immigrant clients to invest in the center’s projects — often housing developments — without disclosing their ownership of both entities.

In October 2020, this scheme left Mission Hills Square only partially constructed and vacant for years. The project’s lender, 2501 Cormack, eventually paid $40.2 million for that property in February 2022.

Several current Richmond city councilmembers and the city attorney’s office did not return requests for comment by press time.

However, former at-large Councilmember Demnlus Johnson was dismayed to learn about the project’s current status. Thinking about the benefits Miraflores was supposed to provide the community, he said he hopes the project can be put out for another bid, rather than be abandoned altogether.

“If this is all true, it is extremely disappointing to hear,” Johnson said in an interview. “But I really do hope that if not them, we’ll be able to find a developer who can bring that type of housing project to the community, because we need housing for teachers, first responders and low income parents.”

Until 2006, the Miraflores property was home to flower nurseries that had been run by Japanese immigrants since the early 1900s.

Once that business went under, the city purchased the land in 2016 through its Redevelopment Agency, taking advantage of federal grant money to help clean up contamination of pesticides and carcinogenic solvents on the site to allow for housing development.

In addition to commercial housing, Richmond officials hoped to construct affordable senior housing, develop a “greenbelt” park and a creek on site, and relocate the historic former Japanese flower nursery structures on the 16-acre property for rehabilitation.

“If people are looking for a place to live where they don’t want a car and can depend on public transit, you couldn’t find a better spot,” then-Richmond Mayor Tom Butt said in 2017. “This project is going to be a showcase for many reasons. One of the most important is that it highlights the history of the early 20th-century Japanese immigrant flower operations that at one point dominated that part of the city.”

While Eden Housing successfully constructed its 80-unit affordable senior housing project on the same property four years ago, the for-sale housing has yet to come to fruition.

Richmond’s redevelopment successor agency first selected Miraflores Community Devco, LLC to develop the land in July 2014, according to city documents. Subsequently, the city inked an Exclusive Right to Negotiate Agreement in September 2015 and a Disposition and Development Agreement (DDA) was signed in 2016.

Purchased for $4.2 million, the property deed was transferred to Miraflores Community Devco by October 2018.

Despite not commencing any construction, the developer approached the city in mid-2022, asking to modify the project from a for-sale development to a workforce rental project, which would have changed the project’s financing structure.

However, city staff said the developer has been uncooperative in providing full disclosure of the modified plan, in addition to failing to pay taxes and defaulting on the loans on the property, which all constitute breaches of the project’s DDA.

According to the DDA, the city does not have any liability in the event of default and may choose to repurchase the property.

The Richmond City Council has been negotiating the “price and terms of payment” of the property in closed session since at least July 26, 2022, according to city records.

While Richmond officials continue to weigh their options on how to move forward, former Mayor Tom Butt called out their work on the project.

“Hints of trouble began to surface years ago, accelerating in 2022, but staff did not want to let the community know that the project they had anticipated for so many years was headed for the toilet,” Butt wrote on his e-Blog earlier this month. “As late as a few weeks ago, the developer appeared at a community event at Miraflores Park and told the community to anticipate a groundbreaking this summer, knowing full well it was a lie.”