Investors sue developer of 2 planned Honolulu condo towers

The developer of two planned condominium towers near a Walmart store in the Ala Moana area is facing multiple lawsuits from investors who allege their money has been misused.

More than two dozen foreign investors have sued the developer of the projects, called Hawaii City Plaza and Hawaii Ocean Plaza.

The litigation presents a new challenge for the tower projects, one of which survived contentious public hearings at the Honolulu City Council, then ceased construction after breaking ground a year ago and promoting condo sales.

Johnson Fang, who is also known as Zhong Fang and heads the projects, which sought financing largely from investors in China, was not available to comment on the lawsuits or development activity of Hawaii City Plaza, which is supposed to rise on Sheridan Street just Ewa of Walmart, and Hawaii Ocean Plaza, which is slated for a site on Kapiolani Boulevard makai of Walmart.

The first lawsuit was filed in state Circuit Court in October by a single investor from China, Pinmei Wang.

Since then a Honolulu attorney representing Wang, Wen Sheng Gao, has filed two similar lawsuits representing 26 other foreign investors.

A fourth complaint was filed Feb. 3 in federal court by Honolulu attorney Andrew Daisuke Stewart representing an investor from Japan named Shozo Nakajima.

David Squeri, a local attorney representing Fang and his development companies, deferred comment on allegations but recently filed a motion to dismiss the state lawsuits largely on procedural grounds. Squeri also has filed a motion to have the cases decided by arbitration in California under terms of the investment contracts.

All the plaintiffs claim to have each invested at least $500,000 in one or both of Fang’s Honolulu projects.

The investments were structured to take advantage of the federal EB-5 Immigrant Investor Program, which offers U.S. residency green cards to foreign investors who help finance projects that create jobs in economically challenged areas of the country. Fang’s projects qualified for the program.

Fang’s use of the program drew critical views from some observers, including city Councilman Ikaika Anderson, who at a 2017 Council hearing asked Fang’s son, Jay, who is a project principal, whether more than half of Hawaii City Plaza condos were being sold or marketed to EB-5 investors from China. Jay Fang responded that investors had no priority right or reservation to buy condo units, but also gave other vague answers.

Anderson suggested that the Council reject the project. That led the Fangs to call Anderson’s comments “racial remarks” that violated federal law, and they threatened to call on Chinese nationals to boycott Hawaii as a visitor destination if the project was not approved.

Later, the Fangs said that much of the clash was due to a language barrier in part due to Johnson Fang primarily speaking Chinese.

The Council ultimately approved Hawaii City Plaza in 2017, and a year ago the Fangs celebrated commencement of construction on the 27-story tower with 184 residential units, of which 37 must be reserved for residents with moderate incomes at affordable prices. Market-rate unit prices range from $457,100 to $1.2 million.

However, construction stalled in an early phase to install tower foundation pilings. On Tuesday morning no workers were on the site where the only piece of equipment on the lot was a drill rig.

Nearby, workers were busy on two other tower projects that started construction after Hawaii City Plaza: The Central Ala Moana, where the superstructure is two stories high, and Azure Ala Moana, which has risen six stories.

On the site for Hawaii Ocean Plaza slated for 216 condos and 175 hotel rooms, construction was projected to start six months ago but has not. Fang has sought to sell this project for $80 million, according to one listing.

Investors aim to possibly wrest control of the projects, and allege that Hawaii City Plaza and Hawaii Ocean Plaza have encountered financial difficulties and delays.

“Plaintiffs believe that the undue delay was caused by unexperienced and incompetent management, and even worse, was caused by many dishonest management activities,” one complaint filed by Gao said.

To bolster the claim of financial trouble, the lawsuits said the developer has fallen behind paying city property taxes.

According to city rec­ords, taxes that were due Oct. 31 for the Hawaii Ocean Plaza site are delinquent in the amount of $131,130. Online city records for the Hawaii City Plaza cite were not available Tuesday.

The complaints also allege that representatives of the developer last year demanded that existing EB-5 investors contribute another roughly $100,000 but refused to share financial information.

One complaint alleges that investor money was commingled with two California projects by Fang companies and that development team members, who include several members of Fang’s family, used investment funds for personal uses. Another complaint alleges that the developer threatened to terminate investment agreements if investors refused to put more money into the project.

The state lawsuits claim that the investments were described as being “riskless as loans” and that investors could exchange their investment for a completed condo.

In the federal lawsuit, Nakajima claimed that he is entitled to either a 5% return on his $1 million investment or an ownership interest in a condo.

Nakajima also contends that representatives of the developer misled him about how long it would take to receive a green card by incorrectly saying it would take 18 months with delivery by the end of last year.

Green cards under the EB-5 program can take many years because of processing times and visa quota limits.