Monroe Capital sues to strip Tan’s Greektown student housing complex

Student housing specialist Shangxuan Tan has taken three strikes in his attempt to hit a $50 million sale of a Greektown apartment building, and his hard money lender wants him out of the batter’s box.

Monroe Capital, a short-term lender based in Rochester, New York, is seeking to strip the equity, held by Tan’s venture, in the 482-bed Letterman Apartments at 410 South Morgan Street, near the University of Illinois Chicago, court records show.

Tan, whose firm is Chicago-based OC Ventures, has been accused of using his property management firm Varsity Campus to extract fat fees out of the property and fleeing to Singapore after defaulting on a $6 million loan from Monroe, according to the lender’s lawsuit filed in New York Supreme Court.

Tan has allegedly ceased communication with Monroe and used his equity in the Chicago property as well as a 277-bed Albany, New York, student housing property called Block75, as collateral to obtain the debt. Monroe has sought an $8.6 million payback, after accounting for interest and fees owed by Tan’s venture.

Monroe gave Tan multiple chances to sell the property, and the landlord promised on several occasions that he had a deal in the works to sell The Letterman for more than $50 million, the lawsuit claims. Each sale fell apart or has yet to close.

Monroe lost patience and is working to exercise its option to seize the property — which OC Ventures bought in 2019 for nearly $51 million — as well as the Albany asset. It required the option to take over the properties as a condition for making the loan.

OC Ventures hired brokerage Berkadia to market the Chicago property for sale last year, and it was set to be sold for $52 million to San Francisco-based Reliant Group, but that deal fell apart, according to Monroe’s suit.

Then last fall, OC Ventures claimed to have a deal to sell The Letterman for $50 million, as well as the Albany property for about $30 million, to Salt Lake City, Utah-based Redstone Residential. But those deals also disintegrated, perhaps as a result of OC rejecting the Albany offer and counter-offering its price at $31.5 million, according to Monroe. The Albany property is encumbered by a $27 million Fannie Mae loan, and was called “essentially worthless” by Monroe, which pegs its value at close to the Fannie debt amount.

OC Ventures borrowed $38.3 million against the Chicago property in 2019, and that loan is also held by Fannie. That Fannie loan helped fund OC Ventures’ nearly $51 million acquisition of The Letterman.

In January this year, OC hired Newmark to sell a portfolio of eight student housing assets, including the Chicago and Albany properties, as well as others in Alabama, North Carolina and New York, even as the Berkadia listing of the Chicago property remains active.

Earlier this year, Chicago-based UpCampus Properties was said to have a deal to buy The Letterman, which is a more than century-old building that used to be a former electrical gear factory and is listed on the National Register of Historic Places.

OC Ventures appears to have talked UpCampus into upping The Letterman’s purchase price to $52 million, but no deal has closed. A buyer called BDC Group also had interest in paying about $27 million for the Albany property, but that deal fell through, Monroe’s suit said.

Tan “made no serious effort to sell the valuable Chicago property,” Monroe said in the suit. “Given that this is now yet another example, in a long line of previous examples, of [Tan] falsely claiming that a sale of the Chicago or Albany properties is imminent, only for those sales to never be fully consummated, [Monroe] can no longer wait for [OC Ventures] to complete one of these supposed sales in order to satisfy the [debt].”

The lender goes on to accuse OC Ventures of “continuing to derive substantial revenue from the properties and using their continued possession of the properties to divert money to themselves and the various shell companies they own, rather than paying” the loan.

The Chicago and Albany properties generated about $1.3 million apiece in net annual income as of 2021, according to Monroe, which claims the landlord’s marketing materials touted the Chicago property’s value as upwards of $60 million.

It’s unclear if UpCampus’ deal is still on track, though it was still working to buy it as of May, records show. UpCampus managing director Stephen Bus declined to comment. Lawyers for Monroe didn’t return requests for comment, and Tan didn’t return a request for comment left with Varsity Campus’ and OC Ventures’ office, which list their respective addresses in a Michigan Avenue building. An attorney for Tan and his borrowing entity also didn’t return a request for comment.

Another Tan attorney, Erich Eissenegger, has pushed back against Monroe’s attempt to take over ownership of the properties. He claims that there’s at least $13 million in equity in the Chicago property, and that OC has a deal in the works to sell the Albany property for $29.5 million, meaning there’s also a chance for the landlord to profit from that asset. Forcing Tan’s venture to surrender the properties to Monroe would be “giving a windfall to [the lender] in excess of millions of dollars more than the current judgment amount” owed to Monroe, Eissenegger said in court documents.

Transferring the properties to Monroe would also blow up the deals OC has to sell the assets, which would harm other investors in the properties, Eissenegger said, pointing out that Monroe has wrongly claimed Tan and his firm are the sole owners of the buildings. Lawsuits from others could be triggered if Monroe takes control of the assets, Eissenegger said.

UpCampus also appears to have gone through some recent shakeup. It was previously led by Nishant Bakaya, who was recently engaged in a separate $6 million legal battle with his former employer, embattled Chicago-based student housing developer CA Ventures. But a LinkedIn profile for Bakaya shows he left UpCampus in April.

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