Court fights ensnaring a Greektown student housing development near the University of Illinois-Chicago took a new twist last week.
Shangxuan Tan, the CEO of Chicago-based student housing firm OC Ventures, sued his business partner Shaofan Zhang Aug. 1, alleging that he secretly conspired to oust him from their shared multifamily investment portfolio known as Ivy Fund.
Drama between the business partners was exacerbated by their firm’s default on a $6 million short-term loan that they took out in 2022 using the Greektown apartment and another student housing complex in Albany, New York as collateral.
“As I have communicated individually with all for you, for the benefit of all parties involved with Ivy, it is crucial to make an attempt to remove Tan as manager of Ivy,” Zhang wrote in an email to lenders that was included in Tan’s Cook County court complaint.
Tan, as manager of the firm, was to blame for the default, a prior lawsuit filed in New York by the lender claims. In the lawsuit, the lender, Rochester, New York-based Monroe Capital, alleges that Tan extracted excessive property management fees from Ivy buildings, ceased communication with Monroe and fled to Singapore after defaulting on the loan. (The New York-based company that filed the lawsuit has no relation to a Chicago-based lender of the same name.)
Monroe gave Tan multiple chances to sell his firm’s properties, and he promised on several occasions that he had a deal in the works to sell the Chicago property known as The Letterman at 410 South Morgan Street for more than $50 million, the lawsuit claims. Each sale fell apart or has yet to close.
Tan’s new lawsuit against Zhang however, claims Zhang is trying to make a sale happen without Tan’s involvement.
In Zhang’s email to lenders included in Tan’s lawsuit, Zhang committed to selling the building and told the lenders that, without Tan in the picture, they will “have the peace of mind that sale proceeds are not going to just ‘disappear.’”
Tan, however, wants a judge to find that Zhang is breaching his commitments to OC Ventures by sharing company matters — such as financial information and other “trade secrets” — with people outside the firm, including “creditors, competitors and adversaries,” the latest lawsuit shows.
OC Ventures originally bought the 482-bed, 235,100-square-foot Greektown property in 2019 for $51 million with a $38.3 million loan now held by Fannie Mae. The status of a recent deal to sell the building to Chicago-based UpCampus Properties is still up in the air — the would-be buyer has agreed to pay about $52 million for the property, according to court records.
If a sale doesn’t take place, it could be some time before Monroe is made whole. In the New York lawsuit against Ivy Fund, Monroe sought an order from the judge for Ivy to pay the lender back $8.6 million plus interest, and later to surrender the rest of its equity in the buildings.
While the lender obtained a judgment for $8.6 million and looks on track to be repaid at least that much if the Letterman sale closes, the judge stopped short of handing Monroe any additional equity in the properties.
One of Tan’s attorneys, Erich Eissenegger, contested 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 as its debt amount is $27 million.
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.
The judge in Monroe’s New York case ruled this week that the lender and the borrower will need to settle the case out of court. The judge referenced repeated assurances that a deal to sell the Greektown building for $52 million is still possible.
“[Monroe’s] commercial representatives were in constant discussions with Ivy
Fund’s representative regarding the sale of properties in which Ivy Fund has ownership
interests,” the judgment stated. “[Ivy Fund] contend[s] that the order sought by Plaintiff in this application would disrupt the sale processes.”
Zhang has yet to respond to Tan’s lawsuit as of Thursday.
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