Fannie’s $38 Million Foreclosure Adds to OC Ventures’ Woes

Shangxuan Tan spread himself too thin while slicing up a Chicago student housing property, according to Fannie Mae.

The mortgage giant alleged in a $38 million foreclosure lawsuit filed late last week in Cook County court that an entity controlled by Tan, who founded Chicago-based multifamily firm OC Ventures, made “unpermitted transfers” of the 482-bed Letterman Apartments property in the Greektown neighborhood.

Fannie’s complaint is far from the only legal and financial trouble facing OC Ventures, as Tan is allegedly living in Singapore while battling with his partner in the firm, Shaofan “Steven” Zhang, through lawyers in Chicago courtrooms. The pair’s infighting is hampering the firm and its investors’ ability to make the best of a bad situation involving student housing properties across the nation, public records show.

Fannie is taking issue with Tan obtaining multiple additional debts totaling $8 million against the Letterman property in Chicago, despite also having a larger mortgage loan from the government-sponsored agency.

Tan’s company Ivy Fund Manager, an affiliate of OC Ventures, had already borrowed more than $38 million through a Fannie mortgage loan to buy the Letterman, formerly known as Automatic Lofts at 410 South Morgan Street, for more than $50 million back in 2019.

But Tan’s firm Ivy later took out $6 million in debt from upstate New York-based hard money lender Monroe Capital and pledged just under half of Ivy’s equity interest in the Letterman to secure the loan. Ivy also borrowed $2 million from an individual named Daili Xiao.

But Tan then defaulted on the Monroe and Xiao loans, and he later settled a lawsuit with Xiao for a judgment against Ivy for nearly $2.5 million that was set to be paid upon the sale of the Letterman. A New York court ordered Tan to have Ivy surrender all of its interest in the property to Monroe to settle the $6 million loan default. A representative of Monroe said Monday that his firm had control of the property but transferred it back to its Tan-led previous owner within the past few weeks after failing to strike an agreement with the other interested parties.

A judge has since required any funds generated by the sale of the Letterman property to be remitted to the court so they can be dispersed to Xiao, Monroe and any others in accordance with a settlement, in the event it fetches a price beyond the $38 million still owed to Fannie.

There’s evidence it might, as Tan had told creditors that Chicago-based Up Campus Properties was on track to pay more than $51 million for the property, but that deal was lined up a year ago and never closed. The property’s value today is unclear.

Regardless, Fannie claims that Tan’s debts to Monroe and Xiao and subsequent defaults on those deals constitute a breach of his firm’s mortgage loan contract. Fannie is suing to foreclose on the mortgage and asking the court to seize the property from Tan’s firm.

Attorneys for Fannie and Tan didn’t return requests for comment. A lawyer for Tan’s partner Zhang declined to comment.

Meanwhile, Zhang and Tan’s dispute shows there’s a problem at assets across the firm’s portfolio, which includes a handful of student housing complexes with an estimated value of $300 million. But multiple properties — ranging from Auburn, Alabama, to North Carolina to Rochester, New York, among other markets — are facing varying degrees of financial distress as Tan’s partners grow impatient. The portfolio’s liabilities total $340 million, according to litigation involving Tan.

A lawsuit filed in New York federal court last year by Yanglong Song, a Chinese national who oversees OC Ventures, asserted that he financed the firm and approved Tan’s role in acquiring large apartment complexes near college campuses across the U.S., appointing Tan as CEO.

But the real estate ventures have faced significant challenges. Song’s suit sought to claw back $34 million that Tan was given to make deals. It also alleged Tan’s property management firm Varsity Campus diverted significant portions of revenue from OC Ventures’ investment properties, some without proper authorization.

“It is apparent that the current catastrophic mismanagement of Ivy Fund has caused the business to crumble and Ivy Fund Collateral to dissipate,” Song’s lawsuit against Tan and Ivy said. “Without immediate legal intervention, Plaintiffs and other creditors and stakeholders will be left with no recourse.”

That lawsuit was dismissed due to jurisdictional issues that partly arose from Tan’s lack of U.S. citizenship — he’s a Chinese citizen, he said. A lawyer for Song who has also represented Zhang said Monday they’re working to consolidate the claims brought in New York into the Chicago suit involving Tan.

Tan has also filed his own suit against Zhang, alleging Zhang divulged private information about OC Ventures and Ivy Fund to “adverse creditors” and others who could have used the details against the firm as they sought to unload or refinance real estate.