Su-Mei Yen couldn’t dig herself out of distress at her big South Loop hotel development in time to avoid her lender’s wrath, according to a recent lawsuit.
San Francisco-based lender ACORE Capital filed a $187 million foreclosure complaint against the owners of 1100 South Michigan and 1101 South Wabash Avenues, including the Yen family’s firm, Hinsdale-based SB Yen, which also employs the longtime Chicago hotelier’s relatives Bert and Cassie.
The lender’s foreclosure lawsuit threatens to strip the landlords of their control of the lodging property, which includes the 172-room Best Western Hotel on Michigan Avenue they renovated in recent years as well as the Homewood Suites by Hilton on Wabash Avenue, which consists of 196 hotel rooms, and a separate 85-room extended stay suites section plus ground-floor retail they built in 2018.
The Yens poured at least $3.7 million into extending the loan’s maturity date, which originally was set to come due in 2022, when the aftermath of the pandemic was still weighing heavily on the travel and lodging industries.
Meanwhile, investors hailing from China say they collectively raised more than $18 million for real estate projects backed by SB Yen, including the South Loop developments, but Yen and her children allegedly mismanaged the money. The funds were raised through the federal EB-5 program that allows foreigners to obtain U.S. visas in exchange for investments in real estate projects, but some of the investors say they never gained permanent residency due to SB Yen’s financial missteps. Their lawsuit against Yen expanded in recent months from three plaintiffs who had put $1.5 million into SB Yen to now more than three dozen who each contributed at least $550,000.
The funds were meant to go into renovating the Best Western Grant Park Hotel at 1100 South Michigan and developing the newer, neighboring 30-story mixed-use tower at 1101 South Wabash.
They claim a conflict of interest arose due to Cassie Yen controlling the EB-5 lender vehicle while her mother Su-Mei Yen controlled the borrower entities. The investors allege the Yens “entered into an agreement to misappropriate funds from the company, to intentionally allow the loan to default, and to intentionally conceal the loan’s status” from the investors, their lawsuit said.
Su-Mei Yen and an attorney for SB Yen didn’t return requests for comment. An attorney for Lotus declined to comment, and representatives of ACORE didn’t return requests for comment on how the EB-5 investors’ lawsuit may impact the foreclosure proceedings.
Even though the investors and ACORE are seeking a total of over $202 million from the Yens — who have owned and operated Chicago hotels for decades — their Gold Coast and Evanston properties have so far wiggled out of precarious financial situations in the post-pandemic era.
After a brush with a previous lender in 2022, their 97-year-old Whitehall Hotel on the Gold Coast, at 105 East Delaware Place, is carrying a $50 million loan that so far remains intact, but is set to mature later this year, according to public records. Su-Mei Yen has owned the Whitehall since 1992. Her 259-room Evanston property, at 1501 Sherman Avenue, earlier this year also had its mortgage expanded by 30 percent to a total principal amount of $13 million, public records show.
Yen also got a New York judge to dismiss her as an individual from a lawsuit filed by a debt restructuring firm, Lotus Capital, that negotiated a loan extension on the ACORE deal for the South Loop properties. Her firm SB Yen in March settled with Lotus, though the terms weren’t disclosed, after the brokerage claimed it wasn’t paid its $700,000 fee for its services for the hotel firm.
But ACORE is now alleging that after it granted forbearance to SB Yen for its loan three times, in 2020, 2021 and and again in 2024 ahead of its September 2024 maturity date, the borrower has violated its agreements with the lender by failing to deposit hotel revenue in recent months.
The lender claims the account that SB Yen is supposed to fund with the South Loop hotel revenues is “significantly short,” including by about $2 million during peak summer months.
“Moreover, borrower has admitted to [ACORE] that, instead of remitting revenues to the clearing account, these amounts have been used to repay cash fundings from borrower’s affiliates,” the lender said in its suit.
The complaint also alleges SB Yen agreed to pay a forbearance fee of $600,000 in June 2024 but never coughed up the money, constituting yet another event of default.
Due to interest and fees, the unpaid balance on the debt has swelled to over $187 million despite being originated for just $146 million in 2019, with over $60,000 being added to the loan each day it remains in default, the lawsuit said.