Chicago hotelier Su-Mei Yen has so far avoided losing three hotels to foreclosure, but lawsuits against her and her companies are piling up as the hospitality industry continues its rocky recovery from the pandemic.
Yen, who began building a career in Chicago’s hotel scene in the 1990s, is facing legal action regarding a Best Western and Homewood Suites by Hilton in the South Loop and a Holiday Inn in Evanston that her firm owns. As she works to overcome the litigation, her disputes provide a window into the tough decisions hotel landlords made after the health crisis sent shockwaves through the market and interest rate hikes compounded financial difficulties.
Yen’s company, Yen Management Group, narrowly averted foreclosure on the Best Western, at 1100 South Michigan Avenue, and the Homewood Suites by Hilton, at 1101 South Wabash Avenue, legal filings show. Debt restructuring firm Lotus Capital Group secured two extensions of a $146 million loan backed by the properties, issued by Acore Capital. The most recent restructuring, in 2022, also allowed Yen to make a $3 million payment toward the debt tied to the hotels to get a longer maturity date, rather than a $42 million payment that was previously set to come due.
But Lotus alleges Yen did not pay a $700,000 fee Lotus is owed for restructuring services and is seeking that amount plus damages from Yen Management through a lawsuit filed in New York court in 2023. The case is pending, but court documents show tense exchanges between the two as the high-stakes financial negotiations played out.
Yen suggested paying Lotus a fee that would be equivalent to half of Acore’s extension fee of $383,000.
Extending the loan was helpful but still left the company in a challenging situation, she said in an email exchange with Lotus founder Faisal S. Ashraf. The hotels “have been performing well but are still discharging substantial amounts of accumulated old debt/taxes, etc. carryover from the pandemic,” Yen wrote.
Faisal responded, calling the $192,000 offer “an embarrassment and not consistent with our discussions.”
“What we have achieved for you is not a joke,” he wrote. “Without us you would be paying down tens of millions of dollars. It took us off and on all year and a few hundred calls/emails internally and with you and your team to get here.”
The status of the hotels is unclear, but it appears Yen is still in control of them. No new deeds or mortgages have been recorded for the properties since the 2022 loan extension, and a financing statement filed in August shows an LLC tied to Yen listed as the owner.
Another lawsuit, filed this month, alleges investors who put money toward renovations of the Best Western and the construction of the Homewood Suites are seeking a refund from Yen.
Three Chinese investors allege they bought into Yen’s South Loop hotel projects with the understanding that they’d be granted visas through a U.S. immigration program for real estate funders known as EB-5. Now they allege she is withholding a refund on their investment after their visa applications were denied.
The investors, Po Hsun Lin, Chenyu Wang and Ran Ding each invested $500,000 in 2015 through the EB-5 visa program in two South Loop projects led by Yen Management Group, the lawsuit said.
The projects, which were completed, included renovations to the 172-room Best Western hotel and the construction of the Homewood Suites by Hilton, which consists of 96 hotel rooms, 85 residential units and ground-floor retail.
The EB-5 program was created in the 1990s for foreign investors who put at least $500,000 in a real estate development that is located in a U.S. government-designated “targeted employment area” and create at least 10 full-time jobs. The policy was updated in 2019, later lapsed and was revived again in 2022 to increase thresholds that investors must fund to be eligible for visas through the program.
An agreement stated that Yen would be required to refund the trio’s investment if their applications for permanent residence were denied. The investors repeatedly requested refunds after their applications were denied three times between 2021 and 2024, but never received them, the lawsuit filed Jan. 17 in Cook County alleges.
The complaint also names Yen’s daughter, Cassie Yen, as a defendant, alleging she wrongfully disbursed $300,000 of the investors’ funds. It also alleges that Yen Management is in default on a loan funded by the investors’ money.
Although their combined $1.5 million investments were key components to Lin, Wang and Dings’ requests to immigrate to the U.S., they made up a small portion of the two hotel projects’ total costs.
It’s unclear how much Yen spent on the development, but her company took out a $90 million construction loan for the Homewood Suites project in 2018. SB Yen Management Group then refinanced the Homewood Suites by Hilton and the Best Western with the $147 million with help from Lotus. The same Acore loan is now subject to the Lotus debt restructuring lawsuit.
Yen is also facing legal trouble for failing to pay $50,000 in attorney’s fees to Chicago-based property tax lawyer Jimmy Sarnoff, public records show. Sarnoff was hired to protest property tax assessments for two of Yen’s hotels on Wabash.
As some of Yen’s legal challenges make their way through the court systems, two other properties faced close calls in recent years and might not be out of the woods entirely. Legal representatives in the respective cases declined to comment or did not respond to requests for comment.
Yen and her husband, Hui Hsien Yen, faced foreclosure over nonpayment of two loans against Chicago-area hotels, including the Whitehall in the Gold Coast, totaling $15 million. Not long after, they were hit with another foreclosure filing for allegedly failing to pay off a $20 million loan against a hotel in downtown Evanston.
The first lawsuit was settled in 2022 with an agreement that the Yens would satisfy the $15 million debt by September 2024. It’s unclear if that agreement was kept, but no new mortgages or foreclosure actions have been filed.
The Evanston case is still pending, but the Yens did secure a $10 million loan against the hotel in 2023, potentially resolving the dispute.
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