15-Dec-18 The 90 Chinese investors who each invested $550,000 in a hotel/condominium proposed for Rush & Superior Streets have filed a federal class action lawsuit, a year and eight months after the project was cancelled.
The Carillon would have replaced three 19th century Victorian row houses at 42, 44, and 46 East Superior Street with 246 condo units, 216 hotel rooms, 120 hotel timeshare units, and 30,000 square feet of retail space. Concerned about its impact on traffic in the neighborhood, 42nd Ward Alderman Brendan Reilly rejected the proposal in April 2017. Architectural preservationists are now trying to protect the row houses from demolition.
The lawsuit, filed on November 28 in United States District Court, alleges securities fraud, breach of contract, and breach of fiduciary duty.
Seven defendants are named in the suit, including Symmetry Property Development of New York and its managing partner, Jeffrey Laytin.
Annabelle Yao, a Chinese citizen, is suing on behalf of herself and the other investors, all of whom reside in China and collectively invested $49.5 million in the project, money they now say they cannot get back.
At the time, the project was called Carillon Tower and described as a 42-story building with a 200-unit Hilton hotel, 154 apartment units, 225-seat Gibsons restaurant, and parking spaces for 154 vehicles.
(Left) Screen capture of a Chinese website on which, according to a federal lawsuit, investment in Carillon Tower was offered.
Investors thought money was safely in escrow
According to Yao, the investors believed their money was going to be held in escrow by TD Bank until the project was submitted to the Chicago Department of Planning and Development. That never happened but, according to the lawsuit, the money was released to developers anyway. TD Bank is now one of the defendants.
Defendants failed to prominently disclose the fact that, based on long-standing policy and procedure for all development in the City of Chicago, and the defendants knowledge of such policy and procedure, the project required alderman/ward approval prior to the submission of a project plan to the city commissioner of development and planning, reads the lawsuit, and that the submission of any project plan to the city commissioner without such alderman/ward approval would result in rejection by the commissioner and failure of the project.
According to the lawsuit, the project was presented to the Chinese investors as an EB-5 project. The EB-5 program was created in 1990 to stimulate the U.S. economy through capital investment by immigrant investors. If an immigrant investor puts $500,000 into a new commercial enterprise that creates at least ten full-time jobs, the investor qualifies for admission to the United States as a Conditional Permanent Resident.
They are asking for a full refund of their money, plus interest, court costs, and attorney fees.
Peter von Buol contributed to this story.