EB-5 Immigrant Investors Duped by San Francisco Hotel Developers, Class Action Lawsuit Alleges

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A proposed class action lawsuit claims EB5 Global SF, MiMA Real Estate Partners I, LLC and other business affiliates have defrauded almost 90 people who invested in the purchase, renovation and operation of a San Francisco hotel for the purpose of attaining EB-5 immigration visas and eventually receiving permanent residency in the United States.

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The 32-page breach-of-contract lawsuit alleges the defendants have systematically exploited and misled investors under the EB-5 immigration program, individuals who each put $500,000 into a fund to acquire equity interest in a company whose goal was to revamp and operate the Renoir Hotel in downtown San Francisco.

The suit was filed by three Chinese plaintiffs who claim the company in charge of the project, SF Hotel Investors, as well as general partner EB5 Global SF and co-manager MiMA have preyed on investors and misrepresented the venture from the very beginning.

For example, the case contends, the companies allegedly kept certain parts of the project deliberately ambiguous, such as the price MiMA paid to acquire the hotel in 2012, how much the site was later sold to SF Hotel Investors for, and the terms and conditions of the sale.

Moreover, the estimated budget for the purchase and renovation of the hotel was only “vaguely disclosed” to investors, the complaint says. Per the filing, after the project was delayed for approximately three years, the budget was then increased without explanation from more than $62 million to more than $110 million—an expense “substantially above the cost of building a comparable hotel from the ground up,” the lawsuit points out.

The suit notes that EB5 Global SF and MiMA received 10.5 percent of the project’s development costs from SF Hotel Investors, which, according to the case, gave the companies “perverse incentives to increase the amount spent on the acquisition and renovation of the hotel.”

In addition, the complaint alleges that the companies—including co-defendants Kor Realty Group LLC and affiliates Renoir HM and Proper Hospitality LLC—induced the plaintiffs to invest in the project by misrepresenting that the hotel would be managed by Marriott.

“However, from the beginning, neither the Kor Parties nor the General Partner truly intended to have Mariott [sic] manage the hotel, which would deprive them of the opportunity to continue to access the cash produced by the hotel,” the filing asserts.

As the suit tells it, EB5 Global SF had a duty under the limited partnership agreement with investors to “act in exclusive benefit of the partnership.”

The case claims that the company, despite its duty, has “effectively been bribed by MiMA with the contingent profit and equity interest in the hotel, together with the immediate payment of a portion of the 10.5% commission for any funds spent on the hotel, and has breached its fiduciary duties to the plaintiffs in its reckless pursuits of its self-interests.”

The EB-5 visa lawsuit looks to represent anyone who was solicited and/or invested in San Francisco’s Renoir Hotel for the purpose of obtaining an EB-5 visa.

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