|By Antonio Olivo, Chicago
TribuneMcClatchy-Tribune Regional News
July 15, 2012--SHANGHAI -- -- Anshoo Sethi flew in from Chicago in search of Chinese money, leaving behind the worn hotel his family owns near O'Hare International Airport to sell a much grander vision of life in America.
Here, in the heart of China's still-thrumming economic engine, 140,000 residents -- about equal to the population of Naperville -- have a net worth of at least $1.6 million, according to a local "Wealth Report."
Sethi, wearing a crisp gray suit as he sipped coffee at the base of the twisting 101-story Shanghai World Financial Center, was in town to land some of those millionaires. Through the federal EB-5 program, which offers a path to U.S. residency for foreign investors, Sethi hopes to collect as much as $250 million from Chinese citizens eager for a foothold in America.
He wants to build a soaring hotel convention center in Chicago's Norwood Park neighborhood on land now occupied by his family's budget hotel, where rooms go for as little as $33 a night and weeds grow at the bottom of an empty swimming pool. He admits it's a tough sell in a competitive field.
"China is very 'dog-eat-dog,' very cutthroat," Sethi, 28, said of the competition for foreign money. "Everyone is looking to get their share of investors."
Sethi's proposal, to build five environmentally progressive luxury hotels near O'Hare, reflects both the promise and potential problems of the program. Critics say his plan is part of a trend toward mega-projects that are aggressively promoted by Chinese brokers at the expense of smaller developments that could create jobs faster.
During an interview in Shanghai, Sethi offered only spare details on his project, describing it as a "corporate meeting center" that would take advantage of increased hotel traffic generated by O'Hare's $15 billion expansion and create as many as 5,000 jobs.
According to a prospectus obtained by the Tribune, the project seeks as many as 499 EB-5 investors and could cost up to $735 million. In addition to their $500,000 ante, investors have to pay the Sethis' trust an administrative fee of $41,500, according to the documents.
Sethi declined to say how many foreign investors he has signed up.
Initially, the project's lofty ambitions attracted support from Gov. Pat Quinn's administration. A promotional video shot for potential EB-5 investors last fall shows Warren Ribley, then the head of the state Department of Commerce and Economic Opportunity, expressing support. The same video includes an appearance by Quinn at a Beijing promotional event for the project last September. "We know how to make convention centers," Quinn boasts.
But in January, state officials sent Sethi several emails demanding that he stop using Quinn's image and the Illinois state seal in his promotional materials, according to correspondence obtained through the Freedom of Information Act.
Sethi said he was unaware of the shift in position, and his project continues to use the Quinn and Ribley video.
A Commerce and Economic Opportunity spokeswoman, Marcelyn Love, said Ribley "overstepped his role" by agreeing to shoot the video endorsement without approval from the governor's office.
Ribley did not respond to requests for comment.
Love said Quinn's appearance in Beijing also was misrepresented. "The governor's attendance at the event was to promote investment in Illinois in general," Love said. "There is no specific endorsement of the project from the governor."
Financial consultants who have reviewed the convention center project on behalf of potential foreign investors said it has appeared troubled from the start.
Michael Gibson, whose Tampa, Fla.-based firm researches the viability of EB-5-financed developments across the U.S., called the project too big and unrealistic. He cited a saturated market for hotels in Chicago and the monumental task of securing the public financing and backing from so many private investors. The project, he said in an interview, is "a mess."
"In order to raise this much capital from an extremely large number of investors (499), the migration agencies in China and elsewhere often make exaggerated claims to meet their quota," Gibson wrote on his blog, eb5info.com.
Punyu Ho, a Chicago financial adviser to Chinese clients interested in the program, said Sethi made several shaky assumptions. Among them: a future land valuation for the site at 8201 W. Higgins Road estimated at $600 million when, according to Sethi, the land was purchased in 2003 for $13.2 million.
"What kind of improvement could they possibly do to this land so it would have that much value?" Ho asked.
Sethi's personal Web page boasts of nearly 15 years of experience as a real estate developer and global financier, which would mean that he began when he was about 13. His development company lists him as a CEO with a decade of experience developing large universities in India.
The hotel the Sethi family now operates -- the Chicago O'Hare Garden Hotel -- has been struggling. Last year it was cited by Chicago building inspectors for defective carpeting, a lack of smoke detectors, and holes in the walls and ceilings.
Also last year, Sethi and his father were sued in federal court for $355,000 by the Wyndham hotel chain for failing to maintain sanitary conditions in the hotel, which Wyndham said violated a franchise agreement. The hotel lost the Wyndham name and now operates independently.
The Sethis were sued by the state of Illinois in 2010 for failing to pay hotel employees $8,300 in wages and by a money-exchange company for bouncing a $332 paycheck, court records show.
Through a spokeswoman, Ambar Mentor-Truppa, Sethi said all of those legal debts have been paid. Mentor-Truppa said Sethi declined to comment on questions about his resume or experience as a developer.
In Shanghai, Sethi said he was unruffled by the criticism of his project, chalking it up to a fiercely competitive EB-5 market.
His consultant, Kevin Wright, said: "What you'll find here, especially in China, they have a whole industry of blogs, where if your project is doing well, you can expect that you're going to get a heavy, heavy amount of people hating on it."
During the past year, Sethi has made the 13-hour flight to China about six times, promoting his project in the country's smaller cities outside of Shanghai and Beijing.
He said he has learned that persuading someone to take the risk is sometimes an uphill battle.
"The very wealthy investors have already left China," he said.
(c)2012 the Chicago Tribune
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