Shangri-La Industries has lost control of six out of seven of its Project Homekey sites to court-appointed receivers, ending its goal of becoming a major operator of homeless housing sites across California.
State courts have appointed receivers on the six former motels, located in Salinas, King City, San Bernardino and Redlands, according to court records.
The receivers were appointed after Shangri-La defaulted on loans tied to the seven properties and owed about $41 million in delinquent debt as of Dec. 1, TRD reported. In separate court cases, lenders had sued Shangri-La and asked the court for receiverships, an alternative to bankruptcy.
Los Angeles-based Shangri-La had obtained $121 million in state Homekey grants from 2020 through 2022, according to state data, about 3 percent of the total funds handed out by the state program to date.
After TRD reported on the defaults, the state opened an investigation into Shangri-La and found the firm had violated its operating agreements tied to six of the properties. California Attorney General Rob Bonta filed a lawsuit against the firm last month, claiming the developer breached state contracts and alleging fraud.
Receivers have the power to lease up properties, investigate financials, collect rents and put the properties up for sale.
However, the receivers cannot remove the low-income restrictions on the projects, and the lenders could keep the affordable covenants in place, adhering to the state contracts.
Any sale of the properties has to be reported to the California Attorney General, according to court documents.
Edwin Leslie-Kubat at LK Asset Advisors has been named as a receiver on five properties — 1030 Fairview Avenue, 545 Work Street and 180 South Sanborn Road in Salinas, 1130 Broadway Street in King City and 450 North G Street in San Bernardino.
At 1675 Industrial Park, Mitch Vanneman at Hilco Global is the court-appointed receiver.
Shangri-La still manages and owns a site in Thousand Oaks contracted under Project Homekey, though the firm faces at least three lawsuits from contractors over that property, claiming unpaid mechanic’s liens.
Andy Meyers, the CEO of Shangri-La, which was founded by the late Hollywood producer Steve Bing, has previously laid blame on the state for the defaults, arguing that because officials failed to sign regulatory agreements for the deals, lenders triggered defaults.