It’s been nearly two years since Los Angeles-based developer Shangri-La Industries received more than $114 million in state funds to convert seven motels into homeless housing. Four of the seven projects remain unfinished, while at least one of the other three is unrenovated and just 13% occupied. Some of the properties are facing foreclosure or encumbered by construction liens.
In court documents, lawyers for a lender that had worked with Shangri-La on some of the Project Homekey properties accused the company of “operating a real estate Ponzi scheme.’’
The state’s housing department has acknowledged that the company is in breach of its contract and confirmed to KCRW that it is investigating the company’s actions. Last week, a court-appointed receiver was ordered to take over one of the vacant motels that were part of the Homekey project with Shangri-La.
The seven motels that Shangri-La was supposed to convert are located in San Bernardino, Ventura and Monterey counties.
In just one example, Shangri-La was given $26.7 million to purchase and renovate a hotel in Thousand Oaks. According to Assistant City Manager Ingrid Hardy, Shangri-La borrowed another $10 million from private lenders and defaulted. As a result, the hotel is now in foreclosure. There are also $1.9 million in liens against the property.
A similar scenario played out in Redlands and in King City where Shangri-La took out a $4.3 million private loan on a 45-unit motel after receiving $12.2 million from the state to renovate it. The project was supposed to be completed over a year ago, but remains unfinished.
"It’s so frustrating,” King City Mayor Mike LeBarre told KCRW. “If it was fulfilled, we would have people right now in permanent supportive housing, getting the things that they need to better their lives.”
According to the latest point-in-time count, despite billions of dollars spent to combat homelessness, there are 123,423 unsheltered people living in the state of California. Critics have repeatedly questioned how funds for homelessness are being spent at both the state and local levels. The Shangri-La saga is a perfect example of why.
Read more about the allegations against Shangri-La and the company’s response here.