Thousand Oaks homeless housing project in limbo as developer faces suits, foreclosure

Editor's note: This article was updated to include an interview with Step Up CEO Tod Lipka.

When developer Shangri-La Industries broke ground last year on a state-funded renovation of the Quality Inn & Suites in Thousand Oaks, the plan was that, by now, the motel would be transformed into permanent housing for formerly homeless people.

At least 77 people with disabilities, illnesses or other conditions that have made it impossible for them to stay housed would spend this holiday season in newly refurbished studio apartments, rather than on the street or in a shelter.

That didn’t happen. The former Quality Inn & Suites is still mid-renovation, with little or no work happening on the property most days.

There’s reason to doubt the project will ever be finished, because Shangri-La hasn’t paid some of its subcontractors and has defaulted on nearly $12 million in loans on the property, according to public records filed with the County of Ventura.

If the company doesn’t catch up on its payments soon, the lender could foreclose on the property and sell it as early as next month. Without a state grant like the one for $26.7 million that went to Shangri-La, it’s unlikely any new owner would be interested in converting the motel into permanent supportive housing.

“A foreclosure would be nothing short of devastating,” said Ingrid Hardy, Thousand Oaks' assistant city manager. “We do not want to see that happen.”

Shangri-La CEO Andy Meyers and other company executives did not respond to multiple calls and emails requesting an interview. Someone who answered the phone at the number on the company's website said the number was not for Shangri-La Industries.

Shangri-La under state investigation

The Quality Inn & Suites conversion is one of seven motel renovation projects Shangri-La is working on under the state’s Project Homekey program. Two of them are completed and tenants have moved in.

Six of the seven have “apparent violations” of Shangri-La’s contracts with the California Department of Housing and Community Development, and the department is “actively investigating” the company, department spokesperson Pablo Espinoza said in an email interview. The department has also alerted the California Attorney General’s Office about Shangri-La, Espinoza said.

Those suspected contract violations include unpaid loans and unpaid subcontractors in Thousand Oaks, Redlands and Salinas. And on those three projects and three more, in San Bernardino, King City and Salinas, Shangri-La has not finalized agreements with local government that would guarantee the properties remain as low-cost housing.

The seven Shangri-La projects were awarded a total of $114 million in Project Homekey funds, according to information provided by the Department of Housing and Community Development.

For the Quality Inn & Suites conversion, Shangri-La and the city of Thousand Oaks were joint applicants. The entire $26.7 million Homekey award was paid directly to Shangri-La, Espinoza said.

That money was supposed to pay to buy the property and renovate it, with some left over to fund part of the operations. The operator would be a Santa Monica-based nonprofit called Step Up, which has worked with Shangri-La on a number of affordable housing projects.

With the $26.7 million in state funding secured — more than enough to buy the Quality Inn & Suites property — Shangri-La also financed the purchase with $10 million from one lender and another $1.8 million from a second lender. Shangri-La’s purchase of the property, for $18.5 million, closed on Oct. 4, 2022, a week after the groundbreaking, according to Ventura County property records.

Shangri-La has defaulted on both loans, according to documents filed with the county by the lenders. The developer stopped making payments on the $1.8 million loan in April of this year, and on the $10 million loan starting in August.

According to The Real Deal, a real estate news website in Los Angeles, Shangri-La has defaulted on loans tied to Project Homekey properties all over the state and owes a total of $41.3 million under the delinquent loans.

Tod Lipka, the CEO of Step Up, said he didn't know that the loans were in default until late November.

"That (Shangri-La) didn't notify all of its partners in Homekey was shocking to us," Lipka said.

Step Up is a member of the partnership that owns the Thousand Oaks property. It's a small ownership stake and allows Step Up to bring a nonprofit property tax exemption to the project, he said.

But Step Up's role is to run the property once it's finished, he said. Shangri-La is in charge of property acquisition, financing and construction.

When work slowed down in Thousand Oaks and at the other Homekey properties, executives from Shangri-La told Step Up "the work was going to restart soon," Lipka said. "That was communicated to us multiple times."

In Thousand Oaks, Shangri-La also owes hundreds of thousands of dollars to six different companies that have worked on the Quality Inn & Suites conversion, according to mechanic’s liens filed with the County of Ventura by those subcontractors. A mechanic’s lien is a claim on the property by a subcontractor, putting the business in line for repayment if the property is sold or foreclosed upon.

Shangri-La owes about $300,000 to a plumbing company and $200,000 to a roofing company, plus smaller amounts to other subcontractors, according to the lien documents.

There are mechanic’s liens on file for other Shangri-La projects, too. In Redlands, Shangri-La's conversion of the Good Nite Inn into a Step Up-run supportive housing facility was completed in late 2022, according to reporting by Redlands Daily Facts. Since then, 13 subcontractors and suppliers on the project have filed a total of $2 million in liens for unpaid work, the Daily Facts reported.

No red flags

Hardy, the Thousand Oaks assistant city manager, said there were no red flags regarding Shangri-La when the company applied for Project Homekey funds. Shangri-La had completed commercial construction and renovation projects all over Southern California, including other affordable housing developments operated by Step Up, and it won the contract with the city of Thousand Oaks through a competitive bidding process, Hardy said.

One of the key elements to Shangri-La’s successful bid was “site control,” she said, which means the company had an agreement in place to buy the Quality Inn & Suites property.

Last year’s groundbreaking was ceremonial, Hardy said, and work at the site didn’t really begin until June of this year. Construction then stopped in September and has proceeded “on and off” since then, she said.

In addition to Shangri-La’s $26.7 million Homekey grant from the state, the city of Thousand Oaks contributed $1.8 million to cover some of the construction costs. Hardy said Shangri-La provided “documentation and backup” to confirm that the city’s money actually went to pay subcontractors and for other construction expenses.

Shangri-La executives have largely kept mum about their company's troubles, but Meyers told nonprofit news site CalMatters this week that the state was partly to blame and that high interest rates also made it difficult for them to refinance their loans.

Hardy said Shangri-La's team has continued to meet weekly with Thousand Oaks city officials. The city has also been in touch with state officials about ways to salvage the project.

“Our interest as a city from the very beginning is being on the front lines of addressing homelessness and providing housing to people who need it the most,” Hardy said. “Our conversations have been focused on getting this project done.”

Lipka said Step Up is also doing everything it can to make the Quality Inn & Suites conversion happen. He said he's been meeting regularly with representatives of Shangri-La and the city, and thinks the state may need to step in to save the project.

"This is really devastating from our perspective," Lipka said. "Our mission is to house people, and it would be a terrible loss if these projects do not end up housing people. We've learned in our work that people are more likely to die in the street without this life-saving support of housing and services."

Shangri-La appears to have borrowed tens of millions of dollars while it was obtaining more than $100 million in state Homekey grants. In 2021, BMO Bank loaned Shangri-La $20 million, according to a lawsuit filed earlier this year by BMO in Los Angeles County Superior Court.

BMO's lawsuit claims that Shangri-La has violated the terms of the loan and has been in default on the payments since April. In a response filed with the court, Shangri-La denied all of the claims in the suit.

BMO's lawsuit claims that Shangri-La's financial reports "do not appear to reflect accurate assets, liabilities and revenue" and showed "inappropriate use of funds." For example, the suit states that in November 2022, a bank account used by a company affiliated with Shangri-La paid nearly $1 million in 20 payments to American Express for credit card bills.

Luxury homes for sale

Shangri-La Industries, which includes the subsidiaries Shangri-La Construction and Shangri-La Development, is based in downtown Los Angeles. Its owner and CEO is Meyers, a former UCLA football player who was an all-Pac-10 offensive lineman in the late 1990s.

Shangri-La was co-founded by Steve Bing, the late Hollywood producer and political mega-donor. Bing financed movies and music through his company Shangri-La Entertainment. He also gave millions to Democratic Party campaigns, and in 2006 he spent $40 million to bankroll a failed California ballot initiative that would have taxed oil companies to pay for green energy.

Bing died by suicide in 2020, after jumping from the 27th floor of the luxury building in Studio City where he lived, the Los Angeles Times reported. When he turned 18, he had inherited $600 million from his grandfather, a New York City real estate magnate. Bing died having spent just about all of it; he was worth a reported $300,000 at the time of his death.

Meyers has run Shangri-La Construction since 2000 and is also vice president of Shangri-La Entertainment, according to his LinkedIn page.

He owns a pair of luxury homes in the Los Angeles area and may be on his way out of both of them. The Dirt, a now-defunct real estate news website, reported in August 2022 that Meyers had purchased a Beverly Hills estate from the actress Milla Jovovich for $13.4 million, according to a re-posting of a Dirt story by a Los Angeles real estate firm.

That home is in "pre-foreclosure," according to the real estate information website Zillow, which means the loan is in default. A limited liability company that owns the home has filed for bankruptcy protection, according to court records.

The Dirt reported that Meyers also owns a landmark oceanfront home in Long Beach known as Casa Oceano. That house is in the process of being sold, according to Zillow. The asking price was $10.5 million.

Tony Biasotti is an investigative and watchdog reporter for the Ventura County Star. Reach him at tbiasotti@vcstar.com. This story was made possible by a grant from the Ventura County Community Foundation's Fund to Support Local Journalism.

This article originally appeared on Ventura County Star: Thousand Oaks homeless housing project in limbo as foreclosure looms