Shangri-La Industries loses control of two more Project Homekey sites 

Shangri-La Industries has lost control of two more California motels slated for conversion into permanent housing under the state’s Project Homekey, after two separate state courts appointed receivers on the developments. 

A San Bernardino County Superior Court judge appointed Edwin Leslie at LK Asset Advisors to take over as receiver on 450 G Street in San Bernardino, with the power to operate, lease and go through the property’s finances. In Monterey County, a judge ordered the same receiver to take over 545 Work Street, formerly a Good Nite Inn, in Salinas. 

The court orders mark the second and third Shangri-La properties sent to receivership — last month, a court ordered a receiver for Shangri-La’s 1030 Fairview Avenue in Salinas.

In all cases, the receiver can market the properties for sale, putting the future of the conversion projects in flux. 

The receivership orders come after Shangri-La defaulted on loans tied to seven Project Homekey sites, owing more than $41 million. 

After TRD reported on the defaults last month, California’s Department of Housing and Community Development has filed its own lawsuit against Shangri-La over the seven motel defaults, alleging fraud. 

Shangri-La had scored $121 million in state grants between 2020 and 2022 to help finance the conversions — but the funds were not enough to keep Shangri-La afloat at the sites. 

New York-based lender Medalist Partners asked the courts to appoint a receiver on both 545 Work Street and 450 G Street. Medalist acquired a $13.8 million loan on 545 Work Street and a $3.2 million loan on 450 G Street from Sunday Capital in September 2022, according to property and court records. 

In the case of 450 G Street, Shangri-La had asked the court not to appoint a receiver, calling it an “extreme and drastic request.” The firm said it was in the process of finding new financing to cure any defaults.