Council to discuss purchase of Step Up in Redlands housing site
After cutting ties with developer Shangri-La Industries, city officials will discuss acquiring the property that houses more than 100 formerly homeless residents.
REDLANDS, Calif. — The Redlands City Council is set to meet in closed session on April 15 to discuss the potential purchase of the Step Up in Redlands housing facility at 1675 Industrial Park Ave., according to the meeting agenda posted by the city.
Why it matters: The move marks the latest development in the unraveling of the city’s partnership with Shangri-La Industries and Step Up on Second Street, Inc., the original developer and operator of the permanent supportive housing project known as Step Up in Redlands.
Details: Government code allows public agencies to meet privately to negotiate real estate transactions. The city manager and assistant city manager will represent the city in negotiations with Seth Davis, managing director of Arixa Capital.
Terms under negotiation include the price and payment conditions for the property at 1675 Industrial Park Ave.
Background: Step Up in Redlands provides supportive housing to approximately 130 formerly homeless residents and was one of several hotel-to-housing conversions funded through California’s Homekey program. The California Department of Housing and Community Development (HCD) awarded the city and its partners $30 million in 2022 to renovate a 98-room motel. The project was completed and opened by February 2023.
But in late 2023, the city identified at least seven contract violations by developer Shangri-La and issued a notice demanding the defaults be corrected. Among the allegations were unauthorized use of the property as collateral for loans, failure to pay contractors, and improper transfer of property titles.
In January 2024, California’s attorney general filed a lawsuit in Los Angeles Superior Court against Shangri-La Industries, LLC and related entities, accusing the firm of misusing public funds and breaching multiple Homekey agreements. The case, California Department of Housing and Community Development v. Shangri-La Industries, LLC, et al. also names Redlands and other cities as co-defendants due to their roles as grantees. Before discussing property negotiations, the City Council will also receive a closed session update on the ongoing case.
Redlands terminated its contract with Shangri-La in April 2024 but committed to continue funding the operations of Step Up in Redlands through the city’s portion of the Homekey grant. Officials emphasized that the city’s financial support for the facility’s residents will not be interrupted.
What’s next: City staff previously indicated the goal is to secure local control of the property to protect the project’s long-term viability. Direct negotiations between the city and Step Up on Second are already underway.
Acquiring the property outright would potentially allow the city to stabilize the housing program and ensure that state and local funds are used as intended.
The council’s decision and any public disclosures from the closed session will likely follow during open session at the April 15 council meeting.
City Council Meeting Information
View full meeting agenda here.
5:00 p.m. Meeting open for public comment before closed session
6:00 p.m. Open Session
City Council Chambers
35 Cajon Street
Redlands, California
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