After their preferred partner for the project ran into legal trouble, Chattanooga officials are renewing their search for a developer to convert a dilapidated hotel off Lee Highway into housing for the homeless.
Shangri-La Industries and Step Up on Second, both based in California, are defendants in a lawsuit filed in January on behalf of that state’s Department of Housing and Community Development. According to CalMatters, a nonprofit news outlet, the state is trying to recover more than $100 million Shangri-La Industries received during the pandemic via California’s Homekey program, which is focused on developing housing for the homeless.
Last year, CalMatters reported, Shangri-La Industries defaulted on private loans it took out on seven motel conversions funded through the initiative, which put those projects at risk of foreclosure. The defendants in the lawsuit also include private lenders, cities that applied with the developer to obtain grants and Step Up, which would offer services at the housing projects, according to CalMatters.