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King City files lawsuit against a Project Homekey developer

KING CITY, Calif. (KION-TV)- On Tuesday, King City officials announced that they have filed a lawsuit against a Project Homekey developer for allegedly breaching their contract with the city.

City officials announced that they will be filing a lawsuit against Shangri-La Industries, Inc. after the company allegedly defaulted on loans they acquired without receiving required approvals.

In November 2021, King City entered a Memorandum of Understanding (MOU) with Shangri-La to acquire and develop the former Days Inn Hotel on the 1100 block of Broadway Street.

The project is part of the State Homekey program.

"That put us in a difficult situation, because not only did the developer fail us on the development of the Homekey project, but they had because of the delays," Adams said. "They had promised us that they would fund the next extension of a temporary program that we set up and they never paid anybody."

According to the lawsuit this building would have had 44 units for the homeless. The city says the project would have been an ideal location with public transit and a grocery store nearby for people trying to get back on their feet.

According to King City Manager Steve Adams, the project has experienced months of delays and the property is now in foreclosure proceedings.

"Not only has their mismanagement, misconduct and fraudulent actions put this important project and shelter for many people in need at risk, it has also placed the City and operating partner in a position of having to defend ourselves against legal actions by the State for issues involving the grant requirements even though no funding was paid to the City and the City has no ownership interest in the property under the grant program.

King City Manager Steve Adams said

City officials said that six other projects throughout the State of California that were operated by Shangri-La Industries are facing similar situations.

The City confirmed to KION that they are also trying to temporarily house homeless individuals who had previously resided in the Salinas Riverbed area, which was determined to be an unsafe and hazardous situation.

"We're having to scramble around and develop alternate Means to. Uh, keep the folks that we've tried to help in hand, at least temporarily. Housing for now,"

During a Jan. 9 City Council meeting, the city approved a Memorandum of Understanding with multiple agencies to fund the extension of a shelter program while trying to resolve issues with a permanent project moving forward.

King City Council did approve an extension of a lease for 18 months at the Monarch Inn to make the program possible.

We did reach out to Shangri-La Industries, Inc for a statement and we have not heard back at this hour.

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Derrick Ow

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Dania Romero

Dania Romero is an reporter at KION News Channel 46.


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