HomeMy WebLinkAboutContracts & Agreements_74-2024City of
REDLANDS
30o E. State Street, Suite 690
Redlands, CA 92373
909-798-7510
cduggan@cityofredlands.org
April 17, 2024
BY CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Shangri-La Industries, LLC
660 South Figueroa Street
Suite 1888
Los Angeles, CA 90017-3433
Step Up on Second Street, Inc.
Attn: Tod Lipka, President and Chief
Executive Officer
1328 Second Street
Santa Monica, CA 90401-1122
Charles M. Duggan, Jr.
City Manager
1675 Industrial Park, LP
c/o Shangri-La Industries
Attn: Andy Meyers Abdul-Wahab/Cody
Holmes
660 South Figueroa Street
Suite 1888
Los Angeles, CA 90017-3433
Cornelius & Cohanghadosh, APC
Attn: Alex Cornelius
23801 Calabasas Road
Suite 100
Calabasas, CA 91302
Re: Notice of Termination and Re -Affirmation of Funding Commitment re
Homekey Grant Agreement dated July 19, 2022
Dear Shangri-La Industries, LLC; 1675 Industrial, L.P.; and Step Up on Second Street, Inc.:
This Notice of Termination and Re -Affirmation of Funding Commitment ("Notice") provides
express notice that the City of Redlands ("City") hereby exercises its right to terminate the
Homekey Grant Agreement dated July 19, 2022 ("Agreement") by and between the City on the
one hand, and Shangri-La Industries LLC ("Shangri-La Industries"), Step Up on Second Street,
Inc. ("Step Up"), and 1675 Industrial, L.P. ("1675 Industrial") (together, the "Counter -Parties")
on the other hand.
This Notice also provides express notice to the Counter -Parties and other interested stake holders
that the City remains committed to the success of the Homekey project in the City as well as its
obligations under the separate grant agreement with the California Department of Housing and
Community Development ("HCD"). These commitments include, specifically, the provision of a
City -funded operating subsidy. The City will work directly with Step Up and other parties to
ensure that the operating subsidy fitnds on -site operations and services provided at the Homekey
project in the City.
The Agreement concerns the City and Counter -Parties' endeavor to acquire an existing motel,
rehabilitate the motel, and convert the motel to a permanent housing solution for individuals and
families who are homeless or at risk of homelessness ("Project").
In or around November of 2023, the City discovered that Counter -Parties were in default of their
obligations under the Agreement. In accordance with Sections 6.1 and 7.7 of the Agreement, the
City sent a Notice of Default letter to the Counter -Parties on November 15, 2023. The Notice of
Default letter identified numerous defaults by the Counter -Parties, described such defaults, and
demanded cure of these defaults. The defaults listed in the letter included, but were not limited
to, the following: (i) failure to record the affordability covenant in first position (§ 2.2), (ii)
failure to pay due and owing taxes and assessments (§ 6.1), (iii) failure to apply for the property
tax welfare exemption (§ 4.7), (iv) failure to promptly inform the City of pending litigation
involving the Project (§ 4.8), (v) failure to make loan payments when due and failure to notify
the City of existing loan defaults (§ 4.14), (vi) failure to inform the City of material changes to
Shangri-La Industries' financial condition (§ 5.1), and (vii) failure to obtain City and HCD
consent before encumbering the property (§ 4.11).
The Counter -Parties did not cure these defaults, and have made no efforts to discuss steps that
could be undertaken in order to progress toward a complete cure. "[A]t the option of the City," it
"has the right to terminate th[e] Agreement" and "seek any remedies at law or equity" that may
be available to it. (Agreement, § 6.2(a) and (C).) The City, pursuant to City Council action on
April 16, 2024, now exercises its right to terminate the Agreement. The City preserves all
additional rights and remedies it may pursue under the Agreement. The City, through counsel, is
willing and available to discuss the contents of this letter further with you.
Sincerely,
C1,041 arf
Charles M. Duggan, Jr.
City Manager
cc: State of California, Department of Housing & Community Development
Yvette M. Abich Garcia, City Attorney
Dustin Nirschl, Esq., Best, Best & Krieger
Christopher Boatman, Assistant City Manager