This is the first in a series of articles about the Ramada Inn project.
When two California organizations came to Asheville in late 2021, eager to purchase and convert an old motel into permanent supportive housing for unhoused people, they pledged that their partnership would deliver “the solution” to “radically change how quickly housing is developed.”
The partners — a nonprofit called Step Up and a developer called Shangri-La Construction — presented their proposal for the Ramada Inn in East Asheville to city officials in December 2021.
For a majority of the city council, the proposal sounded like a solution to longstanding challenges with housing the city’s more than 500 unhoused people.
The city relinquished the right to purchase the property to Shangri-La a few weeks later.
At the time, Step Up CEO Tod Lipka assured the city that the experience of the two organizations was part of his team’s “special sauce” for speed and efficiency.
But the sauce may have expired.
In the almost 10 months since the project’s groundbreaking ceremony, no new construction beyond initial demolition has occurred.
The stakes are high.
“Creating this housing usually is a five-year process,” Lipka explained at the council meeting. “And so people die. People who need this life-saving housing with supportive services, die before the buildings are ever completed.”
Almost 22 months later, the need for stable housing continues, and the site’s proposed 113 units sit vacant.
None of the many cooks in the project’s kitchen have taken clear responsibility for the stalled development which was originally set to open its doors this summer.
The developer, Shangri-La Construction, attributed the delay to multiple causes: unexpected structural deficiencies found during demolition, financing issues and a struggle to come to terms with a contractor.
Meanwhile, court records from other projects in California show allegations of nonpayment by the developer.
Reasons for delay?
When Asheville leaders gave Shangri-La the right to purchase the motel, the partnership between the developer and Step Up was not new. Over the last decade, the two organizations have frequently partnered on renovation efforts, including eight projects in California.
The partners worked together on three projects as part of Homekey, a $1.4 billion government-funded program in California started in 2020 to convert motels into permanent supportive housing.
For the Asheville deal, Shangri-La said they could obtain the $10 million in private capital for the renovation of the motel. At the time, the city agreed to provide $1.5 million over three years in funding to Step Up to support social services at the housing site.
Shangri-La CEO Andy Meyers told BPR in August that the delay stemmed from being forced to refinance the project after failing to reach an agreement on a contract with the site’s demolition contractor, Asheville builder Beverly-Grant.
BPR requested the contract terms of the agreement with Beverly-Grant, but the contractor’s project manager, Jason Wightman, said they did not have a contract with Shangri-La. He said they completed the demolition based on an authorization to proceed.
“We did not have an agreement at the time, nothing officially inked in. It was moving very quickly, drawings were not completed, so there was no formal agreement,” he said.
Beverly-Grant received a permit for demolition in mid-March, but the developer filed the paperwork to release Beverly-Grant from the permits with the city in early July 2023.
According to Wightman, most of the initial demolition on the project was completed with the exception of some exterior demolition. Shangri-La confirmed to BPR that Beverly-Grant would not be the contractor moving forward.
“We don't have any issues, really, with the first contractor, it was just really hard to get to a contract with them,” Meyers explained in a phone interview in August.
Wightman said the two parties came to an impasse on the scope of work.
Asked if they were paid for the work they completed, Wightman demurred.
“We are working through that. I really wouldn't be at liberty to say about the current payment status,” he said. “From our perspective, you know, we just couldn't come to an agreement on a multitude of things. And, you know, everyone just kind of agreed to disagree.”
Wightman said Beverly-Grant would not be working with Shangri-La again, but he declined to elaborate on the reasons beyond saying the two companies operate in “different worlds.”
Meyers said the failure to move ahead with Beverly-Grant created a delay that necessitated a refinance of the loan.
“We just had a hard time coming to a contract, which meant we burnt a lot of time, which burnt a lot of time on the loan, which meant the loan had to be refinanced,” he said. “We could be under construction right now but we're just waiting to close the loan because, look, banks have exploded all over the country,” Meyers said.
Beyond the refinancing hurdle, a new contractor faces another roadblock. Permit records from the city show outstanding fees of $67,031 owed by the developer on the project.
Haley Mahoney, a development review specialist for the city, said the fees must be paid in order for Shangri-La or any new contractor to begin any construction work.
“I can tell you that the city of Asheville is not holding this project up,” Mahoney said. “We're waiting for them to get their ducks in a row.”
This week, Shangri-La declined to provide further comment about the unpaid permitting fees.
Lawsuits, liens and lessons learned?
The financial questions around the project are not a first for Shangri-La.
At one motel conversion project in Redlands, California, 13 contractors and suppliers filed more than $2 million in liens in March, April and May 2023, according to reporting by the Redlands Daily Facts.
Vivek Timbadia, Shangri La’s then-project manager for the project, told BPR that payments to contractors were delayed for around “six to eight months.”
Frustrated with what he said was a lack of communication from Shangri-La executives and the delayed payments to contractors, Timbadia said he left the company in August just shy of a year of employment.
“Some of the contractors really had faith in me and I used that credibility as long as I could. At some point they didn't value my words,” he said.
One of the subcontractors, BCM Construction, filed two liens for nearly $496,000 in April 2023.
Henry Castro, a project manager for BCM Construction, said he could not speak on the matter due to a non-disclosure agreement, but he confirmed that the company had received payment.
When contacted this week, Shangri-La representatives declined to respond to requests for comment about the subcontractors.
The Redlands project was not the only legal challenge for the developer, court records show. The company faces several lawsuits for other projects in California where other organizations allege they were not paid for work completed for Shangri-La.
In one case, Streamline Integration, a California electrical company, alleged Shangri-La failed to pay them for about $80,000 of work, according to court documents.
According to emails submitted as part of the legal filings, Streamline repeatedly asked Shangri-La for payment from mid-summer to early fall 2022.
In February 2022, Streamline filed a suit in Superior Court in LA County.
In an email in the court filing, Streamline CEO Brian Armstrong expressed concern about a lack of responsiveness from Shangri-La representatives.
“Is there a better contact than you to discuss this? Possibly accounting? Project manager? Legal team? I'm very concerned that I am again falling on deaf ears,“ he wrote in September 2021.
In November of the same year, Armstrong wrote again to Shangri-La Director of Development Robert Kuhl, court documents show. This time, he explained the inability to pay wholesalers when his company is not paid.
“I paid a partial payment out of my pocket despite no money from Shangrila. You guys are hurting my relationships with my vendors with how irresponsible your company has been and this is absolutely unacceptable. I know they have reached out to you many times and have NEVER heard back from you nor anyone else from your company. If you ruin relationships with wholesalers, how could anyone work for you?” he wrote.
Streamline representatives, including Armstrong, did not respond to interview requests by BPR.
One former Streamline executive, Vincent Castro, indicated he could not speak because of a non-disclosure agreement.
Shangri-La representatives did not respond to requests for comment on the litigation.
Coming soon, part two: Who is responsible for oversight on the Ramada Inn project? What city officials’ emails show about decision-making and accountability.
