Greensboro officials have publicly expressed support for Step Up on Second, the city’s partner on a permanent supportive housing project, even after the group became embroiled in a multimillion-dollar lawsuit. But public records reviewed by WFDD paint a more complex picture of the city’s response and relationship with the organization. 

Emails obtained via a Freedom of Information Act request suggest that city staff members were becoming frustrated with Step Up in early January, months after the group was slated to close on the Regency Inn property on North O’Henry Blvd and begin transforming it into housing for the chronically homeless. 

(Editor's note: the contents of the following emails are quoted verbatim and may include errors.)

On January 10, Tod Lipka, Step Up’s CEO, told the city’s housing department that due to issues with the building, they would need an additional $1.5 million in city money to complete the project. Greensboro had already committed $3 million in support. 

“No surprises there,” Assistant Director of Housing and Neighborhood Development Cynthia Blue wrote to Director Michelle Kennedy. “Could have told him that 9 months ago that he wasn’t looking closely enough at it… which is when he was SUPPOSED TO CLOSE THIS THING.”

Kennedy expressed similar concerns in her reply to Lipka. 

“Had this property closed in the timeframe we were initially told that it would, much of the deferred maintenance and other issues could have been avoided,” she wrote. “It is extremely disappointing that due diligence is only happening now.”

The exchange took place before city housing officials knew that Step Up and its development partner Shangri-La Industries had been named in a $100 million lawsuit filed by the State of California, which alleges in part that the companies failed to meet contractual obligations in its projects in the state. WFDD shared that information with Assistant Director Blue during an interview on January 10. 

That news was a cause for concern for Councilmember Zach Matheny, who emailed fellow councilmembers and the city manager after being informed of the lawsuit via a WFDD interview request on January 19. 

“Greensboro needs to pause this project immediately,” he wrote, linking to news coverage of the suit. “It appears the Regency Inn plan has been and continues to be a huge failure on the City for its purpose of house inn the homeless. Before the City goes any further with Step Up and its partners, we need to take a step back and be very cautious. It appears Step Up is not what it seems to be in reality.”

The concerns were not limited to Greensboro. Emails show Victor Isler, an assistant county manager in Guilford County, was prompted by WFDD’s coverage of the lawsuit to ask Board of Commission Chair Skip Alston to table Greensboro’s then-upcoming funding request for the project on January 16. 

He also indicated that he had not received updates on issues outlined in news coverage.

“Chair Alston, I am sharing to see if there is any consideration to pause on this as an agenda item to explore the viability of Greensboro's proposal considering this new information.?”

Alston said he asked staff to remove the item from the county commission’s January 18 agenda. 

In interviews on January 23, Greensboro Housing Director Michelle Kennedy and Mayor Nancy Vaughan said that they remained confident in Step Up because the lawsuit is focused on Shangri-La Industries, a development partner that is not attached to the project at the Regency Inn. 

California’s suit alleges that the two companies “have such a unity of interest and ownership that the separate personalities of these business entities do not exist.” A similar point was raised by Matheny in an email to council and City Manager Taiwo Jaiyeoba. 

“With the Step Up lawsuit, this is what I would deem BIG news,” he said. “I get there is another party, but, Step Up is involved. We should have been notified in my opinion if this impending news.”

Jaiyeoba asked Matheny to “reserve judgment about the lawsuit until Step-Up comes before Council,” writing that Step Up officials would be able to answer questions about how the company’s relationship with Shangri-La “impacted them financially as well.”

Representatives from Step Up and Slate Property Group, their development partner on the Regency Inn project, are expected to attend Greensboro’s February 6 council meeting.

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