AIDS Healthcare Foundation to buy six Skid Row Housing Trust buildings

Half a dozen properties owned by a bankrupt Skid Row landlord should be sold to the AIDS Healthcare Foundation, said the court-ordered receiver who oversees the buildings, despite the nonprofit organization’s problematic history Hollywood-based company operating social housing.

The foundation agreed to pay $27 million for six properties owned by the Skid Row Housing Trust, which collapsed financially last year. Under the agreement, the foundation will continue to operate the buildings, half of which are single-room occupancy hotels and half of which are efficiency apartments, as permanent housing for formerly homeless residents.

The foundation submitted the highest offer for the properties, and the sale is in the best interest of all parties, including tenants and creditors, Kevin Singer, founder and president of Receivership Specialists, wrote in a filing filed Monday in Los Angeles Superior Court.

The purchase, which could be finalized as early as next month, would accelerate the foundation’s rapid growth as an owner of formerly homeless people. The foundation has a turnover of $2 billion per year, largely thanks to its network of pharmacies. Since 2017, it has purchased 16 properties totaling about 1,500 homes in and around Skid Row.

The Skid Row Housing Trust buildings — the Boyd, Hart and St. George single-room occupancy hotels and the Lincoln, New Carver and Rainbow Apartments — would add 415 units to the foundation’s portfolio.

The foundation says it has stepped in to combat chronic homelessness where public agencies, the private market and other nonprofits have failed, increasing the occupancy rate of its buildings by nearly 200 percent and removing nearly 1,000 people from the streets into permanent housing.

But the foundation’s buildings have faced heating, plumbing, elevator and electrical failures, as well as vermin infestations. In some cases, the buildings experienced an increase in tenant complaints and crimes after the foundation took them over, the Times found in an investigation published last fall.

Those issues prompted the state Department of Housing and Community Development to send a letter to the receiver last month saying the foundation “would not be an appropriate owner and operator” for the trust buildings. A department spokesperson told The Times on Monday that its concerns about the foundation’s potential ownership remain.

The Los Angeles City Council is expected to discuss the receivership in a closed-door hearing Tuesday.

The proposed sale comes as Singer and city officials attempt to end the year-old receivership that began when the trust, once considered a national model for housing formerly homeless residents, declared in February 2023 that it could no longer pay its bills and largely abandoned its 29 buildings and 1,500 tenants.

The receiver has deeded 11 of the trust’s newer, better-maintained properties to the more established nonprofit affordable housing providers, LA Family Housing and People Assisting the Homeless, or PATH, and hopes to transfer one more. Singer has put the remaining 17 trust buildings up for sale, many of which are older, single-room hotels without private bathrooms.

In addition to this trust, many other owners of single room hotels, considered housing of last resort for the city’s most vulnerable, have struggled in recent years with low public subsidies and a tenant population at struggling with mental health and substance abuse issues. which was prioritized for permanent housing.

Last fall, city officials presented a plan in which the local housing authority would take control of the remaining properties and operate them until they could be turned over to developers who would demolish and rebuild them into efficient apartments for homeless residents.

But that proposal failed due to growing budgetary pressures on the city and state. The focus instead has been on salvaging the buildings and potentially recouping some of the nearly $40 million in funding the city authorized for receivership.

In court filings Monday, Singer said three other bidders, whom he declined to name, had made substantial offers for the trust portfolio. But those offers were inferior to those from the AIDS Healthcare Foundation or involved complicated financing that he considered unsustainable.

Of the foundation’s $27 million offer, $5 million would fund ongoing repairs at the six buildings, and $10 million would pay off part of the city’s debt; the remainder would be spent continuing escrow operations until the remaining properties are sold. Singer said he continues to negotiate with two other bidders to purchase six more buildings.

Los Angeles Superior Court Judge Mitchell Beckloff, who was handling the receivership case, retired this month. Singer is asking Beckloff’s replacement, Stephen Goorvitch, for a hearing to approve the sale of the buildings to the foundation no later than May 10.

Without an influx of cash, Singer wrote in his filings, the receivership will run out of money in May.

A key issue in negotiations with the foundation was the availability of social services for tenants. Residents of trust buildings were eligible to receive case management, mental health and other services through their voucher programs. But the foundation doesn’t offer services in many of its buildings, citing cost.

The purchase and sale agreement calls for the foundation to use an external property management company for up to six months and agrees that it will have ongoing responsibility to provide unspecified social services to tenants. Ultimately, the agreement states, the foundation intends to operate and manage the properties with its own staff. The agreement also provides a two-year moratorium on enforcing existing code violations at properties at the time of sale so the foundation can continue its rehabilitation efforts without penalty.

A foundation spokesperson declined to detail the nonprofit’s social service plans for the buildings or respond to further written questions from The Times.

Clara Karger, a spokeswoman for Mayor Karen Bass, said the city emphasized to the receiver that any future owners and operators of trust properties must ensure that tenants receive comprehensive social services.

“It is paramount that the selected buyer commits to long-term affordability commitments and provides property management services that meet both the needs of vulnerable residents as well as maintenance and investment that will be needed to manage these buildings,” Karger said. “The city has clearly expressed its expectations for the provision of full on-site services in all buildings. »

Monday’s agreement comes as city regulators and courts scrutinize the AIDS Healthcare Foundation’s housing operations.

The Los Angeles City Ethics Commission is expected this week to discuss imposing $22,250 in sanctions against the foundation and one of its lead housing organizers, Susie Shannon, for failure to registration and declaration of their lobbying in 2023, according to the proposed settlement agreements between the parties. .

Shannon lobbied city officials on behalf of the foundation on various affordable housing issues without publicly disclosing her actions, as required by city law, according to the settlement. A foundation spokesperson said Shannon did not lobby for the trust to be placed into receivership.

The foundation faces at least 10 lawsuits in state and federal courts over conditions in its buildings, including class-action lawsuits detailing habitability problems at Baltimore and Madison’s single-room occupancy hotels on Skid Row.

This month, it won $1.5 million in damages through a default judgment against Kameron Segal, the former owner of the Madison, after the foundation alleged he failed to disclose the condition of the chronically broken elevator in the five-story building before the sale in September. 2017. It is unclear whether the foundation will be able to recover from Segal, who did not defend himself in the lawsuit and whose companies are bankrupt. An attorney for the foundation said in a statement that the ruling shows the nonprofit is not responsible for the building’s elevator problems and noted that it spent $600,000 on repairs.

Despite the expense, the Madison’s elevator suffers from frequent prolonged outages, including last month. Last year, the foundation agreed to pay $832,000 to 13 residents and undisclosed amounts to four others who filed suit over the elevator.

In a separate ruling this month, a Los Angeles Superior Court judge dismissed part of the class action lawsuit against the Madison foundation. But he noted that “some reduction in the agreed rent is likely owed” to tenants, as compensation for alleged plumbing and electrical problems, unsanitary conditions and other breakdowns in the building’s common areas.

“The fact that the tenants lived in subsidized housing at below-market rents does not mean that they were obliged to pay the full agreed rent in the event of significant defects in the condition of the common areas or other breaches” , wrote Judge William Highberger in the ruling. .

Times Staff Writer Doug Smith contributed to this story.