A Beverly Hills developer has agreed to pay $10 million to acquire one of the largest homeless housing portfolios in Los Angeles.
Leo Poustilnikov, 38 years old, to purchase 17 buildings owned by nonprofit Skid Row Housing Trustwhich had collapsed financially and was placed into receivership last yearThe properties, which consist of single-occupancy hotels and small apartment complexes, contain 1,200 units for formerly homeless tenants, many of whom are elderly, disabled or have mental health issues. The deal requires court approval, which is expected to be granted by Los Angeles County Superior Court next month.
Under the terms of the deal, first reported by The Times this month and formally announced in court papers filed by Receivership Specialists on Friday, Pustilnikov will pay $19 million for the portfolio and then receive $9 million to cover other renovations and repairs.
“The buyer appears to me to be a responsible and qualified operator,” Kevin Singer, president of Receivership Specialists, wrote in the court filing. “The at-risk population living in the properties being sold requires a permanent owner/operator, and without such an owner/operator, the alternatives for these tenants could be catastrophic.”
The sale to Pustilnikov, along with a separate sale to another owner for an additional property, would complete the dissolution of the trust’s 29-building portfolio. The trust’s bankruptcy last year triggered what city officials called a “looming humanitarian crisis” with tenants living in squalid conditions and sparked widespread fears about the loss of a vital source of last resort housing.
Eleven of the trust’s properties, most of them newer and in better condition, have already been transferred to nonprofit owners. But the remaining buildings, which are older and losing money despite federal rent subsidies, have struggled to find new owners because traditional nonprofits have shunned them.
At the beginning, the city planned to take over the rest of the portfoliostabilize the neighborhood financially and turn over clusters of buildings to nonprofits that would redevelop them into housing for the homeless. But that idea was abandoned as city and state budget pressures mounted.
Next, the AIDS Healthcare Foundation appeared as a potential buyer. Negotiations with AIDS charity fail amid opposition from state officials The Foundation’s Balance Sheet in Skid Row and gaps in social service plans for tenants. In April, foundation officials pulled out of a deal to buy half a dozen properties, saying their physical condition was worse than they thought.
Pustilnikov, who has long been interested in acquiring the trust’s buildings, currently owns a collection of valuable residential and commercial properties in Los Angeles County. He is trying to take advantage an aggressive interpretation of state law to force local governments to approve 3,500 new apartments, including a massive project on the Redondo Beach waterfront and a 19-story tower in Beverly Hills.
Pustilnikov’s first attempt, alongside two wealthy investors, to build a large downtown portfolio a decade ago failed and turned into litigation. Three SRO hotels owned by the trio sat mostly empty, and Pustilnikov struggled with oversight and financing for other low-income properties in the neighborhood.
Pustilnikov said his downtown experience was an asset. He said he learned to navigate the challenges of managing homeless housing on Skid Row and stepped in to save the wallet when established nonprofits failed to do so.
“It’s something that Los Angeles needs,” Pustilnikov said in an interview with The Times this month.
For the trust buildings, Pustilnikov formed a partnership, Hope for an Affordable LA, with Hope the Mission, a San Fernando Valley-based nonprofit that will oversee social services. Mayor Karen Bass and other city leaders have insisted that mental health, substance abuse and other support services continue to be offered in the buildings as a condition of any sale.
Singer, the recipient, said that condition was one of several challenges dictating the disposition of the trust portfolio.
“Selling a property is incredibly difficult: first because the properties are complex and problematic, second because the buyer must obtain city approval pursuant to regulatory agreements, and third because some of the properties for sale appear to have negative equity and could not even be given away for free (hence the consolidation of the seventeen properties into one sale),” Singer wrote in Friday’s court filing.
A hearing before Judge Stephen Goorvitch to approve the sale to Pustilnikov is scheduled for Aug. 7.
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