Skid Row deal gets OK
The controversial AIDS Healthcare Foundation agrees to buy six properties out of receivership.
A half dozen properties that are owned by a failed Skid Row landlord should be sold to the AIDS Healthcare Foundation, the courtordered receiver overseeing the buildings said, despite the Hollywood-based nonprofit’s problematic history with operating low-income housing.
The foundation has agreed to pay $27 million for six properties owned by the Skid Row Housing Trust, which financially collapsed last year. Under the deal, the foundation will continue to operate the buildings — half of which are single-room occupancy hotels and the other half efficiency apartments — as permanent housing for formerly homeless residents.
The foundation had the highest bid 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 document filed Monday in Los Angeles Superior Court.
The purchase, which could be finalized as soon as next month, would accelerate the foundation’s rapid growth as a landlord for the formerly homeless.
The foundation has revenue of $2 billion a year, largely from its network of pharmacies. Since 2017, it has bought 16 properties with about 1,500 units in and around Skid Row.
The Skid Row Housing Trust buildings — the Boyd, Hart and St. George singleroom 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 address chronic homelessness where public agencies, the private market and other nonprofits have failed, upping the occupancy in its buildings by almost 200% and taking nearly 1,000 people off the streets and into permanent housing.
But the foundation’s buildings have been beset with heating, plumbing, elevator and electricity failures and vermin infestations. In some cases, the buildings have seen a surge in tenant complaints and crime after the foundation took them over, The Times found in an investigation published last fall.
These 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 a suitable owner and operator” for the trust buildings. A spokesman for the department on Monday told The Times that its concerns about the foundation remain.
The Los Angeles City Council is scheduled to discuss the receivership in a closed hearing Tuesday.
The proposed sale comes as Singer and city officials are trying to wind down the year-old receivership that began when the trust, once considered a nationwide 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 spun off 11 of the trust’s newer and 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 — many of which are older, single-room occupancy hotels without private bathroom facilities — up for sale.
In addition to the trust, numerous other owners of single-room occupancy hotels, which are seen as lastresort housing for the city’s most vulnerable, have struggled in recent years with low public subsidies and a tenant population beset with mental health and addiction problems that has been prioritized for permanent housing.
Last fall, city officials put forward a plan for the local housing authority to take control of the remaining trust properties and operate them until they could be turned over to developers who would tear down and rebuild them as efficiency apartments for homeless residents.
But that proposal has fizzled amid mounting budget pressures for the city and state. The focus turned instead to salvaging the buildings and potentially recouping some of the nearly $40 million in financing the city has authorized for the receivership.
In Monday’s court filings, Singer said three other bidders, whom he declined to name, made substantive offers for the trust portfolio. But those offers were lower than the AIDS Healthcare Foundation’s or involved complicated financing that he believed was not viable.
Of the foundation’s $27-million offer, $5 million would fund ongoing repairs at the six buildings, and $10 million would repay part of the city’s debt; the rest would go toward continued receivership operations until the remaining properties are sold. Singer said he’s continuing to negotiate with two other bidders to purchase six other buildings.
Los Angeles Superior Court Judge Mitchell Beckloff, who had been in charge of 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 has been the availability of social services for tenants. Residents in trust buildings have been entitled to receive case management, mental healthcare and other services as part of their voucher programs. But the foundation does not offer services in many of its buildings, citing the cost.
The purchase and sale agreement calls for the foundation to maintain an outside property management firm for up to six months and agree that it has an ongoing responsibility to provide unspecified social services to tenants. Ultimately, the agreement says, the foundation intends to operate and manage the properties with its own staff. The agreement also calls for a two-year moratorium on enforcing code violations that exist at the properties at the time of the sale so that the foundation can continue rehabilitation efforts without penalty.
A foundation spokesperson declined to detail the nonprofit’s social service plans for the buildings or to answer other written questions from The Times.
Clara Karger, a spokesperson for Mayor Karen Bass, said the city has emphasized to the receiver that any future owner and operator of trust buildings must ensure that tenants receive comprehensive social services.
“It is paramount that the selected buyer commit to long-term affordability covenants and provide property management services that address both the needs of vulnerable residents and the maintenance and investment that will be required to manage these buildings,” Karger said. “The city has conveyed clear expectations that wraparound services be delivered on site at all of the buildings.”
Monday’s agreement comes as city regulators and the courts are scrutinizing the AIDS Healthcare Foundation’s housing activities.
The Los Angeles City Ethics Commission this week is scheduled to discuss leveling $22,250 in penalties against the foundation and one of its lead housing organizers, Susie Shannon, for a failure to register and report their lobbying in 2023, according to 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, the settlement states. A foundation spokesperson said Shannon did not lobby on the trust receivership.
The foundation is facing at least 10 lawsuits in state and federal courts over conditions in its buildings, including class-action cases detailing habitability concerns in the Baltimore and Madison single-room occupancy hotels in Skid Row.
This month, it won $1.5 million in damages through a default judgment against Kameron Segal, the prior owner of the Madison, after the foundation alleged that he failed to disclose the condition of the five-story building’s chronically broken elevator prior to the sale in September 2017.
It’s unclear if the foundation will be able to collect from Segal, who didn’t defend himself in the lawsuit and whose companies have been in bankruptcy. A foundation attorney said in a statement that the decision shows the nonprofit isn’t to blame for the elevator problems and noted that it has spent $600,000 on repairs.
Despite the spending, the Madison’s elevator suffers from frequent lengthy outages, including as recently as last month. Last year, the foundation agreed to pay $832,000 to 13 residents and undisclosed amounts to four others who had sued over the elevator.
In a separate decision this month, a Los Angeles Superior Court judge threw out portions of the Madison class action against the foundation. But he noted that “some reduction of the agreed rent is likely due” to tenants as restitution for alleged plumbing and electrical problems, unsanitary conditions and other failures in shared portions of the building.
“That the tenants lived in subsidized housing at below-market rents does not mean that they were obligated to pay their full agreed rent if there were material deficiencies in the condition of the common area or other lapses,” Judge William Highberger wrote in the ruling.