A deal to buy Skid Row homeless housing fell apart. Here's why vulnerable tenants and taxpayers are at risk

The potential buyer of a half-dozen troubled homeless housing developments in Skid Row announced Thursday it was pulling out of the deal, throwing the future of the properties and the city’s rescue efforts for one of its largest supportive housing portfolios into disarray.

The AIDS Healthcare Foundation had agreed to buy six buildings owned by the Skid Row Housing Trust for $27 million in a receivership sale earlier this month. But during due diligence, the foundation discovered the properties needed millions of dollars in further repairs and were on track to continue suffering large operating losses, foundation spokesperson Ged Kenslea said in a statement.

“Any buyer of these properties will find themselves in the same situation that led to the failure of Skid Row Housing Trust in short order unless a new model can be developed,” Kenslea said.

The foundation’s decision adds another obstacle to efforts to salvage the trust properties, and potentially puts the city on the hook to increase the nearly $40 million in financing it’s already authorized to repair and operate the buildings over the past year.

After Skid Row Housing Trust financially collapsed in February 2023 and largely abandoned its 29 buildings and 1,500 formerly homeless tenants, the city pushed its portfolio into a receivership in Los Angeles Superior Court. Since then, 11 of the trust’s newer and better maintained properties have been transferred to established nonprofit homeless housing providers.

That’s left 18 buildings without new owners. Receivership Specialists, the firm that has managed the portfolio since last summer, has put the properties, many of which are older single-room occupancy hotels without private bathroom facilities, up for sale on the condition that they remain housing for formerly homeless residents.

Last week, the receiver recommended that L.A. Superior Court Judge Stephen Goorvitch approve AIDS Healthcare Foundation’s $27-million bid, which included $5 million for ongoing repairs, to buy the Boyd, Hart and St. George single-room occupancy hotels and the Lincoln, New Carver and Rainbow apartments. The six buildings have 415 units in total.

Unless Goorvich approved the sale to the foundation by May 10, Receivership Specialists said in court papers last week, the receivership’s bank accounts would be empty by the end of the month.

The world’s largest AIDS charity, the Hollywood-based foundation became a Skid Row landlord in 2017 and has since purchased 16 properties with about 1,500 units in and around the neighborhood. Foundation officials contend that they’ve filled a gap in preserving homeless housing where public agencies, other nonprofits and the private market have failed.

But the foundation’s buildings have been replete with problems, as detailed in a Times investigation last fall. The Times found structural failures, vermin infestations, dozens of evictions and, in some cases, increased violence and tenant code and public health complaints after the nonprofit took over the properties.

The effort to sell the trust buildings to the foundation attracted opposition from state housing officials and some Skid Row advocates. The California Department of Housing and Community Development sent a letter to the receiver last month saying the foundation “would not be a suitable owner and operator” for trust buildings, citing The Times’ reporting.

In a court hearing last week, Melody Osuna, an attorney for the Los Angeles Community Action Network, which organizes low-income tenants in Skid Row, said the group planned to ask Goorvitch to stop the sale to the foundation.

“We will have testimony from tenants in their buildings about habitability, evictions and other concerns that we have that the buildings could fall back into the state that brought them into receivership,” Osuna said.

Any formal written opposition to the foundation’s purchase was due to be filed to Goorvitch on Thursday.

The city had not taken a public position on the deal. Clara Karger, a spokesperson for Mayor Karen Bass, had said in prior statements that the foundation was the only organization that had made “a financially feasible offer” for the buildings, but also that the city needed to ensure that tenants were provided with comprehensive social services.

Residents in trust buildings have been entitled to receive case management, mental health and other services as part of their voucher programs. But the foundation does not offer services in many of its buildings, citing the cost.

It’s unclear what happens now. The departure of the AIDS Healthcare Foundation, which makes more than $2 billion in revenue annually largely from its network of pharmacies, likely takes away the most deep-pocketed potential owner for the portfolio.

The receiver said in court filings that three other bidders, whom he declined to name, made substantive offers for the trust portfolio. But those offers were lower than the foundation’s or involved complicated financing that the receiver believed was not viable, the receiver said.

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