A Beverly Hills developer has agreed to pay $10 million to acquire one of the largest portfolios of homeless housing in Los Angeles.
Leo Pustilnikov, 38, will buy 17 buildings owned by the nonprofit Skid Row Housing Trust, which had financially collapsed into receivership last year. The properties, made up of single-room occupancy hotels and small apartment complexes, contain 1,200 units intended for formerly homeless tenants, many of whom are elderly, disabled or suffer from mental health problems. The deal requires judicial approval, which is scheduled in 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 back to cover further renovations and repairs.
“The purchaser appears to me to be a responsible and qualified operator,” wrote Kevin Singer, president of Receivership Specialists, in the court filing. “The at-risk population that lives at the sale properties needs a permanent owner/operator, and without such an owner/operator the alternatives for these tenants could be catastrophic.”
The sale to Pustilnikov, in addition to a separate sale to another owner for an additional property, would finalize the dissolution of the trust’s 29-building portfolio. The trust’s failure last year triggered what city officials called an “impending humanitarian crisis” with tenants living in squalid conditions and sparked widespread fears of losing a critical source of last-resort housing.
Eleven of the trust’s properties, mostly those newer and in better condition, already have been transferred to nonprofit landlords. But the remaining buildings, which are older and lose money despite federal rental subsidies, struggled to find new owners as the traditional nonprofits shunned them.
Initially, the city planned to take over the rest of the portfolio, stabilize it financially and spin off groups of buildings to nonprofits that would redevelop them as homeless housing. But that idea died as city and state budget pressures mounted.
Then the AIDS Healthcare Foundation emerged as a potential buyer. Negotiations with the AIDS charity fell apart amid opposition from state officials over the foundation’s track record in Skid Row and gaps in plans for tenant social services. Foundation officials in April pulled out of an agreement to buy a half-dozen properties, saying their physical condition was worse than they had believed.
Pustilnikov, who has long been interested in acquiring the trust buildings, currently owns a collection of high-value residential and commercial properties across L.A. County. He’s trying to leverage an aggressive interpretation of state law into forcing 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 at amassing a large portfolio downtown a decade ago failed and spiraled into litigation. Three SRO hotels owned by the trio were left nearly empty and Pustilnikov had troubles with oversight and financing for other low-income properties in the neighborhood.
Pustilnikov has said that his experience downtown is an asset. He said he’s learned to navigate the difficulties in managing homeless housing in Skid Row and stepped in to rescue the portfolio when established nonprofits have not.
“It’s something that L.A. needs,” Pustilnikov said in an interview with The Times this month.
For the trust buildings, Pustilnikov formed a partnership, Hope for an Affordable LA, alongside San Fernando Valley-based nonprofit Hope the Mission, which will oversee social services. Mayor Karen Bass and other city leaders have insisted that mental health, addiction and other supportive services continue to be offered in the buildings as a condition of any sale.
Singer, the receiver, said that condition has been one of many challenges dictating the disposition of the trust portfolio.
“Selling any [property] is incredibly difficult: first because the properties are complex and troubled, second because the buyer must meet the city’s approval per the regulatory agreements, and third because some of the sale properties appear to have negative net value and could not even be given away for free (hence packaging all seventeen into a single 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.