A Beverly Hills developer has agreed to acquire one of Los Angeles’ largest homeless housing portfolios for $10 million.
Leo Pustilnikov, 38, is buying 17 buildings owned by Skid Row Housing Trust, a nonprofit that collapsed and emerged from bankruptcy last year. The properties, a collection of single-room hotels and small apartment buildings, have 1,200 units for formerly homeless tenants, many of whom are elderly, disabled or mentally ill. The deal requires judicial approval and is expected to be approved in Los Angeles County Superior Court next month.
Under terms of the deal, first reported by The Times this month and formally announced in court documents filed by receivership experts on Friday, Pustilnikov will pay $19 million for the portfolio and then receive $9 million to cover further renovations and repairs.
“The purchaser appears to me to be a responsible and competent operator,” Kevin Singer, president of Trustee Specialists, said in a court filing. “The at-risk people living in the properties for sale need a permanent owner/operator. Without such an owner/operator, the options for these tenants could be dire.”
The sale to Pustilnikov, along with the sale of additional properties to other owners, finalizes the liquidation of the trust’s 29-building portfolio. The trust’s collapse last year sparked what city officials called an “imminent humanitarian crisis,” leaving tenants living in squalid conditions and fearing they would lose a vital source of housing of last resort.
Eleven of the trust’s properties, most of which are new and in good condition, have already been transferred to nonprofit landlords, but the remaining buildings are old, in the red despite federal rental subsidies and struggling to find new owners because traditional nonprofits have shied away from them.
The city initially planned to take over the remaining assets, financially stabilize them, and turn over the buildings to nonprofits to redevelop as homeless housing, but mounting city and state budget pressures scuttled those plans.
The AIDS Healthcare Foundation then emerged as a potential buyer. Negotiations with the AIDS charity fell apart after state officials objected to the foundation’s track record in Skid Row and its inadequate social-services programs for residents. Foundation officials backed out of a purchase agreement for six of the properties in April, citing worse-than-expected physical conditions.
Pustilnikov, who has long been interested in acquiring trust buildings and currently owns valuable residential and commercial properties throughout Los Angeles County, is using an aggressive interpretation of state law to force local governments to approve 3,500 new apartments, including a massive waterfront project in Redondo Beach and a 19-story tower in Beverly Hills.
Mr. Pustilnikov and two wealthy investors tried to build a big downtown portfolio a decade ago, but the effort fizzled and led to litigation as the trio’s three SRO hotels sat largely vacant and Mr. Pustilnikov had trouble overseeing and financing other low-income properties nearby.
Pustilnikov said his experience downtown was an asset, learning to navigate the challenges of managing homeless housing on Skid Row and stepping in to rescue the portfolio when existing nonprofits couldn’t.
“This is something Los Angeles needs,” Pustilnikov told The Times in an interview this month.
As for the Trust Building, Pustilnikov has partnered with San Fernando Valley-based nonprofit Hope the Mission to create Hope for an Affordable Los Angeles, which will oversee the social services. Mayor Karen Bass and other city leaders have insisted as a condition of the sale that mental health, addiction and other support services continue to be offered in the building.
Trustee Singer said the situation was one of many challenges affecting the disposition of the trust assets.
“what kind [property] “This is extremely difficult because, first, the properties are complex and problematic, second, the purchaser must obtain city approval pursuant to regulatory agreements, and third, some of the properties for sale have negative net worth and cannot even be transferred for free (which is why we have combined all 17 into one sale),” Singer said in Friday’s court filing.
A hearing before Judge Steven Goulevich to approve the sale to Pustilnikov is scheduled for Aug. 7.