LOS ANGELES (CN) — A Los Angeles County judge on Friday appointed a receiver to take over Skid Row Housing Trust, an ailing nonprofit responsible for 29 buildings which together provide apartments for roughly 1,500 formerly homeless residents.
The appointment had been requested by both the city and the nonprofit itself. By its own admission, the trust is nearly insolvent, its buildings in various states of disrepair. A lawyer for the city called the situation a "humanitarian emergency" during a hearing this week.
At least 10 of the properties are under "fire watch," meaning the fire alarms don't work and someone must be assigned to watch out for smoke. This past weekend, a broken sprinkler caused severe flooding in one of the buildings. And on Wednesday, three people were found dead of drug overdoses inside another building, the 649 Lofts. On Friday, Alia Haddad, an attorney for the city, cited a "lack of security on the property" as a reason for the deaths.
"We are seeing the train go off the cliff here," Haddad told LA County Superior Court Judge Mitchell Beckloff.
The attorney representing Skid Row Housing Trust, Manny Abascal, praised LA Mayor Karen Bass and City Attorney Heidi Feldstein-Soto for petitioning the court for the receivership.
"It takes a lot of courage for the city to have taken this step, instead of just issuing more violations," Abascal said.
In a written statement after the hearing, Mayor Bass called the receivership a "bold and historic step towards making more housing available in Los Angeles... and saving lives."
"If we want to help and house folks in Skid Row, we need to have housing in Skid Row," she said. "We are going to be just as bold when it comes to preserving housing as we are about building housing."
Beckloff approved the appointment of Mark Adams, president of the California Receivership Group, as the housing trust's receiver. He also approved a $500,000 loan taken out by Adams to begin what appears to be a long and expensive process of rehabilitating the properties. Adams told the court that after having his crew inspect some of the properties, he wished he'd asked for $1 million.
"The number one thing that’s missing here is money," Adams said. "I won’t be surprised if I’m back at the confirmation hearing asking for $5 million."
The takeover is the latest in a chain of events first set off three weeks ago, when Pacific Premier Bank sued the Skid Row Housing Trust, claiming the organization had defaulted on a $4 million loan, and asked a judge to approve an order freezing the housing trust's bank accounts and enjoining them from selling any properties. Such an order had the potential to prevent the company from paying its 129 employees, sending the properties further into disarray.
Pacific Premier Bank's attorney, Paul Malingagio, was at pains to assure the court that the bank, though it still wants its money back, is cooperating with the city and is not opposed to the receivership.
"The bank supports the city of Los Angeles' efforts to protect public safety," he said, asking the judge to put off the request for a restraining order for 30 days, in order to let Adams begin working and to "let the dust settle."
Abascal asked Beckloff to dismiss the motion.
"We can’t operate for 30 days with a gun to our head," Abascal said. "This bank has not cooperated. They've frustrated process. They're saying they're going to destroy the value and shut us down."
"That is just absolutely false," Malingagio said. "To say we’re not cooperating is just false."
Beckloff agreed to delay the hearing on the restraining order for 30 days.
Among Adams' first tasks will be to fix up the roughly 500 units under Section 8 abatement orders, meaning the units are uninhabitable and the owner of the properties are unable to collect money from the federal government from renting them out.
"The 2,000 units in these 29 buildings have 1,500 tenants who are among the most vulnerable people in our city, requiring health services, security and daily assistance, which we are working with the county and other government agencies to provide," said City Attorney Feldstein-Soto in a written statement. "The receiver will also be able to rehabilitate the 500 units under orders of abatement to make those units available for housing."
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