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LA moves to place Skid Row Housing Trust into receivership

The nonprofit, which operates nearly 2,000 units of supportive housing, is on the verge of financial collapse, and is being sued by its bank which says it defaulted on $4 million in loans.

LOS ANGELES (CN) — Los Angeles City Attorney Hydee Feldstein Soto filed a petition Thursday to place Skid Row Housing Trust, a beleaguered nonprofit supportive housing operator, into receivership.

"There are times — and this undoubtedly is one of them — when the extraordinary remedy entrusted to local governments to establish a public health and safety receivership is the only solution to an impending humanitarian crisis," the petition says. "The city, therefore, makes this unprecedented filing seeking to protect some 1,500 vulnerable tenants living in 29 dilapidated or otherwise dangerous buildings managed by the Skid Row Housing Trust."

Skid Row Housing Trust is among the largest and most respected supportive housing providers in the city, managing nearly 2,000 units of permanent supportive housing which largely serve the chronically homeless. The organization has played a key role in both fighting homelessness and revitalizing downtown Los Angeles. In recent years, the housing trust has constructed hugely expensive and gorgeous buildings designed by award-winning architects. Its groundbreaking ceremonies routinely feature a who's who of local government.

But the Los Angeles Times recently reported that Skid Row Housing Trust was "on the verge of financial collapse," having spent years of running deficits in the tens of millions of dollars, thanks in part to soaring maintenance costs and a ballooning bimonthly payroll of $800,000 (including taxes and benefits) for its 129 employees. In a recent court filing, the trust's interim CEO said that it is running an operational deficit of $300,000 per month.

The organization's collapse would be devastating to a city already struggling to contain one of the worst homeless crises in the country.

"Losing nearly 2,000 units of housing would be devastating to Skid Row, would be felt citywide, and, undoubtedly, people would have lost their lives," Mayor Karen Bass said in a written statement on Thursday.

According to a letter sent to the city by Skid Row Housing Trust Interim CEO Joanne Cordero, the trust's 29 properties are in a desperate state, facing "numerous challenges, including critical life safety fire protection system malfunctions, elevator outages, unrepaired damage due to excessive and ongoing vandalism, electrical outages, consistent and unrelenting vandalism and trespassers, electrical problems, plumbing and sanitation issues, among other adverse building conditions."

It its petition, the city asked an LA County Superior Court judge to appoint Mark Adams, president of California Receivership Group, as receiver for the ailing nonprofit.

In its quest to control the fate of Skid Row Housing Trust, the city will face competition from Pacific Premier Bank, which filed a lawsuit against the organization two weeks ago, saying the trust owes the bank more than $4 million in defaulted loans. The suit seeks to freeze the Skid Row Housing Trust's bank accounts and enjoin the trust from selling any of its properties, which were used as collateral for the loan.

In their opposition to the emergency injunction, lawyers for Skid Row Housing Trust called the bank's request "premature, overbroad and based on incorrect and incomplete facts," adding the injunction would "present a grave threat to public health, safety and welfare."

Pacific Premier Bank "shockingly doesn’t propose any provisions for the day-to-day operations of the trust, and instead asks this court to prioritize financial interest over the health and well-being of 1,500 residents, the livelihood of 129 employees and public health, safety and welfare," the trust said in opposition.

The filing suggests the Skid Row Housing Trust would much prefer the city's plan to place the trust into receivership, and asks the judge to consider both proposals at the same hearing. A hearing on the bank's request for an injunction is currently scheduled for Monday morning.

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