LOS ANGELES (CN) — It's been two months since a Los Angeles Superior Court judge appointed Mark Adams as a receiver for Skid Row Housing Trust, a nonprofit that controls 29 permanent supportive housing complexes comprising 2,000 units. The trust's buildings had fallen into disrepair, creating unsafe conditions for the 1,500 or so tenants who were formerly homeless.
The appointment came at the urgent pleadings of both the nonprofit housing trust and the city of Los Angeles. Mayor Karen Bass called the move a "bold and historic step towards making more housing available in Los Angeles… and saving lives." There was no one else considered as a receiver. Adams, it seemed, was not only the best person for the job — he was the only person for the job.
But Adam's receivership has already devolved into a "quagmire," according to an attorney for the city of LA. And by his own admission, it's "starving for cash."
In May, the Los Angeles Times published a lengthy story detailing Adams' many past failures while acting as a receiver of other beleaguered properties, including accusations that he'd padded his fees "by six-figure amounts." City Attorney Hydee Feldstein-Soto, who had sung Adams' praises a month before, now admitted that her office hadn't formally vetted the receiver.
In June, the Times revealed that a number of tenants living in the buildings once owned by the housing trust had received eviction notices. In total, 451 tenants have received eviction notices; Feldstein-Soto has said that those notices are illegal.
Last week, Adams filed a dire request for help with the court. The receivership, Adams said, was "starving for cash," in need of at least $3.5 million in additional funding, which Adams wanted to borrow at a 15% interest rate, using all 29 buildings as collateral. He needed the judge's approval for such a loan.
"If the Receiver cannot fund $3,493,187 million immediately, the Receiver will be required to cancel all security, alert the New Hope Receivership Group that the next paycheck will be their last one, and begin to wind down all aspects of this receivership," Adams wrote.
At a hearing on Thursday afternoon, attorneys for the city said they had soured on Adams. Alia Haddad, a lawyer representing the city, expressed dismay that 19 of the 29 properties were still on "fire watch," meaning that the buildings' fire alarms aren't working and that security personnel must be assigned to look out for any sign of fire.
"It has become a quagmire," Haddad said. She asked Superior Court Judge Mitchell Beckloff for a two-week stay — effectively pausing proceedings, which would mean not approving Adams' request for at least two weeks.
"The city is talking to other receivers and exploring other funding options," Haddad said. In other words, the city wanted to ditch Adams.
Adams said many of the buildings were waiting for approval from the fire department to be taken off of fire watch status.
"It's not like we’re asleep at the switch, trying to get these buildings off of fire watch," he said. Adams also said he wasn't sure he could wait two weeks for his loan.
"I have $336,000 in the receivership's account," Adams said, with "$1.7 million in urgently needed payables, including security and payroll next week. Two weeks would be cataclysmic." He added: "There are people threatening to walk off the job."
At least half a dozen sets of lawyers representing a panoply of interests, including banks, lenders, the Skid Row Housing Trust and Adams, appeared at the hearing via videoconference. A number of the parties expressed frustration that they hadn't received certain documents from Adams, who said that his controller was about to leave the country, making it difficult to hand over certain forms.
At one point, the judge accused Adams of using "doublespeak." And Haddad suggested that she didn't trust what Adams had said about the security companies' payment demand.
"We would like the contact information for the security companies," she said. "If it truly is this emergency, that info should be provided to us immediately."
The city suggested that the court approve a $2 million loan for Adams to secure, which the judge agreed to. The loan will be approved on Wednesday unless the city first comes up with its new "funding option," which they did not elaborate on.
"I feel like we’re in between a rock and a hard place with concern to funding, going forward," Beckloff said. "I don’t know what the solution is. I know it requires money."
Nevertheless, he reaffirmed his confidence in Adams.
"I appointed you because I think you’re the person for this job," Beckloff said. "We all appreciate how difficult it is."
Of the 29 properties, the Skid Row Housing Trust owns 14. The other 15 are owned, at least in part, by investors. One such investor, the National Equity Fund (NEF), asked Beckloff to release seven properties, including the $40 million Star Apartments, which would go into a new trust controlled in part by NEF.
Both the city and Skid Row Housing Trust approved the arrangement. But Adams balked, saying that taking the seven buildings, some of which were newer and more valuable, out of the pool of 29 buildings would devalue the entire pool of available collateral. It also, he said, "might jeopardize the tax credit status of all those investments," referring to loans that he might receive.
"We’re puzzled by that causality," said Bradford Arndt, NEF's attorney. He said that NEF would be happy to pay Adams for the buildings. "If the receivership provides the bill today, we could pay today."
He added: "We appreciate the fact that there needs to be some orderly transition here."
Beckloff approved the transfer of the properties to NEF's new trust against Adams's wishes.
Follow @hillelaron
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
