A controversial AIDS charity seeks to acquire a Skid Row housing portfolio. State officials want to stop it

The world’s largest AIDS charity has emerged as the leading bidder to take over a portfolio of homeless housing developments on Skid Row, a move that’s drawn the opposition of state housing officials who’ve called attention to the charity's troubled tenure as a landlord.

The Hollywood-based AIDS Healthcare Foundation is looking to acquire properties, mostly old single-room occupancy hotels, owned by the Skid Row Housing Trust. The trust collapsed financially a year ago and is in receivership.

Seventeen trust buildings, totaling 1,200 units, are up for sale or are expected to be shortly. The foundation has proposed paying $53 million for the first dozen of the buildings made available, which is the highest offer received, according to a person with knowledge of the bidding process who wasn't authorized to discuss it.

A spokesperson for Mayor Karen Bass said that the foundation is the only organization that has put together "a financially feasible offer" for the trust portfolio, but added that other factors should be considered in the deal. The foundation declined to comment.

State officials are expressing concerns about the foundation’s track record in operating homeless housing, citing problems detailed in a Times investigation in the fall.

The foundation "would not be a suitable owner and operator considering widely known and well documented shortcomings in the Foundation’s ability to provide safe and well-maintained buildings," Jennifer Seeger, a deputy director with the Department of Housing and Community Development, wrote in a March 20 letter to the receiver.

The foundation, which makes more than $2 billion in annual revenue — largely from its network of pharmacies — became a landlord in 2017, contending that it could provide homeless housing faster and cheaper than public agencies and other nonprofits. It now owns 16 buildings with about 1,500 units on and around Skid Row.

The Times found that foundation buildings have had heating, plumbing and electricity failures, vermin infestations and, in some cases, a surge in tenant complaints and crime after the foundation took them over.

Read more: The Times’ investigations into Skid Row's troubled housing providers

Seeger’s letter references The Times’ stories and other news reports by nonprofit organization Knock LA.

In previous comments, the foundation has said it has spent tens of millions of dollars renovating and repairing its buildings, increasing occupancy so that nearly 1,000 people are off the streets who otherwise wouldn't have been. It has attributed problems at its sites to the buildings' age, lack of support from the city and a challenging tenant population.

Another sticking point in the foundation's attempt to buy the trust portfolio could be the availability of social services. The city’s bidding qualifications call for any purchaser to have a history of successfully operating supportive housing or partner with a property management firm that did. The foundation does not supply services to tenants in most of its buildings, citing the costs to do so.

“Ensuring health and safety of the tenants and providing required supportive services is essential to the Department’s regulatory compliance and failure to meet these standards puts tenants at risk,” Seeger wrote in the letter.

The state and the city are creditors on the trust buildings, but neither controls the sale. Last spring, with the trust unable to pay its bills or care for its tenants, the city petitioned Los Angeles County Superior Court Judge Mitchell Beckloff for a receivership to manage the buildings and oversee repairs. Final determination on what happens to the properties rests with the judge.

Beckloff already has approved turning over 11 of the trust’s 29 properties, newer buildings that have tax credit investors, to other nonprofit providers with experience in homeless housing and social services, and one more is expected. The receiver, Receivership Specialists, is marketing the remaining 17 for sale.

A decision about who will buy at least some of them is expected within weeks. The City Council discussed the receivership in a closed session hearing Friday.

Clara Karger, Bass' spokesperson, said whichever providers are selected to buy the properties should be able to meet the qualifications to offer services and demonstrate that they can continue rehabilitation efforts at the properties.

"The city will be closely scrutinizing any future buyers based on rigorous criteria established and provided," Karger said. "As of now, the receiver has informed us that AIDS Healthcare Foundation is the only organization that has come to the table with a financially feasible offer."

Read more: The end of Skid Row’s cheap hotels? L.A. leaders want to replace last-resort homeless housing

In a response to questions from The Times, Jackson Wyche, a senior project manager with Receivership Specialists, wrote that the company is reviewing offers and bargaining with multiple prospective purchasers for a dozen of the trust properties and that the final five will be listed soon.

Wyche declined to name any of the bidders, but said he expected there to be more than one buyer dividing up the properties. The receiver will negotiate letters of intent, purchase agreements and then file motions with the court seeking confirmation of the sales, Wyche said. Terms are likely to include measures to ensure the buildings' long-term operation, he said.

"We do not want a situation where we sell these properties, and then they end up back in receivership because their new owners can’t safely operate them," Wyche said.

In the fall, the City Council approved a preliminary plan for the city housing authority to take over any remaining properties from the receivership, stabilize them financially and then turn the buildings over to nonprofit providers that would tear down or gut them for conversion into efficiency apartments. The motivation for the proposal was in part a growing belief among public officials and social service agencies that single-room occupancy hotels, many of which are a century old and do not include private bathrooms, are an outdated housing model for chronically homeless residents with significant mental health or drug addiction challenges.

But since then, the city's and state’s financial outlooks have worsened. The city has authorized nearly $40 million to finance the receivership and was expected to seek more money this year. Gov. Gavin Newsom’s proposed budget for next year ratchets back spending on affordable housing, dollars that could have been used to redevelop the trust buildings.

Through a receivership sale, at least a portion of the city’s expenditures would be repaid.

The AIDS Healthcare Foundation has been interested in the Skid Row Housing Trust’s entire portfolio since its impending dissolution became public in February 2023. Foundation officials toured half a dozen properties as part of sale explorations within weeks of the news, a spokesperson for the charity told The Times last year.

Read more: Inside the world's largest AIDS charity's troubled move into homeless housing

Currently, the foundation is facing at least 10 lawsuits in state and federal courts over conditions in its buildings, including class-action cases detailing habitability concerns in the Baltimore and Madison single-room occupancy hotels on Skid Row. A negligence suit against the foundation filed by a Madison tenant who was shot in his doorway reached a preliminary settlement this month, court filings from the case show. Terms were undisclosed.

Last February, the foundation settled a lawsuit filed by elderly and disabled tenants at the Madison over the building’s perpetually out-of-service elevator, paying $832,000 to 13 residents and undisclosed amounts to four others. The foundation agreed to additional elevator repairs at the time. But outages remain frequent, including five consecutive weeks without service this year before the elevator was restored March 15, according to the city housing department.

Wyche of Receivership Specialists said the company wants to recommend buyers for the first dozen trust buildings up for sale by early April. The next court hearing in the receivership case is scheduled for Thursday.

Times staff writer Doug Smith contributed to this report.

This story originally appeared in Los Angeles Times.