Inside Skid Row Housing Trust’s Distressed Mortgage Play

As its name suggests, Skid Row Housing Trust touts itself as a provider of living quarters on Skid Row, the Downtown L.A. neighborhood that has struggled with one of the largest populations of unhoused people in the country.

But in recent years, the nonprofit has branched out into other businesses, perhaps in an effort to bring in more capital as it struggles with consistent cash shortfalls.

Skid Row Housing Trust has teamed up with Chicago-based nonprofit American Homeowner Preservation to pool investments for distressed residential mortgages, according to filings with the Securities & Exchange Commission by Skid Row AHP LLC, an entity created by both nonprofits.

In July, that entity filed to raise $75 million from investors. The money would be used to buy nonperforming loans from banks and other lenders across the U.S. Skid Row AHP will then work with the homeowner to refinance the loan, pay it off or modify it. As a last resort, Skid Row AHP may foreclose on the property. Skid Row AHP LLC is advertising returns of 7 percent on its investments.

Under the agreement, Skid Row Housing Trust will receive a 1 percent consulting fee, based on how much the entity raises. If Skid Row AHP scores all $75 million, the trust will receive $750,000, though it’s unclear how much the entity has raised so far. Joanne Cordero, Skid Row Housing Trust’s chief of staff, also sits on the board of Skid Row AHP LLC, though is not entitled to receive compensation.

The decision to team up with AHP comes as Skid Row Housing Trust faces financial collapse.

In 2018, the nonprofit reported a net loss of about $17 million, according to its own financial reports. Its most recent disclosures show a net loss of $14 million in 2020.

The nonprofit did not respond to a request for comment.

The 1 percent consulting fee is for use of the “Skid Row” name, plus consulting services with one of Skid Row Housing Trust’s majority-owned subsidiaries, Restora.

AHP has raised money to buy distressed mortgages since 2013, according to an offering statement filed with the SEC in July. And though 2021 marked the first time Skid Row Housing Trust teamed up with the nonprofit, Restora has acquired distressed mortgages and other loans since at least 2017, according to Skid Row Housing Trust’s tax forms.

Last year, Restora won a bid to buy a portfolio of 61 non-performing loans from Fannie Mae. The loans totaled $13 million worth of unpaid balances and were mostly located in Miami.

“Restora will enhance the company’s access to bidding opportunities for distressed mortgage assets with governmental agencies [and] make the Skid Row Housing Trust’s resources available in resolving those assets,” Skid Row Housing AHP said in a statement offering in July.

While trying to raise money for its partnership, Skid Row Housing Trust is battling to raise its own money, divest 29 of its buildings and improve occupancy at its properties.

Its buildings are about 78 percent occupied and in need of maintenance. Hundreds are uninhabitable, according to the Los Angeles Times.

The California Housing and Community Development Department and the Los Angeles Housing Department — two of the nonprofit’s lenders — have both filed notices of default on some of Skid Row Housing Trust’s older properties.

“It’s unfortunate that it has gotten to this point with their finances where they’re not able to maintain the breadth of assets they have,” Miguel Santana, the head of philanthropic organization the Weingart Foundation, which donated $200,000 to Skid Row Housing Trust last year, told the L.A. Times.