Leo Pustilnikov to acquire 17 Skid Row buildings in LA for $10M

Developer Leo Pustilnikov has agreed to buy 17 Skid Row buildings for formerly homeless residents in Downtown Los Angeles for $10 million.

The owner of Beverly Hills-based SLH Investments has cut a deal to buy the portfolio of buildings containing 1,200 units once owned by the Skid Row Housing Trust, the Los Angeles Times reported. The seller was Receiver Specialists, a receiver that controls the properties.

If the deal goes through, the price works out to $8,333 per unit.

The addresses of the properties, made up of single-room occupancy hotels and small apartment complexes, were not disclosed. Their 1,200 units serve formerly homeless tenants, many of whom are elderly, disabled or suffer from mental health problems.

The deal requires judicial approval slated for Los Angeles County Superior Court next month.

Under the terms of the deal, reported by The Times this month and formally announced in court papers filed by Receivership Specialists, Pustilnikov will pay $19 million for the portfolio — and then receive $9 million back to cover renovations and repairs. 

“The purchaser appears to me to be a responsible and qualified operator,” wrote Kevin Singer, president of Receivership Specialists, in the court filing. “The at-risk population that lives at the sale properties needs a permanent owner/operator, and without such an owner/operator the alternatives for these tenants could be catastrophic.”

For the trust buildings, Pustilnikov formed a partnership, Hope for an Affordable LA, alongside North Hills-based Hope the Mission, which will oversee social services. Mayor Karen Bass and city officials have insisted that mental health, addiction and other supportive services continue to be offered in the buildings as a condition of a sale. 

The sale to Pustilnikov, plus a separate sale to another owner for an additional property, would finalize the dissolution of the trust’s portfolio of 29 buildings.

The trust’s failure last year triggered what city officials called an “impending humanitarian crisis” with tenants living in squalid conditions and sparked widespread fears of losing a critical source of last-resort housing, according to the Times.

Eleven of the trust’s properties, mostly those newer and in better condition, already have been sold to nonprofit landlords.

The remaining buildings, which are older and lose money despite federal rental subsidies, struggled to find new owners as the traditional nonprofits shunned them. The city once planned to take over the rest of the portfolio, but the plan fizzled as budget pressures rose.

Last spring, Hollywood-based AIDS Healthcare Foundation offered to buy a dozen buildings for $53 million.  Then the nonprofit backed out because of the expected cost of repairs. 

Pustilnikov, who has long been interested in acquiring the trust buildings, now owns high-value residential and commercial properties across Los Angeles County. 

The 38-year-old developer has pioneered using the state legal loophole known as the builder’s remedy that allows developers to skirt zoning in cities with uncertified state housing plans, with mixed-use projects in the works in Beverly Hills and Redondo Beach. In the past decade, he estimates having completed more than $1 billion in real estate deals, according to a profile by The Real Deal.

— Dana Bartholomew

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