The trustee overseeing the welfare of 1,500 tenants in Skid Row has declared bankruptcy, can’t borrow money and is piling up $1.7 million in unpaid bills.

Financial conditions have become so dire that Mark Adams, the trustee in charge of 29 properties owned by Skid Row Housing Trust, is asking for emergency action from a Los Angeles County Supreme Court judge or he said he would security contracts had to be terminated. dismiss his staff and give up the effort.

The receivership is literally starving for money, Adams wrote in a lawsuit on June 9 on Friday.

To save receivership, Adams suggested in the filing, the court would have to do it itself

must

Guarantee loans to operate and renovate the buildings.

The trustee is asking the court to reassure potential lenders that the court stands with the trustee, that it is the credibility of the court that they have borrowed and will lend against, Adams wrote to Judge Mitchell Beckloff in the filing.

Adam’s request is expected to be heard at a hearing on June 15. Should the moratorium collapse, it would be another devastating setback for Los Angeles’ homeless provision, and especially for the residents of trust properties, many of whom are elderly, disabled, or suffer from mental health and drug problems.

Adams was appointed two months ago after years of mismanagement and financial disarray left the trust unable to pay its bills. The non-profit housing company, the largest in Skid Row, had cut back on staff and maintenance, leaving the buildings in abysmal conditions.

In response, Mayor Karen Bass and City Atty. Hydee Feldstein-Soto pushed to put Adams in charge of the trust portfolio of century-old residential hotels and newer permanent support residential complexes. Nearly 900 units were vacant, deemed uninhabitable, or left in such poor conditions that government agencies refused to pay rent even though tenants were still living in them.

The court appointment gave Adams the authority to fund repairs and upgrades and, once stabilized, to transfer the properties to other affordable housing providers.

Adams has since received approval from Beckloff to borrow $5.3 million, the amount he needed to fund operations through July.

But Adams has

only

been able to secure just $1.8 million, leaving a cash crunch to threaten the trustee’s very existence.

In court documents, Adams gives a litany of reasons for the failures, including a lack of support and funding from city leaders, potential lenders needing assurances that they will be paid back, and a budget far beyond initial projections.

The demands placed on the trustee, regarding the minimum financing available to address 29 properties and more than 2,000 units (some of which have active leases with individuals entitled to government benefits and other protections) are almost unthinkable, Adams wrote in the submission.

Neither Adams nor anyone else has estimated the full cost to rehabilitate the buildings as they continue and where the money will come from.

Normally, moratoriums pay for repairs and the fees of the receivers by tapping equity or proceeds from property sales or higher rents. But the trust is on the brink of insolvency, federal and local restrictions prevent tenant rents from rising, and city leaders are desperate to preserve thousands of apartments for formerly homeless residents. City housing officials have acknowledged that the city’s treasury is likely to get on the hook for at least part of the price tag.

The cost overwhelms some of Adam’s initial estimates. Adams had to revise his projections to account for $1.3 million in security for the 29 properties in May alone, more than double his initial forecast. Adams said more staff were needed to keep watch while urgent fire and physical safety repairs were made to the buildings.

Likewise, the price tag for restoring the buildings proves unrealistic. Adams told the court in May that he hoped to spend an average of $3,000 apiece to repair nearly 400 units where the City of Los Angeles housing authority has stopped paying vouchers that cover much of renters’ rent.

But in his June 9 filing, Adams said repairs to the roof of one property, the Rainbow Apartments, are needed before problems in the top-floor units are resolved, and that three other units in the complex

absolutely

destroyed, requiring more work than anticipated. Adams estimated the cost to make these repairs at $270,000, an amount not yet budgeted.

Therefore, the work cannot be done despite the demands, he wrote.

Without the repairs, the housing authority will continue to withhold rent, putting further pressure on the finances of the moratorium.

City officials are urging Adams for more detailed accounting of his duties, saying the trustee omitted his April financial report, expenses for cleaning services, costs for his outside attorneys and his own fees.

The municipality understands that the first month of the moratorium was a transitional period, especially for such a large portfolio, deputy municipal clerk

Lawyer

thoughtful Alia Haddad wrote in a

12 June

submit on Monday. At the same time, the nature and complexity of the trustee’s work makes it all the more important that the books are accurate, timely and complete.

Haddad’s application did not address the overall financial problems of the moratorium, and Feldstein-Soto did not respond to a list of questions from The Times.

Adams told The Times that the trustee had $336,000 in his bank account on Tuesday, with $1.7 million in outstanding obligations.

One debtor is JRM Private Security, which guarded some of the trusts’ property until May 11. John McKillop, the company’s president, said he canceled the contract after going weeks without being paid, leaving with an unpaid balance of $910,000.

In preparation for the job, McKillop said, JRM hired more than 30 guards and bought two patrol cars. and, because Adams was a new customer, included a provision in the deal that the bill would be paid weekly.

The company started on April 18, and McKillop said Adams paid $250,000 for the first week but has not received anything since.

It all went so that we said, can we get paid?

“

said McKillop.

Responding to questions from The Times, Adams said he terminated JRM after questioning the company’s performance and plans to ask the judge how to proceed with his debt.

Adams is one of the most experienced receivers in the state, having handled 300 such cases in more than two decades. But concerns about his selection for the job have been simmering since The Times reported in May that in some of his previous cases tenants were at risk of eviction and property owners lost their homes, while multiple judges ruled that he had to pay his fees by six-figure amounts. .

Feldstein-Soto has told The Times that Adams was uniquely qualified for the role and needed to be installed urgently due to the collapse of the trusts. But she said the city had not formally checked his resume before recommending his appointment.

Last week, Feldstein-Soto, Bass and other city officials killed Adams after the property management company he hired sent eviction notices to 451 tenants in arrears. to evict residents solely for non-payment.

Adams said the eviction notices were sent without his knowledge and that he sent letters to withdraw them as soon as he found out.

Adams said the perceived lack of support from city officials is hurting his ability to raise money.

The city has been negotiating with investors representing half a dozen of the trusts’ more financially stable properties to take the buildings out of receivership and place them under the control of local nonprofits.

The potential exit of some of the trust’s highest-value assets has spooked potential financiers, Adams said in his filing, with the possibility that reduced collateral will force them to demand higher interest rates.

Loans to finance moratoriums, involving troubled properties that need substantial upgrades, typically include high rates to entice lenders who fear they won’t get their money back. After learning last month that Adams took out a $1.3 million loan at an interest rate of 15%, city officials requested pre-approval from the court when a loan interest rate would exceed 10%.

Adams told Beckloff that no outside lender will agree to those terms, and neither the city nor any of the existing investors in the trusts’ properties, including U.S. Bank and Wells Fargo and other prominent banks, have committed any funds in the meantime. .

These are some of the major financial institutions in the United States, as well as the city of Los Angeles, and with all these resources there was no movement, Adams wrote in his file. The silence / lack of response speaks volumes.