Confidential Emails Reveal How Public Agencies Covered Up Skid Row Housing Trust's Collapse

Gentle reader,

Since early February, we’ve been digging into the mystery of the collapse of Skid Row Housing Trust and the disappointing whitewash presented in the local press. You can read our initial report here.

Since that newsletter was published, we’ve been adding to our investigation on the Esotouric blog. To get the full story, search for the text “Updates to our 2/10/2023 post,” where our initial report lets off. The text of this newsletter will also go up on the blog, but we think it is important enough to share as a standalone email. So here goes…

Drawing on information uncovered in our February 2023 investigation into the collapse of Skid Row Housing Trust (SRHT), on 2/23/2023 we submitted a public records request to the California Department of Housing and Community Development (HCD). 

This is the state granting agency that appears to have questioned improprieties in SRHT’s operations and begun to restrict its access to grants and loans several years ago—even as the supposed watchdogs in Los Angeles ignored the warning signs, repeatedly passed the buck and allowed the nonprofit to go on neglecting its buildings and putting vulnerable tenants in harm’s way.

On April 6, 2023, we received the first responsive emails from HCD, with the promise that additional documents would be supplied on a rolling basis. So watch this space. And read on to see evidence of the abject failure of the entire Los Angeles City and County permanent supportive housing machine to oversee the abuse of millions of dollars in taxpayer funded real estate and Section 8 vouchers.

This is so much worse than just one nonprofit running off the rails.

What these emails show is that everybody knew, and they all closed ranks to cover it up, even as 29 buildings fell into a squalid state, endangering vulnerable tenants, contributing to our city’s horrible housing use crisis, squandering millions in public funds and providing fodder for disingenuous and destructive editorials arguing that the SRO housing model doesn’t work (it does) and old buildings are too expensive to preserve as affordable housing (they’re not).

We had already learned from fired CEO Lee Raagas’ employment lawsuit that HCD had declared SRHT an “ineligible sponsor” due to its illegal displacement of the Edward Hotel tenants and misuse of associated grant funds. HCD’s action served to shut down the nonprofit’s redevelopment pyramid scheme, where they would seek funding to demolish and rebuild an existing SRO hotel, even if it meant evicting dozens of vulnerable tenants and taking housing offline for years.

And it wasn’t just HCD turning off the grants tap. As you’ll see below, on 12/30/2020 the Los Angeles County Development Authority (LACDA) rescinded approximately $28 Million in No Place Like Home Program funding commitments for SRHT’s Ambrosia, Confianza, and "Towne" projects, and declared SRHT ineligible to receive additional funding, after the nonprofit defaulted on a Wells Fargo construction loan.

The so-called “Towne” project, which we believe was called The Alvidrez, appears to have been a model similar to the Edward Hotel debacle that raised HCD’s ire: the proposed demolition of the existing 617 Crescent Hotel Apartments (55 units)—a building which is, like the Edward Hotel, is a potential historic resource called out on Survey LA as a contributor to the Fifth Street Single-Room Occupancy Hotel Historic District—and the St. Marks Hotel Apartments (91 units), also a potential historic resource, for a brand new 14 story tower containing essentially the same number of units.

The flashy project, by starchitect Michael Maltzan (controversial Sixth Street Bridge remodel), was to be built with trendy but not necessarily greener mass timber construction, and named after longtime SRHT CEO Mike Alvidrez. (Which is kind of ironic since the organization went to hell once he retired.) On 9/7/2022 the city approved SRHT’s request to withdraw The Alvidrez from planning consideration.

If the St. Marks Hotel Apartments sound familiar, you might have seen the news stories in 2019 and early 2022 (text, video) about unsafe and unsanitary conditions in the building. In the latter story, HACLA was quoted saying SRHT needed to immediately correct deficiencies noted in the inspection. But instead, the building continued to deteriorate.

As for the Ambrosia and Confianza projects, SRHT’s failure to move forward was quietly shared at a meeting of the Proposition HHH Citizens Oversight Committee in May 2022, when the transfer of $21 Million in development funds was noticed, but the deeper meaning was completely missed by journalists and activists covering the homelessness beat. It would be another 9 months until Angelenos learned that SRHT was on the ropes.

It is plain from the evidence uncovered in our investigation that from at least late 2020, SRHT was a dead nonprofit walking, with no choice but to wind down its operations, fire its overpaid executives and hand off its tax-funded properties to other service providers. But this crucial information was kept a secret within the circle of interconnected government agencies, and withheld from the taxpayers who funded SRHT and the tenants who lived in its deteriorating buildings, as the buildings became more and more unsafe.

Where is the accountability, not just for SRHT, but for the City, County and State oversight agencies and the elected and appointed officials who knew what was going on and did nothing to stop it?

And right in the center of it all, the reason we started to ask questions about SRHT in July 2022, is the notorious Hotel Cecil—a mostly empty building that SRHT did not own, yet where its limited resources were being squandered just before the scandal broke.

Read on for tranche #1 in the HCD emails. We think you’re going to hate it.

Email #1) File REL0000000047.MSG

On 1/11/2022, Rebecca Weber, a Section Compliance Resolution Program Chief for HCD forwarded the file titled “Response to SRHT 1-10-2022.pdf” (“The Response”) to then SRHT CEO Lee Raagas and board member Simon Ha, and cc’d 49 interested parties. This list includes board members and senior staff, directors of Section 8 for the city's Housing Authority (HACLA), senior staff at the Los Angeles County’s Departments of Mental Health, Health Services and Housing, Ann Sewill the GM of the Los Angeles' Housing Department and 9 members of HCD’s team.

The outside entities represented the public funders who had participated in a call on 12/16/2021 “in which SRHT committed to detailing specific action steps to be taken within the next 30 days to address ongoing compliance issues.”

“The Response” from Lindy Suggs, Branch Chief, Asset Management & Compliance, Division of State Financial Assistance, references five documents sent by SRHT between 12/27/2021 and 1/10/2022, then states “The Department has reviewed the Plan and found it to be insufficient. The Plan lacks specific details, concrete action steps and dates as agreed upon.”

Over several pages, Suggs explicitly calls out unexplained loan defaults, lack of property management, delayed building openings, stalled lease ups, lack of mandated reporting and SRHT’s failure to fill the vacant Edward Hotel, nearly four years after 47 affordable units were illegally shuttered.

There is also a reference to the mysterious partnership between SRHT and the mostly vacant Hotel Cecil, subject of a separate Esotouric investigation: “Cecil Hotel - Please explain in detail SHRT’s involvement in the hotel. Is SRHT now managing this 600-unit project? If so, how will this demand on your capacity affect your ability to meet your obligations for the other projects in your portfolio? Please also explain what services, if any, you are providing to the tenants.”

“The Response” concludes “The Department will not proceed with the preparation of the loan documents or disbursement of funds for any SRHT projects until the Plan is revised to show specific action steps and deliverables and all outstanding items listed above are fully addressed to the satisfaction of the Department.”

Two months later, KCAL News broadcast a six minute investigation into squalid, unsanitary, unsafe conditions at SRHT’s St Mark’s Apartments, where vulnerable tenants were housed through the Section 8 voucher program. 

Email #2) File REL0000000048.MSG

An email exchange dated 1/10-1/14/2022 between SRHT board member Simon Ha and HCD’s Rebecca Weber regarding “The Response” about the illegally displaced Edward Hotel tenants.

In this thread, Simon Ha confesses that SRHT has “spent millions of dollars in predevelopment to get the project shovel ready” before being forced to halt their illegal redevelopment plans. Ha attempts to blame unnamed former employees or board members for the bad decisions, agrees that it is an outrage to have 47 vacant units on Skid Row, but balks at HCD's demand that the hotel be fully occupied by the end of March 2022. Why, the hotel has no elevator, no air conditioning! It never had an elevator or air conditioning, Rebecca Weber replies. And what they’ve done is a serious violation of the law, their mission, and the conditions of the public funds.

Email #3) File REL0000000053.MSG

An email thread spanning 1/17-1/27/2022 between SRHT and HCD. In it, HCD continues to try to elicit responses to outstanding questions, and payment of missing funds in order to allow the nonprofit to continue operating. CEO Lee Raagas blames COVID infection sick days and signs off with a pathetic “In Partnership.”

Attached is a 7 page document from SRHT marked CONFIDENTIAL. It argues that HCD is wrong to criticize them so severely, and lists what they have done and will do to comply with HCD’s demands. SRHT admits that the illegally emptied Edward Hotel is not their only building with vacant units: the Senator Hotel is only 82% full, Flor 401 is at 66%, SP7 is at 61% and 649 Lofts is at 74%. 649 Lofts has no on-site manager because that person resigned due to resident threats and a domestic violence dispute, but refused to vacate the manager’s unit and had to be evicted.

Of special note—and we’ll return to this in Email #4—SRHT explains its role in the Hotel Cecil project: “Cecil Hotel is owned and funded by SIMON BARRON [sic for Baron] and their private capital partnerships. Therefore, SKID ROW HOUSING TRUST can offer appropriate information but not what is considered confidential by the Investor or prohibited to disclose. SRHT’s involvement was to offer analysis and intellectual support to the private capital group pursuits to use the hotels units for affordable housing during this crisis and moving forward. SKID ROW HOUSING TRUST did not invest or outlay any capital for the project or property. All costs from capital requirements, property oversight, staffing and other required needs are privately funded by SIMON BARRON and therefore there is no impact on the Organization’s capacity to manage its’ own portfolio. There were no, are no nor will there be future Health and Social Services provided to the Cecil residents/tenants by SKID ROW HOUSING TRUST. That was confirmed by DHS in our December 16th meeting.”

Email #4) File REL0000000055.MSG

An email dated 2/19/2022 from Rebecca Weber at HCD to SRHT about the 2/3/2022 meeting with Los Angeles public funders to discuss plans to reoccupy the Edward Hotel by 3/31/2022. Attached is a 5 page letter from Lindy Suggs, Branch Chief, Asset Management and Compliance summarizing the meeting and HCD’s concerns.

Included in this document is evidence that SRHT has made unauthorized withdrawals from the [Edward Hotel] Operating Reserve (“OR”) Account, misused more than $219,000 in project funds for the Simone Apartments, has $109,564 in delinquent residual fees spread over four buildings and that there are 250 health and safety issues with buildings must be cured by 2/28/2022.

The relationship with the Cecil gets an entire section, and it’s pretty hot stuff. Like us, HCD wants to know why Skid Row Housing Trust is dedicating scarce staff and administrative resources to a building they do not own, while their own portfolio sits largely empty and squalid.

Subsequent to the 2/3/2022 meeting, HCD’s team caught SRHT senior staff lying about the relationship with the Cecil, and they want answers!

6. Cecil Hotel
a. Provide any and all contractual agreements between SRHT and Simon Baron, including but not limited to the property management contract and the organization documents for SRHTandCecil GP LLC and the SB Cecil LP.

i. SRHT’s lack of transparency and honest communication with the public funders who are trying to assist SRHT is astonishing. In the meeting on December 16, 2021, Lee Raagas said, “we’re just facilitating and assisting in the launch” and Sierra Atilano added, “our involvement was helping them with the financial structure, that it goes to affordable housing and not market rate.” On February 3, 2022, SRHT admitted being the Managing General Partner and the Property Management Company.

According to Lee Raagas' own employment lawsuit, board member Simon Ha and an unnamed colleague asked her to resign on 3/17/2022 "in order to ensure the well-being and safety of residents," but she refused. She was then fired on 3/21/2022. Sierra Atilano, who also apparently lied to HCD about the relationship with the Cecil, served as CEO through October 2022, then resigned to take an Executive Vice President position at BRIDGE Housing.

It is interesting that five months after HCD became aware that SRHT had been lying about the Cecil, councilman Kevin de Leon introduced a motion for the city to take a Master Lease and use the hotel for temporary homeless housing. It is unclear if SRHT would be managing the facility under this plan.

Southeast 1, a 2016 renovation of two existing RSO hotels in their portfolio, also gets a lengthy and disturbing write up in the 2/18/2022 letter.

HCD did a site visit on 11/30/2021 and made 19 Findings of issues to be corrected. When they returned on 2/11/2022: “the group discovered cockroaches, water damage on the ceiling tiles, broken smoke detectors, AC systems not working, piles of garbage, and no soap, toilet papers, or paper towels in the bathrooms which residents reported had been out for weeks. The project smelled heavily of bleach, however the areas all appeared dirty. It was also noted the only nice and clean area in the project was the garden area, which is cared for by the residents.”

Of even greater concern to HCD was SRHT’s deliberate lies: “Again, the lack of accurate information from SRHT is alarming and of grave concern to the Department. Please note the Department’s opinion is that SRHT has not made significant progress in addressing the concerns of the Department. This determination is based on the absence or incomplete nature of the documentation submitted by SRHT, and the lack of details and transparency in SRHT’s communication. It is apparent that SRHT has not grasped the seriousness of this situation, as the suggestions made by the Department and the other public funders continue to be ignored. The Department has given several items deadlines of March 31, 2022, and sincerely hopes that SRHT will be able to meet those deadlines. However, if SRHT continues on the same path and does not meet its commitments, the Department is prepared to take additional steps necessary to protect the tenants and future tenants housed in SRHT’s portfolio.”

Cc’d on this letter are all the major players in the Los Angeles supportive, affordable and Section 8 housing community: LA County Department of Health Services, LA County Department of Mental Health, Los Angeles Housing Department, Housing Authority of the City of Los Angeles, Los Angeles County Development Authority and Los Angeles Homeless Services Authority.

And yet a year would pass before the profound crisis at Skid Row Housing Trust would become public knowledge, and another two months before their dangerous SROs would be put into receivership, with taxpayers on the hook to clean them up—too late for the three people in the 649 Lofts who overdosed and died in early April or for the Dewey Hotel tenants displaced in February when the building caught on fire.

Everybody knew, and they all covered it up

Email #5) File REL0000000056.MSG  

An email from Lee Raagas at SRHT to Kim Losoya at HCD inviting her to attend a moderated conversation and Q&A session with California State Assemblyman Miguel Santiago on 1/26/2022.

You can see a brief exchange from the program that was posted to Facebook here. Lee Raagas appears both jumpy and disheveled as she interrupts the Assemblyman. The event was not announced to the public, and only one uncomfortable minute was shared on social media. Who—if anyone—attended, and who was the intended audience? Was SRHT using their relationship with Santiago to send a message to their unhappy funders that they still had friends in Sacramento?

Email #6) File REL0000000058.MSG  

An email dated 4/19/2021, subject “Skid Row Housing Trust Portfolio Findings Letter” from Mai Le at HCD to Lee Raagas. CC’d are others at SRHT, the nonprofit’s attorneys at Gubb and Barshay, and HCD.

It is a deadly serious document, explaining that “a ‘Finding’ is a deficiency in performance based on a statute, regulation, guideline, and/or regulatory agreement." There are eight Findings detailed, as well as information about the pending Declaration of Default for the Edward Hotel, which has been held illegally vacant for 3 years and 2 months. But 10 more months will pass before the public becomes aware of the crisis unfolding in the nonprofit’s unmanaged residency hotels. There are 7 separate attachments (#6.1 is erroneously attached twice):

#6.1) HCD+Findings+Letter+to+Skid+Row+Housing+Trust.pdf - Ten pages from Jennifer Seeger, Deputy Director, dated 4/14/2021 spelling out the serious financial and compliance issues that have caused HCD to place the Edward Hotel in default and to express concern that SRHT will be unable to complete the five projects currently in the works.

Under the Summary of Findings, Mai Le writes:

“SRHT’s history of compliance violations, including late payments, unapproved withdrawals of funds from restricted accounts, vacating units without the Department’s prior written approval, purposefully keeping units vacant, continual late report submittals, coupled with a noticeably high staff turnover and lack of knowledge of the Department’s requirements at SRHT, causes the Department grave concern. The Department is worried about the productivity and capacity of SRHT to own, operate, and self-manage affordable housing developments.”

On page 9, HCD threatens legal action if the Findings are not corrected, and objects to SRHT’s proposal to demolish the Edward Hotel, a potential historic landmark that could still offer 47 units of desperately needed affordable housing on Skid Row.

But there were no legal actions taken, at least not ones that the public knew about, for nearly a year.

#6.2) Skid+Row+Housing+Trust+Project+List.pdf - A single page listing the SRHT properties in Los Angeles over which HCD has oversight, with the seven different programs under which their loans and agreements fall, with tracking numbers for each property and program. A very useful list for investigative reporters—if only Los Angeles had some.

#6.3) Pre_Nod+dated+September+29,2020.pdf - A Preliminary Notice of Declaration of Default letter dated 9/29/2020 from Rebecca Weber, then Manager, Compliance Resolution Program, HCD to SRHT, advising that the Borrower is in violation of its loan obligations to HCD for the Edward Hotel, and in breach of the $1,175,000 California Housing Rehabilitation Program - Rental Component Loan, an agreement made in December 1993.

The nonprofit was given 30 days in which to correct the breach, until Hallowe'en 2020. That deadline came and went, but nothing was done to take the property away from SRHT and return it to full occupancy, or to alert the citizens of Los Angeles that one of the largest providers of permanent supportive housing on Skid Row was no longer providing that service to its clients.

#6.4-7) Single page invoices from 2020-2021 demanding unpaid residuals for the Simone and Charles Cobb Apartments, totalling $89,956.

Email #7) File REL0000000059.MSG  

An email dated 7/20/2021, subject “RE: Skid Row Housing Trust Portfolio Findings Letter” from Mai Le at HCD to Lee Raagas. CC’d are others at SRHT, the nonprofit’s attorneys at Gubb and Barshay, and HCD. This is correspondence regarding outstanding non-payment issues surrounding the Simone Apartments. HCD continues to monitor their bank accounts for the outstanding $363,430.

Email #8) File REL0000000061.MSG  

An email dated 12/11/2021 with the subject line “SHRT - All public funders request” from Rebecca Weber at HCD to Lee Raagas and the Members of the board, requesting a meeting on 12/16/2021 to discuss concerns. Attached is an extraordinary four page letter, “RE: SKID ROW HOUSING TRUST NEXT STEPS” which has at the top six full color logos for the agencies behind the message. Look at them: in December 2021, they all knew. Why would more than a year pass before the public was let in on the scandal of Skid Row Housing Trust’s collapse?

A few lowlights from this very tough letter, which we recommend you read in full (page 75 at the link): “We continue to be gravely concerned about the health and well-being of the residents served by SRHT… When the lenders have inquired, SRHT has not been forthcoming or truthful about the reasons for the delays... On numerous occasions, SRHT promised to wire funds to cure the default, but then, without explanation, failed to wire the funds... Clients who are matched through the CES have spent an unusually long time waiting for units in the SRHT portfolio to be move-in ready. Data shows that dozens of people matched to units at SRHT have waited up to 350 days with no status updates... There have also been recent reports from FLOR 401 residents about insect infestation, fire debris from the sixth floor not being cleaned up, and non-operational security cameras.... California Law requires that a property manager or a responsible person be in charge of every project in which there are more than 16 units. At this time, there are at least 150 units between [the new projects FLOR 401 and 649 Lofts], and neither site has a property manager.... As the State continues to face a shortage of affordable housing units and homelessness continues to rise, SHRT has allowed 47 units at the Edward Hotel to remain vacant for more than 3 years, contrary to the requirements of the HCD Regulatory Agreement... SRHT’s public agency funders and stakeholders have collectively attempted to help SRHT correct these deficiencies. Unfortunately, SRHT has been largely unresponsive to these efforts. Due to this lack of progress, on December 30, 2020, the Los Angeles County Development Authority (LACDA) rescinded approximately $28 Million in No Place Like Home Program funding commitments for SRHT’s Ambrosia, Confianza, and Towne projects as a result of the Wells Fargo construction loan default. Similar to the actions taken by HCD, SRHT is not currently eligible to receive funding from the LACDA... HCD has also taken the serious step of revoking SHRT’s Eligible Sponsor designation, making the Trust ineligible for future state funding in a time of historic levels of new resources targeted to ending homelessness.”

This letter is signed by Jennifer Seeger (Deputy Director, Division of State Financial Assistance California Department of Housing and Community Development / HCD), Sarah Mahin (Director of Housing for Health, LA County Department of Health Services / DHS), Carlos Van Natter (Director of Section 8 Housing Authority of the City of Los Angeles / HACLA), Lynn Katano (Director, Housing Investment & Finance Division, Los Angeles County Development Authority  / LACDA)  and Ann Sewill (General Manager Los Angeles Housing Department  / LAHD).

Along with SRHT board members from 2017 through 2023 and senior staff, the above seems like a good start for a list of witnesses to give testimony at a public hearing explaining what the hell happened here.

Email #9) File REL0000000062.MSG  [Note that this is out of chronological order.]

An email dated 6/24/2021 with the subject line “RE: Skid Row Housing Trust Portfolio Findings Letter” from Mai Le at HCD to Lee Raagas. CC’d are others at SRHT, the nonprofit’s attorneys at Gubb and Barshay, and HCD. The email gives SRHT an extension to 7/15/2021 to make good on the misused $291,430 for the Simone Apartments. This is the final email in the first tranche from HCD.

By 12/11/2021, SRHT’s goose was cooked—there was simply no way the nonprofit could continue to operate, since it had allowed its portfolio of SROs to fall into disrepair it was unwilling or unable to correct, and it was barred from operating the redevelopment pyramid scheme.

So why did the California Charities Registry—once SRHT was declared ineligible to receive funding from LACDA and HCD, and after it had failed to cure the many health and safety violations at its buildings—not require the properties be handed off to another nonprofit that shares its mission? Why didn’t the LA Housing Department, LADBS, LAFD, LAPD or the City Attorney shut the unsafe buildings down? Why was this crisis kept secret from the community?

Who was being protected here? And are they still being protected as the city closes ranks to quietly force Skid Row Housing Trust into receivership, with no answers and no consequences after such a shocking violation of the public trust?

Oh, and about that deceptive management deal with the Hotel Cecil? We hear from a resident that Skid Row Housing Trust was a terrible manager, but now that The Eberly Company is running things, it’s better.

All of this is to say, the people who are managing the billions of dollars and thousands of living spaces that are supposed to be helping to alleviate the homeless crisis in Los Angeles are incompetant at best, but more probably corrupt. None of this is good enough. We are all being lied to, while people who desperately need and deserve help are being allowed to suffer and die. It has to change.

Hitting publish on this post will be a relief. We have been sleeping poorly and yelling a lot since receiving the emails. But there is so much more work to do, and we’re going to continue to ask questions, and to support the good people in this city who are actually making a difference, like the oft-demonized AIDS Healthcare Foundation.

It really makes us wonder why there is so much apparently coordinated hostility directed towards a nonprofit that is buying illegally empty SRO hotels on Skid Row, cleaning them up and renting the rooms to people in need, while the crimes of Skid Row Housing Trust are covered up. We hope to find out.

yours for Los Angeles,

Kim & Richard

Esotouric

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UPCOMING WALKING TOURS & BUS TOUR SALE

Saturday, April 15 - Raymond Chandler’s Downtown • Saturday, April 22 - Alvarado Terrace & South Bonnie Brae Tract • Saturday, April 29 - Human Sacrifice: The Black Dahlia, Elisa Lam, Heidi Planck & Skid Row Slasher Cases • Saturday, May 13 - All Around the Auto Club West Adams • Saturday, May 20 - Bunker Hill’s Modernist Marvels with Nathan Marsak • Saturday, May 27 - Evergreen Cemetery, 1877

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