KCRW follows the money into a city-funded homeless housing project and finds evictions, inflated costs, and an LA real estate developer with a long and troubled history. Who in city government is paying attention?
The closed down, partly renovated motel at 1906 W. 3rd Street in LA’s Westlake neighborhood long served as a place for people without much money to find shelter. And that’s what it’ll be again when its current refurbishment is done: 136 subsidized units for homeless veterans, called the West Third Apartments. This transformation of low-income housing into a different type of low-income housing has so far gobbled up more than $30 million, including $10.2 million from LA taxpayers, and isn’t scheduled for completion until next March, according to the city’s Housing and Community Investment Department.
Why so much? Where has the money gone? And who in the city government is following it?
In the case of this one building, the answers raise more questions about LA's oversight of taxpayer money for homeless housing, including from Proposition HHH. Voters passed the $1.2 billion bond in 2016 to help the city produce an extra 7,000 supportive housing units over 10 years.
According to public records, most of the more than $30 million pumped into the renovation of this rundown motel has gone to its former owners, who, right before the sale, were sued by public interest attorneys for illegally evicting tenants.
Now, KCRW has found property records showing that affordable housing developers who bought the motel increased the project’s budget by selling the property again to themselves for an extra $8 million. KCRW’s investigation also found court records showing that this city-funded affordable housing project is tied to an LA real estate developer well-known at City Hall, and not in a good way.
“I don’t think anybody in government would be loaning him money,” said former City Councilman Bernard Parks. “He didn’t fulfill commitments that he was responsible for.”
In January, LA Mayor Eric Garcetti said that a new HHH-funded project would open every three weeks this year, but as the year comes to a close the projects completed have added up to less than half that. Four years after voters approved Proposition HHH, only 333 of the units promised are finished, with costs running as high as $700,000 per unit, according to an audit by the city controller.
What’s happened with this old motel in Westlake offers a case study on why the city can’t seem to get a grip on the costs or timing of this badly needed housing.
A few years ago, the building was operating as the Royal Park Motel, a residential hotel with long-term tenants in rent-controlled rooms. One former tenant, Peter James, said that in the summer of 2017, his landlords gave him notice that he had to leave — temporarily.
“They said, ‘oh, we’re going to renovate,’” he recalled. “‘You’ll be out and you’ll be right back in.’”
James said he accepted a $1,000 check from the landlords and left with his dog. When he tried returning some weeks later, he said, his room was no longer available and belongings he’d left behind were missing. Too broke to pay a deposit on a regular apartment, James lived in his van and couch-surfed for months.
“You know, I can hang under difficult situations, so it could've been worse,” he said. “The saddest thing is it really destroyed the dog.”
In 2018, the Legal Aid Foundation of Los Angeles (LAFLA) sued the owners of the Royal Park, Gerald and Diane Wang, on behalf of James and several other tenants. The complaint accused the Wangs of illegally evicting long-term residents in order to replace them with higher-paying nightly guests.
In December 2018, Gerald and Diane Wang agreed to pay more than $1 million to settle the case, court records show. (James wouldn’t reveal how much his payout was, except to say it was less than six figures.) Yet the landlords made out quite well anyway. Only a few weeks later, they sold the Royal Park for $22 million, three times what they’d bought it for in 2013, according to property records.
Some of the buyers’ money came courtesy of LA taxpayers, in the form of a $10.2 million HHH loan.
“One set of extremely poor residents is displaced to make room for a future set of extremely poor residents, and the wrongdoer was amply rewarded for his misdeeds,” said Barbara Schultz, director of litigation and policy for LAFLA. “That, in a nutshell, is what happened to the Royal Park.”
In early 2019, Schultz wrote an angry letter to City Attorney Mike Feuer pointing out that HHH funds are supposed to add to LA’s low-income housing supply, not turn one kind of affordable housing into another. Feuer’s office declined to comment.
A spokeswoman for LA’s Community and Investment Department (HCID) said by email that the city and the developers who bought the Royal Park both believed it to be a vacant tourist hotel at the time of the sale. After the developers discovered at least one long-term tenant still living there, the spokeswoman said, HCID recommended replacing the project’s HHH money with $10.2 million from other affordable housing funds not restricted to new units.
The saga of tenant complaints, building improvements and a change in ownership at the Royal Park Motel has been documented before. But details of who was on the other side of the sale and how it unfolded have not been previously reported and raise more questions about how taxpayer money was used.
A silent partner?
The team that originally planned to transform the Royal Park Motel into the West Third Apartments, according to the application they submitted to HCID for HHH funding in late 2017, included a small church nonprofit called Figueroa Economical Housing Development Corp.; another affordable housing developer, BlueGreen Preservation and Development (listed as a consultant in the application); a contractor, Shangri-La Construction, co-founded by the late businessman/movie producer Stephen Bing; and the well-respected nonprofit Step Up On Second Street, which would manage the building once open.
What the application didn’t reveal was that BlueGreen Preservation and Development, a Delaware LLC, included a “member” with a long, troubled history in Los Angeles real estate development: Christopher Hammond.
Once a prolific and politically-connected creator of subsidized housing in South LA, by 2004 an LA Times headline referred to him as a “check-bouncing developer.”
“Los Angeles parks Commissioner Christopher Hammond is no ordinary deadbeat,” the story read.
“When I met him, he had all of the trappings of being a successful developer: a house in Malibu, a house in Los Feliz,” former City Councilman Parks told KCRW. “On the other hand, in dealing with him you found he rarely, if ever, fulfilled his commitments.”
Parks worked with Hammond on a redevelopment project called Marlton Square, which was supposed to bring retailers, restaurants and housing to a 22-acre site in South LA.
Hammond ultimately defaulted on the project, Parks said, and filed for bankruptcy.
“I'm surprised if the city gave him a dime, based on their prior relationship with him,” said Parks.
Hammond didn’t respond to emails, or requests sent through a family member and business associates. It’s unclear if he received phone messages left at numbers publicly listed as his.
It’s also unclear whether the city knew of his involvement with BlueGreen when they considered the proposal for the West Third Apartments in early 2018. His name does not appear on the application submitted to HCID, nor does it appear in BlueGreen’s LLC filings with the California Secretary of State’s office. But in a 2019 court filing Hammond stated that he’s a “member” of the company, which means owner in LLC legalese. In the document, a type of agreement used to avoid lengthy court proceedings, Hammond asserts his ownership and ability to sign on behalf of BlueGreen LLC and he agrees to pay $100,000 to a former employee he hired but didn’t compensate.
Emails from 2018 between HCID and the development team, obtained through a public records request, show a “Christopher Whitman” at BlueGreen copied on the correspondence. Whitman is Hammond’s middle name. In California LLC filings Jacklyn Yarboi, a relative of Hammond’s wife, appears at one point as vice president of the Figueroa Economical Housing Development Corp. And court records show that Hammond’s ex-wife, Ayahlushim Getachew, co-owns Shangri-La Construction, the contractor handling the renovation of the old Royal Park Motel.
Other executives with BlueGreen and the head of Step Up On Second did not respond to KCRW’s emailed questions about Hammond’s role. Neither did officials with HCID. Andy Meyers, CEO of Shangri-La Construction, wrote in an email that any questions about BlueGreen’s management should go to BlueGreen.
The fine print
In early 2018, the West Third Apartments sounded like such a no-brainer for HHH funding, it made the news when HCID held up its application. Miguel Santana, who at the time headed the Prop HHH Citizens Oversight Committee, made up of mayoral and city council appointees, remembers feeling frustrated by what seemed like a lack of urgency on the part of bureaucrats.
“We saw it as a mandate to try to get people housed as quickly as possible,” he said. “And to contain the costs. It was becoming clear that the commitment that was made [to fund 7,000 additional permanent supportive units] was going to become limited by the increasing costs.”
While his committee relied on HCID to analyze the fine print, Santana said, the West Third Apartments looked like a relative bargain. With a proposed budget of about $42 million to turn 136 rooms into apartments for unhoused veterans, it penciled out to roughly $309,000 per unit. That was less than half what many projects were coming in at, according to Santana and a city controller audit.
Yet, West Third wasn’t necessarily cheap for a motel conversion. For comparison, it’s more than double what state government currently pays for similar projects: California’s Project Homekey initiative, which gives grants to cities (including LA) to turn motels into homeless housing, costs an average of $146,000 per unit, according to a spokesperson for Governor Gavin Newsom’s office, and the state requires municipalities to match costs above $100,000 per door.
Still, the west Third Apartments met the city’s requirements for HHH funding and moved forward. And between 2018 and 2019 the team including Figueroa Housing, BlueGreen, Shangri-La and Step Up On Second went on to win a total of $62 million in HHH commitments for seven projects, according to HCID records, with about $43 million of that out the door so far. Two of the projects are still in the pre-development stages, the records show, and none have opened yet.
Officials with HCID raised a red flag over at least one part of the 2017 application for the West Third Apartments. The proposal included an appraisal from a Gregg Palmer in Fresno valuing the Royal Park Motel at a whopping $30 million — more than four times what the Wangs had paid for it in 2013. Three commercial real estate experts who reviewed the appraisal for KCRW said it didn’t make sense.
“I'm just sort of stunned at how thin it is in terms of supporting this $30 million valuation that seems to be almost pulled out of the ether,” said Eric Sussman, who teaches real estate and accounting at UCLA’s Anderson School of Management. He noted a lack of relevant comparable sales or financial analysis in the appraisal, but also pointed to the building photos. “There are no amenities, no common areas. It looks like a very rundown motel. It doesn't even pass the smell test at a very superficial level.”
The appraiser, Gregg Palmer, declined to comment because of confidentiality obligations.
City officials, according to HCID records obtained through a public records request, thought Palmer had over-valued the property by about $11 million. They decided to commission their own appraisal of 1906 W. 3rd St., as well as two other motels that Palmer appraised for the same developers.
“HCIDLA, through its checks and balances was able to catch the projects with inflated appraisals,” wrote spokesperson Sandra Mendoza. “We saw an issue, and we corrected it...and proceeded with the revised appraisal.”
Because of the Byzantine way that affordable housing gets funded, however, the city wasn’t the only decision-maker in the matter. Developers typically cobble money together from a variety of public and private sources. Convincing one party to contribute often depends on proving others are already committed. Prop HHH was set up as one more slice of the pie that would come in early to help developers “leverage” other dollars (in the industry lingo) and complete their projects faster.
City officials say this approach will produce the most housing possible. The measure’s head cheerleader, Garcetti, was not available to be interviewed for this story. But HCID General Manager Ann Sewill said that the city is on track to exceed its goal of 7,000 additional units over 10 years, albeit more slowly than hoped for.
“If we had wanted to fund 100 percent of everything and get fewer units, we probably could have done it much more quickly,” she said.
Miguel Santana, the former head of the HHH Citizens Oversight Committee, says in retrospect that might’ve been a better idea. “I think that the biggest mistake is that we didn't change the model of how affordable housing and permanent supportive housing is built,” he said, partly because the current system isn’t built for speed.
The “leveraged” approach also makes it difficult for the city to control overall project costs.
LISTEN: Los Angeles County spent millions to combat homelessness. But why is the problem getting worse? KCRW reporter Anna Scott followed a woman through LA’s homeless services system — and found answers.
With the West Third Apartments, the city rejected the $30 million valuation, but developers obtained some of their non-city funding based on that number. For example, records from the California State Treasurer’s office show that a $30 million acquisition cost was used in calculating the project’s $13 million allotment of federal tax credits. That’s over 10 years, starting after the renovation is complete.
Developers sell these credits, calculated based on certain expenses, to investors for cash to fund their projects.
While the city chipped in what it determined to be an appropriate amount for West Third, it’s hard to say whether those dollars will end up creating the most housing possible for the money.
An unexplained sale
When it came time to buy the building in December of 2018, property records show a complex, multi-step transaction. First, BlueGreen Preservation and Development, through a related nonprofit, purchased the building from Gerald and Diane Wang for $22 million. Then, on the same day, the same records show that the nonprofit sold it again, to a partnership that included Figueroa Housing, Step Up on Second and the head of Shangri-La Construction — for $30 million.
Mortgage records also show more than $30 million in loans going to the final ownership entity, including the $10.2 million in HHH funds and a $4 million loan from the nonprofit related to BlueGreen.
Members of Figueroa Housing and BlueGreen didn’t respond to questions about the double sale. Neither did city officials with HCID. Tod Lipka, the CEO of Step Up on Second, said by email that his organization had nothing to do with the transaction. Shangri-La CEO Andy Meyers said in an email that BlueGreen structured the transaction and therefore should be the one to answer questions about it.
Three other prominent LA affordable housing developers who spoke to KCRW for this story on the condition of anonymity, because they didn’t want to publicly criticize peers, said that while the complexity of the sale is typical, the one-day, $8 million increase in property value in a single day is not.
Within a year of the sale, in October 2019, LA City Attorney Feuer filed a lawsuit accusing Figueroa Housing, its executive director Kendall Walker, and the CEO of BlueGreen, an attorney named Vivian Lum, of misappropriating public funds in a completely different, unrelated affordable housing project.
The case is ongoing, and Feuer’s office declined to comment.
After that case was filed, Figueroa Housing voluntarily withdrew from all of its HHH projects, including the West Third Apartments, according to HCID. The head of Step Up On Second, Lipka, said in an email that BlueGreen was also “removed” from the team. Step Up and Shangri-La are still moving forward as part of a reorganized partnership, according to Lipka, Meyers and HCID.
Meyers, of Shangri-La, said in an email that after the lawsuit was filed against Figueroa Housing the city delayed construction on the West Third Apartments. That, as well as “numerous delay issues” caused by the pandemic, resulted in a pileup of unexpected costs.
So Step Up On Second approached City Councilmember Curren Price about helping to close this budget gap, as well as a gap on another HHH project initiated by the same development team in South LA, according to Price’s spokeswoman. In September, Price and fellow Councilmember Gil Cedillo — whose district includes the West Third Apartments — submitted a motion to their colleagues on the council about possibly helping out.
“Due to unforeseen delays and additional scopes of work that were unanticipated,” they wrote, both projects have funding deficits “that will jeopardize completion.”
The motion, which has not been scheduled for a hearing, asks city staff to investigate what caused the projects’ financial problems and potential funding sources for helping them. In other words, as inexplicably high as the price tag has been for the West Third Apartments, with no benefit yet for the tens of thousands of people living on the city’s streets, LA taxpayers may still be asked to pony up for it one more time.
Listen to more of Anna Scott's reports on homelessness for KCRW here. And check out Samaritans, a four-part podcast journey through LA's homeless services system.