Los Angeles developer Leo Pustilnikov wants to expand in the city’s most down-and-out neighborhood after taking over 17 supportive housing buildings from the collapsed Skid Row Housing Trust in 2024.
But instead, the 41-year-old builder’s remedy crusader is sparring with the Housing Authority of the City of Los Angeles and Citi Community Capital, the nation’s top affordable housing lender, over Rosslyn Lofts, a 297-unit mixed-income building Pustilnikov eyed for years.
The sale to HACLA was botched, Pustilnikov claims in two lawsuits filed this summer in Los Angeles County Superior Court.
Pustilnikov’s two-year-old venture, downtown-based Hope for an Affordable LA, is charting a lonely course in the roughly 50-block neighborhood, long the district of last-resort residential hotels.
He plans to spend about $26 million rehabilitating eight of his 17 Trust properties, backed by tax credit equity and tax-exempt bonds. And he wants more.
“The plan is to fix the properties one by one and see downtown improve to what it should be,” Pustilnikov said. “I am a believer that that is the heart of the city.”
A new wave of Skid Row price resets may be on the horizon, since another nonprofit landlord, SRO Housing Corp., is facing liquidation of some 2,500 units unless the city comes to its rescue, as Politico reported last month.
Pustilnikov said he’s under contract to buy at least one of the nonprofit’s buildings, pending city approval.
For decades, nonprofits have run nearly all of the neighborhood’s permanent housing for formerly homeless tenants. The city’s Community Redevelopment Agency created SRO Housing in 1984 to rehabilitate rundown hotels, and the Skid Row Housing Trust followed in 1989.
“It’s unusual for a for-profit landlord to buy properties like these since they’re designed not to turn a profit,” said Jerry Jones, executive director of the Greater LA Coalition on Homelessness, a nonprofit housing provider association.
Pustilnikov says he isn’t in it for the profit. None of his new firm’s buildings are making money, he said, and he doesn’t expect them to “for a very long time.”
But another real estate player is also growing its footprint in the neighborhood: the city’s housing authority, known as HACLA. And now the two are butting heads over a building on a strategic corner they both want to own.
The fight could be a bellwether in determining who will own Skid Row’s aging, subsidized buildings in future decades. Emails connected to the cases reviewed by the Business Journal show city and state housing officials tracked Pustilnikov’s deal with Citi closely for months before HACLA stepped in to bid.
The auction
On May 21, at the fountain outside Pomona’s Civic Center, a trustee for Citi auctioned Rosslyn Lofts, a 297-unit apartment building at 451 S. Main St., to Jenny Scanlin, HACLA’s chief development officer, for $10 million and one penny, or about $33,670 per unit.
Citi’s notice of sale listed the parcel number of the ground lot only, not the four airspace lots that hold the building above it, according to property records. So Pustilnikov claims HACLA didn’t actually buy the building, according to his complaint. A spokesperson for HACLA declined to answer specific questions about the case, citing the ongoing litigation, but said the authority complied with the law.
Pustilnikov, for his part, had a signed agreement to buy Citi’s bonds on the building, about $20.7 million in principal and interest by Citi’s own accounting, for $10 million. That’s a penny less than HACLA’s bid.
The 12-story former hotel at South Main and West Fifth streets was converted to mixed-income housing nearly two decades ago by a partnership put together by Ruben Islas’ Amerland Group. It was backed by $28.5 million in tax-exempt bonds, which Citi bought, plus $14.9 million in junior loans from the state’s Department of Housing and Community Development and the city’s Community Redevelopment Agency. In 2009, the property was divided into five legal parcels: a ground lot and four airspace lots.
Housing officials signed off on what they hoped would be a successful example of a private developer stewarding a rundown hotel into a new era, with 259 affordable units, plus 38 market-rate lofts on the upper floors.
But when the COVID-19 pandemic hit, cash flow at the property came to a halt, and Rosslyn Partners began to struggle with its debt service, court filings show. Rosslyn Lofts landed in receivership in 2023. Citi put its debt at $20.1 million, and the state and city housing agencies filed their own default notices, county records show. Then the bank postponed its foreclosure sale more than 20 times over two years, according to both lawsuits.
A spokesperson for the bank did not respond to requests for comment.
Today, a soot stain left behind by a fire that broke out Aug. 12 in a corner unit on the seventh floor is a stark reminder of the toll of the building’s gradual dilapidation amid drawn-out financial distress.
A homecoming, of sorts
Pustilnikov has chased Rosslyn Lofts for years.
The Ukrainian-born father of five made his name as the enfant terrible of Redondo Beach, Beverly Hills, Santa Monica and West Hollywood, where he used the state’s builder’s remedy law to propose thousands of multifamily units bypassing local planning boards.
Lately, he has turned back to the city’s core, where he got his start more than a decade ago working for investor Naty Saidoff alongside Izek Shomof.
Last year Pustilnikov and two partners snagged one of downtown’s deepest discounted office properties – PacMutual towers – for $48.5 million, or about $105 per square foot.
And he bought the Original Pantry Café from the estate of former Mayor Richard Riordan.
With Shomof, he holds a stake in the Alexandria Hotel, a block from Rosslyn Lofts. And in 2016 he bought the Baltimore, Leland and King Edwards hotels for about $33 million and later sold them to Michael Weinstein’s Hollywood-based AIDS Healthcare Foundation for $43.3 million, according to deeds filed for the properties at 501 S. Los Angeles St., as well as 116 and 121 E. Fifth St. (Pustilnikov declined to comment on those sales.)
When the Skid Row Housing Trust collapsed in 2023, no established housing provider would take its most distressed buildings. So in 2024, a judge approved selling 17 of them, consisting of 1,204 units, to Pustilnikov’s Hope for an Affordable LA for $19 million, with $9 million to help fund repairs.
“Two years in, we’re not profitable,” said the firm’s chief executive, Adam Kent.
Pustilnikov readily admits there may be no upside. And that’s because affordable housing runs on different economics, said Alexandra Hack, a principal at downtown-based Cedar Street Partners.
“The underlying property still needs sufficient operating revenue to cover expenses and debt obligations,” she said. “And when that balance breaks down, the financial distress can be significant.”
The other shoe drops
That distress was laid bare when Skid Row Housing Trust’s properties entered a prolonged receivership, forcing the city to run up a $30 million bill to keep its buildings running.
The Trust’s youngest buildings ran average operating surpluses from 2008 to 2022, according to a 2025 postmortem financial analysis by consultant Claire Knowlton, funded by the Westlake Village-based Conrad N. Hilton Foundation. Rent subsidies, “more than any other financial factor,” determined whether a building survived, the report found.
None of the Trust’s buildings covered their depreciation, and with 55-year affordability covenants, they “cannot be sold on the open market,” the report argued.
Pustilnikov also blames federal Continuum of Care rules, which put homeless tenants with the most severe needs first in line.
“You’re housing the unhoused that are also unhinged, oftentimes, and it’s your job to make them better,” he said.
Kent believes the new firm can succeed.
“There’s a deeply ingrained institution of nonprofits operating permanent supportive housing, driving it into the ground,” he said.
The housing continuum
Pustilnikov’s answer is scale. Owning clustered buildings lets him spread costs for insurance, materials and staff, he said.
The firm is also working on 80 affordable units in West Hollywood and has started buying in San Diego, Pustilnikov said.
The key is to build a “housing continuum,” comprised of shelters, permanent supportive housing and deed-restricted buildings, according to Kent.Local planning applications and state tax credit filings shed some light on how the Skid Row buildings fit into Kent and Pustilnikov’s plan.
At the St. George, the firm filed plans in August to convert 88 SRO units into 69 “efficiency” units at a cost of about $5.8 million.
The proposed financing pairs a $5.4 million tax-exempt loan from Berkadia with $6.7 million in tax credit equity. Rents would be $300 a month, utilities included, with federal vouchers covering 64 units.
The firm applied for similar deals at the Dewey and Lincoln hotels in 2025, state records show. Pustilnikov said the St. George and Lincoln deals closed this month, and that the Abbey and Rainbow hotels could win tax credits in December.
At the Olympia, Kent filed plans in August for tenant improvements that keep its 46 units. Pustilnikov said he’ll invest another $3 million in upgrades at the Olympia and the Las Americas without tax credits.
The deal that didn’t close
Pustilnikov got his first shot at acquiring Rosslyn Lofts in 2024, when the City Council introduced a motion to hand the building over to Hope for an Affordable LA. Pustilnikov said the Council’s deal died because city and state officials wanted to keep collecting a share of the building’s cash flow even after their loans were paid off.
So he tried another route: buying Citi’s bonds and foreclosing himself. He reached a $10 million bond purchase agreement with Citi that took effect Feb. 9, according to the lawsuit.
On Feb. 3, a city housing official canceled a working-group meeting on the building: “Based (on) Leo’s closing on the Rosslyn Lofts on 2/5, tomorrow’s meeting is cancelled,” he wrote in an email.
The deal didn’t close. Pustilnikov said Citi was slow to deliver documents his lender needed.
“The bank couldn’t tell me how much they were owed,” he said.
On May 15, Citi sent him a draft purchase agreement that described only the ground lot, according to the lawsuit. Pustilnikov said he sent back a redline May 20 adding the other four parcels. Because that draft said signing it would terminate the bond agreement, he argues the bond deal was still alive when Citi went ahead with the auction the next day.
Another prospective buyer had emerged.
An agency buying buildings
The city’s housing authority manages more than 9,000 affordable units and administers about 58,000 federal Section 8 rental assis- tance vouchers, making it the biggest afford- able landlord in Los Angeles, according to its website. And it’s poised to expand, thanks to an acquisition fund backed by a $215 million revolving credit line HACLA’s board approved in 2024. HACLA’s vision plan sets a goal of adding 30,000 affordable units in 10 years.
In May, HACLA paid $16.7 million, or about $378,400 per unit, for a new 44-unit building in Sawtelle from an entity tied to Ste- ven Scheibe’s Manhattan Beach-based Generation Real Estate Partners, according to HACLA records and the property’s deed.
Christopher Johnson, HACLA’s director of development, told its board in June that new units in Los Angeles cost “$700,000 or more,” and that Rosslyn Lofts came at about 6% of that. “That is huge,” he said.
Kent sees it differently. “If you have $10 million, and you know someone else is also going to pay $10 million, you would want two projects to be funded, not one,” he said.
The bid
Emails show how HACLA came to bid.
On April 28, Scanlin wrote to Kevin Kleen, a director of asset management at Citi Community Capital: “LAHD has asked us to consider putting a bid in. I was unaware that your contract with Leo P. had fallen out.”
Kleen replied the next day.
“Leo is still interested in the building, but we couldn’t work out the logistics of a bond sale,” he wrote.
Within weeks, the deal was underway. HACLA attorney James Johnson advised handing commissioners the purchase memo in hard copy and collecting the copies at the end of the closed meeting.
On May 19, HACLA’s board authorized the bid in a closed session. Two days later, Citi opened the auction at $10 million, and Scanlin was the only other bidder.
Pustilnikov said the city never gave him the help it promised.
“They tell me they’ll help me, and as soon as I close, they try to compete with me,” he said. “They know how important the Rosslyn is for a solution, and they bid against me on it.”
On June 10, Kent wrote to HACLA’s board that because Citi’s notices listed only the ground lot, the agency had paid for “a parcel that has no income, use or value.”
Ron Appel, the trustee who conducted the sale, delivered a trustee’s deed June 12 listing only the ground lot, according to the partnership’s lawsuit. A second deed, signed by Appel on June 16 and recorded June 25, added the parcel numbers “16, 17, 18, 19” by hand, county records show.
“I’ve bought a lot of properties in my day,” Pustilnikov said, “and I have never seen a trustee’s deed that’s just adding APNs.”
A spokesperson for HACLA said in a statement that the deed of trust behind the foreclosure predated the property’s subdivision and that all of its parcels remained subject to it. A 2012 amendment to Citi’s deed of trust describes all five lots, records show.
Two lawsuits
Pustilnikov filed a lawsuit on June 12 and now seeks to hold Citi to the bond sale, alleging breach of contract and misrepresentation.
But Pustilnikov didn’t stop there. After the auction, he bought the partnership that had owned the building since 2007 for an unknown amount. And in August he filed a quiet-title suit against HACLA, Citi, Appel and the city and state housing agencies.
If a court agrees the foreclosure covered only the ground lot, it’s unclear what will happen to the rest of Citi’s debt, roughly $10.7 million, or to the city and state loans. In September the state housing agency disclaimed any interest in the property and was excused from the case.
Pustilnikov’s side is spending heavily on the fight – “six figures every month,” Kent said.
HACLA’s nonprofit affiliate took over Rosslyn Lofts July 1, with National CORE as property manager, and plans to refinance and rehabilitate it, according to the authority.
Pustilnikov declined to make predictions about the legal battle – “I leave it up to the courts at this point,” he said.
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