Lake Forest Firm to Form Venture for Halfway Houses : Recovering Alcoholics, Drug Abusers to Live in Renovations

Under what it calls a unique agreement, the Renu Corp. of Lake Forest will buy and renovate run-down houses in California for a Chicago medical services company that will use them as group homes for recovering alcoholics and drug abusers.

Parkside Medical Services Corp. and Renu agreed to form a joint venture to amass $7 million in property nationally. Parkside, as operator of the halfway houses, will then lease them from the new company.

Parkside operates more than 80 U.S. centers for treating drug and alcohol abuse, eating disorders and mental illness.

“As far as we know, nobody’s ever done anything like this on that scale,” said John Surge, marketing director for Renu.

The first six the houses--all in California--should be renovated and operating by September, Surge said.

Renu sees a vast, virtually untapped market in group homes. Such halfway houses provide a place for patients to ease the transition into the workaday world after treatment.

Experts on treating drug addiction and alcoholism say the homes can help prevent alcoholics or addicts from backsliding after treatment in a hospital.

But the experts also worry about halfway houses becoming a big business. Running a halfway house, a treatment center might be tempted to run backsliding patients through an expensive treatment program a second or even third time, the experts suggest.

“We’re not running a revolving-door treatment center,” replied Orville McElfresh, senior vice president at Parkside. “There are some people who do that, but we just don’t.”

Parkside is a not-for-profit subsidiary of the Lutheran General Health Care System, which is loosely affiliated with a Lutheran denomination.

Parkside got acquainted with Renu through Richard A. Santoni, a former executive vice president at Comprehensive Care Corp. in Irvine, which also runs a chain of treatment centers. Santoni left Comprehensive Care to join Renu and contacted McElfresh.

Renu started out four years ago renovating houses--mostly in Orange County--and selling them at profit. Then President Steve Jordan decided to keep the houses, leasing them to group homes at rates far higher than he could rent the houses to ordinary residents. Some houses in the county bring $8,000 a month or more.

Renu is looking for more big partners to operate the halfway houses while Renu handles the real estate operation.

The company said it is in the black and made $500,000 after taxes last year on $5 million revenues.

But not everybody is bullish about the company. In San Clemente, where Renu owned three halfway houses, neighbors complained bitterly last year that they were not told of Renu’s plans and appealed to the city to close them.

Renu has sold two of the houses, but Surge said the sales were not caused by neighborhood pressure but rather insufficient demand for halfway houses in San Clemente.