Housing Operator in Bankruptcy : Government: Santa Monica-based firm’s failure raises issue of who will take over its government-subsidized properties, including three in the L.A. area.
One of the nation’s largest managers of government-subsidized housing has declared bankruptcy and abandoned its projects, raising questions about who will operate the properties, a top federal housing official said in Washington Thursday.
The chairman of bankrupt Santa Monica-based Housing Resources Management, A. Bruce Rozet, said he has other corporations willing to take over the projects. But federal housing authorities must approve any transfer, and that has yet to take place.
“It’s not a positive message,” Housing and Urban Development general counsel Frank Keating said of the bankruptcy. “They in effect have tossed the keys out the window and walked away.”
Executives of Housing Resources Management filed for bankruptcy Oct. 18. On that day, they also lost a bid to have an order overturned in which HUD, citing irregularities in the management operation, had barred them from taking over additional housing projects. The order is to remain in effect pending the outcome of an investigation of various people associated with the firm.
Keating predicted that as a result of the bankruptcy, filed in Los Angeles, there will be some “dislocation to tenants.” He said other firms will be able to manage the projects better than Housing Resources Management has. But there will be “a period of time before that can be fully implemented.”
“They have an absolute legal right to (file for bankruptcy),” Keating said. “But it is disappointing to us that they don’t intend to work with us to fix the problems that they’ve created.”
At the same time, Rozet is trying to sell another major portion of his business to a New York firm, New Communities of America. In that part of his business, he acts as general partner in limited partnerships that own low-income housing.
“We are essentially going out of the business of operating HUD properties,” Rozet said.
He said he plans to continue consulting in the field.
Robert De Monte, regional director of HUD in San Francisco, said the housing agency, which also has the authority to approve sales of property it subsidizes, has yet to authorize the sale.
The fall of Housing Resources Management and the apparent sale of Rozet’s syndication business amounts to another dramatic aftershock of the scandals at HUD.
Neither Rozet nor the firms were named by congressional committees that investigated the troubled housing agency last year. But HUD Secretary Jack Kemp singled out a Rozet-controlled project in Washington last year as an example of how owners have allowed HUD-subsidized projects to deteriorate.
Rozet, a Democratic fund-raiser who has allied himself with such politicians as Jesse Jackson, says Kemp singled him out in an effort to shift blame from Republicans who allegedly used undue influence during the tenure of former HUD Secretary Samuel R. Pierce.
In the late 1970s, Rozet pulled out of the housing business and transferred many of his assets when he ran afoul of federal regulators. Later, in 1987, Rozet’s main company, Associated Financial Corp., had assets of $121 million, and he was influential on Capitol Hill, serving as an expert on legislation affecting low-income housing.
“HUD has made it impossible for us to carry out any kind of reasonable role to maintain the properties, operate the properties or to assure their well-being,” Rozet said in an interview Thursday.
As the battle between Kemp and Rozet progressed, some housing officials voiced concerns that the agency might find itself forced to take over Housing Resources Management’s portfolio of 80 projects nationwide, something it is ill equipped to do.
Rozet said he hopes to turn over his management operation to a firm based in South Carolina that manages 55,000 units nationally.
“We have done what they in fact wanted us to do, which is to divest ourselves of any interest and involvement in these properties,” Rozet said.
Rozet said there will be no impact on the tenants--”unless HUD creates the disruption.” But Keating said the housing agency has no desire to “trade one nag for another nag.”
At its height, Housing Resources Management had 700 employees and operated 100 housing projects with 20,000 individual apartments. The firm now has 14 projects in California, including three in the Los Angeles area. Earlier this month, HUD seized one of its most troubled projects, the 300-unit Ujima Village near South-Central Los Angeles.
In the bankruptcy, Housing Resources Management listed assets of $452,838 and liabilities of $663,552. The company filed under Chapter 7 of the bankruptcy code, which suggests that the operation is being dissolved.
