A Wyoming-based foundation has accused L.A. developer Edward “Eddie” Lorin, founder of the investment and development firm Strategic Realty, of repeatedly deceiving the nonprofit over a failed homeless housing project in Koreatown.
“It wasn’t an out-and-out lie,” said Avi Wagner, a lawyer representing KB Visions Foundation, the Wyoming group. “These were more kind of significant embellishments. And part of that is, you would get these significant embellishments, then you would get radio silence.”
KB Visions Foundation (KBVF), based in Jackson, Wyoming, is a creditor on the project, which sought to redevelop an aging apartment building into new housing for homeless and low-income tenants. KBVF loaned millions toward the effort but alleges the development team, led by Lorin, failed to secure new financing to repay a bridge loan and misled the foundation over the finances and status of the project.
A complaint filed in L.A. County court early this month by KBVF named Lorin; Lorin’s firm Strategic Realty Holdings; and HAPI Foundation, a Strategic-affiliated nonprofit that is the manager of the project, as defendants.
In a statement provided to The Real Deal, Lorin, an experienced affordable housing developer, defended his actions on the project and toward KBVF, and said he personally took serious losses.
He also pointed a finger at state, county and city governments for failing to come through with funding commitments.
“Roughly five years ago we set out, in conjunction with the City of Los Angeles, to prove that using existing properties to house those experiencing homelessness is faster and cheaper,” Lorin wrote in the statement. “The plan was sound, as has been our follow-through pursuing this opportunity.”
But he was “very disappointed that the political will has failed to follow through with this common sense approach,” he added. “I’m also disappointed that these issues have led to the failure of this particular property.”
The project was born of happier circumstances. In the mid-aughts, Lorin met Dr. Renee Kaswan, a former University of Georgia veterinary professor who in 2003 had developed the prescription drug Restasis, the first FDA-approved treatment for chronic dry eye condition, according to the suit.
Kaswan would go on to establish KBVF, a philanthropic organization that currently has $3.2 million in assets, according to Guidestar, a site that tracks nonprofits. The organization’s stated mission is “empowering the innovators combating our planet’s most challenging problems,” and its team includes Roger Daltrey, lead singer of The Who.
Kaswan was interested in affordable housing issues, according to the suit, and, “after ample discussions” with Lorin, agreed to bring the foundation in as an investor on a venture to develop a new affordable housing project.
The plan was to redevelop a building called Normandie Lofts, at 167 South Normandie Avenue in Koreatown, and use at least half the units for low-income housing. Property records indicate that the five-story, 27,000-square-foot building was built in 1928 and has 50 units. A studio in the building rents for a below market $1,250, according to the building’s website, and a one-bedroom rents for $1,600.
In May 2018, Lorin and KBVF created a new entity for the project, called Normandie Lofts KTown LLC, in which KBVF would own 46 percent and Strategic Realty would hold the remaining 54 percent. The foundation, “relying on Lorin’s promises,” gave the entity a “purportedly short-term loan” for $3.1 million that August, according to the suit. That same month, the LLC bought the property for $8.9 million, records show.
Before KBVF entered the deal, Lorin had promised the project would receive new financing, including a $7.2 million loan from the California Housing Finance Agency CALHFA and a $1 million loan from Los Angeles Housing Community Investment Department, a city agency. Lorin also “dangled the promise of HUD funding,” the lawsuit states.
But for months that government financing never materialized, and another financing agreement, with the Jonathan Rose Companies, also fell apart. In January 2021, long after KBVF’s original 2018 loan was meant to be repaid, the group extended it until August 2022.
Yet even as the project’s outlook deteriorated, the developer misled KBVF about its progress, the lawsuit alleges, indicating in one communication that everything was on track only to subsequently disappear for extended periods. HAPI and Lorin also misled the group about the condition of the building, according to the suit.
It was “a mix of half-truths and a total lack of transparency” that collectively “amounted to deception,” said Wagner, KBVF’s lawyer.
In his statement to TRD Lorin, who founded the Calabasas-based multifamily developer Strategic Realty in 2008, said that he had sacrificed on account of the project.
“I’ve worked as hard as possible to protect the foundation from losses and I have personally taken 100 percent of the first losses in seven figures over the last five years,” he said. “But the current market conditions continue to erode and unfortunately we are out of time.”
The Normandie entity and HAPI still own and manage the building, but the failed redevelopment means the building has not taken in low- and extremely low-income tenants — the goal of the project — and Lorin and HAPI have instead been looking to sell, according to the suit.
After ultimately receiving another $7.2 million loan from Rose Capital, the entity now owes more than $10 million in principal on loans due by next month, including the $3.1 million to KBVF.
The group’s lawsuit demands a jury trial. Lorin remains “dedicated to the mission of making housing affordable,” he said in his statement.
The post Failed Koreatown affordable housing project spawns lawsuit appeared first on The Real Deal Los Angeles.
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