California has rescinded a conditional $73.4 million grant that would have permitted a drug and alcohol recovery center to open at the site of the former Little Sisters of the Poor facility in San Pedro.
The move, announced Wednesday, appears to derail the proposal that had drawn intense and heated public opposition over the past few months.
Among those expressing relief on Thursday was Lorraine Keeling, 96, who is president and spokesperson for some 70 care residents still living on the property, which was once operated by nuns who were part of the Little Sisters of the Poor church order. That order sold the property in 2020 as it was reducing the homes it operates throughout the world.
Keeling, contacted by phone on Thursday, July 16, said an existing five-year lease already protects the some 70 residents there, but that the grant being rescinded also offers some reassurance about the future.
“I’ve been here for 12 years,” she said, adding that when the facility was still under the Little Sisters of the Poor it was “first class.”
The letter from the California Department of Health Care Services said a review of the matter — which had also been urged by Los Angeles Councilmember Tim McOsker — determined that the current property owner, 9 Gem Capital Group LLC, was “not eligible or allowed to be the source of funding to meet the BHCIP cash match requirements because the match funds cannot be from the seller of the property.”
McOsker had raised several questions about the proposal and pushed for the state to do more research. The plan, from Fred Brown’s Recovery Services, developed as a result of a proposition approved by California voters in 2024 that provides $6.4 billion in bonds to finance behavioral health treatment.
“This is such a large project for a small nonprofit to take on,” McOsker said in an April phone interview. “It seems beyond their ability.
“For months,” he added in a social media post on Wednesday, “I have raised serious concerns with DHCS about this proposal’s financial structure, transparency, and overall viability.”
The Fred Brown application for the matching grant was signed by Brian Dror, manager of 9 Gem Capital Group LLC. A representative of the Fred Brown group said the organization declined to comment immediately when contacted on Wednesday.
But the state, McOsker said, recognized “that this project presents significant legal and financial risks and does not meet Bond BHCIP funding requirements.”
The proposal for the property, 2100 S. Western Ave., drew strong opposition that sparked almost weekly protest pickets and drew an estimated 300 people to attend a standing-room-only, hours-long town hall meeting called by McOsker in April.
McOsker, in March, said there had been “zero public outreach” by the Fred Brown organization up to that point. Many said the proposal blind-sided the coastal community. Opponents, in addition to carrying out protests, also raised enough cash to hire an attorney in an attempt to fight the proposal, which they said was a bad fit for the neighborhood and posed numerous public safety concerns.
Fred Brown representatives, meanwhile, had pointed to the organization’s long association with the community and track record in recovery treatment, operating numerous small but scattered recovery homes throughout the town. The new, much larger project was to be named Serenity Recovery Campus.
A project overview issued by the organization said the nonprofit has “42 years serving L.A. County” and that the project mission at Serenity Recovery Campus would be to “provide whole-person, accessible, culturally sensitive care and housing that supports recovery and reintegration for veterans, the justice-involved, the unhoused and those with co-occurring conditions.”
Residents mobilized once word spread, however, and the agency quickly found itself on defense.
“Today’s action demonstrates why thorough review, public scrutiny, and accountability matter,” McOsker’s Wednesday, July 15, statement said. “As I have always said, I support expanding access to mental health and substance use treatment. But those services must be delivered through projects that are financially sound, transparent and appropriate for the communities in which they will serve.”
What will ultimately happen to the property remains up in the air. Many hope it can remain an elder care facility under new ownership.
The state’s Wednesday letter — signed by Marilies Perez, division chief of the state Community Services Division, and addressed to Mark Malone, director of administration for Fred Brown’s Recovery Services, Inc. — said the state “requires conditionally awarded applicants to submit documentation reflecting the match source being pledged” and that all match sources must be approved the state.
In late May, Fred Brown submitted supporting documentation for the cash match application at the request of the state.
But after reviewing that information, this week’s letter from Perez said, the department “has determined that (Fred Brown’s Recovery Services) alternative source of match funds is still not sufficient to meet the cash match requirement.”
FBRS, the state’s letter said, identified The Rahman Foundation Inc. as “the purported new source of match funding” but the documentation continued identifying Dror as the signatory, “who also executed the original cash match documentation on behalf of the property seller, 9 Gem Capital Group LLC, and who continues to represent himself as representative” of that group in subsequent correspondence.
“Accordingly,” the letter from Perez added, “DHCS has determined this business arrangement continues to present significant legal and financial risks and does not meet Bond BHCIP funding requirements.
The letter ended by saying the conditional grant and been rescinded.
California law also does not allow for protests or appeals, the letter said — so the DHCS’ decision is final.
Jerry Gaines, secretary of the South Shores Community Association, which was among the proposal’s main opponents, said neighbors are relieved at the news.
“There was a lack of information when this started and the big thing was their size,” he said of the proposal. “The state decided this was not a good deal.”
Both elder care and recovery centers are needed in communities, Gaines said, but the location and lingering questions about the specific proposal drew almost immediate and justified opposition. He credited McOsker for pushing the state on those specifics.
Under Little Sisters, the church-run facility had a long history and widespread respect in the port town, which also has a strong Catholic community. Many had put their names on the home’s waiting list to one day stay there. But then the surprise announcement came on Feb. 18, 2020, that it would close. Looking to pare down some of the Little Sisters’ 167 homes around the world, the Roman Catholic religious order of nuns announced it would withdraw from San Pedro once a buyer was found.
The Los Angeles home, which went back 116 years and was originally in Boyle Heights, moved to San Pedro in 1979, taking over the old home of Fermin Lasuen, a Catholic high school for boys that closed in 1971. The facility was home to about 100 residents. Seven sisters remained on staff, but were also reassigned to other facilities upon a new owner being found.
The one stipulation was that it continue to be a facility that would serve the elderly poor.
The subsequent owner, selected in 2021, was Grace S. Mercado, who operated three skilled nursing facilities in the state and described herself as a devout Catholic. It is unclear if she still owns the facility.
The property includes a 150,000 square-foot main building and a smaller retreat house, with a garden area among the property’s outdoor features.
Supporters of the recovery center also appeared at the earlier town hall meeting, including Fred Brown’s Recovery Services Executive Director Roxanna Natale-Brown, the widow of founder Fred Brown, who said the program provides a chance to bring more people in off the streets. The recovery program’s cofounder, Al Ahl, treated former first lady Betty Ford in 1973, according to information provided by the group.
Speakers in support of the proposal said there is currently a shortfall of beds in the South Bay and surrounding areas for those looking to recover from drug or alcohol addictions.