Palo Alto Weekly

News - March 5, 2010

Wells Fargo now biggest East Palo Alto landlord

Bank becomes city's biggest landlord after foreclosure auction attracts no bids

by Gennady Sheyner

Wells Fargo took ownership of more than 1,800 housing units in East Palo Alto's Woodland Park neighborhood Tuesday afternoon, officially becoming the city's largest landlord.

The bank's foreclosure auction for the properties, which were previously owned by Palo Alto-based firm Page Mill Properties, attracted no bidders Tuesday, said Elise Wilkinson, Wells Fargo spokesperson. As a result, Wells Fargo officially took ownership of the properties, which the bank valued at $142 million.

Page Mill has been vehemently criticized by its tenants and by city officials for repeatedly raising rents at the properties. Some have accused the company of "predatory equity" and demanded rent reductions. Page Mill had maintained that the raised rents are needed to fund security upgrades, seismic retrofits and other improvements at the properties.

The company is also embroiled in more than a dozen lawsuits with East Palo Alto over rent control at these properties lawsuits that the city officials hope to settle in the coming weeks.

Page Mill lost control of its properties last fall, after it defaulted on a $50 million balloon payment to Wells Fargo. In September, the company's property managers temporarily abandoned their buildings because the company had insufficient cash flow. A San Mateo County judge then appointed an overseer for the properties.

Wells Fargo said in a statement that it does not expect the auction results to have much impact on the building residents. The firm Investors' Property Services will continue to manage the properties, the bank announced.

"After speaking with many members of the East Palo Alto community and carefully weighing the options, we believe Wells Fargo's acquisition of these properties will provide the best possible outcome for the residents and the community," Wells Fargo Managing Director Sean Barlas said in a statement. "In the short-term, we expect little or no impact to tenants at Woodland Park Apartments or the community."

Chris Lund, a tenant advocate and leading opponent of Page Mill's rent hikes, said the bank's ownership of the properties comes as a "sigh of relief" for the tenants. He said Page Mill had spent about $269 million to buy up the properties.

On Tuesday, the prices for the opening bids for the housing units ranged from $323,079 for the property at 640 Circle Drive, to $17.6 million for the large apartment building at 1 Newell Court. Lund said he was heartened by the fact that the bank's opening bids closely reflected the building's value, not Page Mill's purchasing price.

"I think the bank genuinely wants to do the right thing," Lund said. "It has closed the Page Mill chapter and that's a positive thing for the community."

Wilkinson said the bank enlisted BRIDGE Housing Corporation, a leading affordable-housing developer, to help it consider long-term strategies for the properties. She said it's too early to tell if, when and to whom these properties would ultimately be sold.

"Together, we will thoughtfully look at what makes sense for the properties," Wilkinson said. "We'll take our time and look at all the options."

Lydia Tan, BRIDGE executive vice president, said in a statement that the first step will be gathering as much input as possible about community concerns and possible solutions. The group now plans to meet with building residents and other stakeholders.

"We are just starting our outreach, and we will be looking forward to connecting with all stakeholders through individuals as well as town-hall meetings," Tan said.

Meanwhile, the East Palo Alto City Council is looking to tighten up the city's rent-control ordinance to make it more consistent with state law. City officials also hope to clarify some of the language about allowable rent increases issues that prompted a flurry of lawsuits from Page Mill.

East Palo Alto officials were forced to cancel last year's attempt to revise the ordinance after a court challenge from Page Mill. Councilman Ruben Abrica said the city now plans to place the revised rent-control ordinance on the June ballot.

Abrica said the city has scheduled a public meeting on March 11 at 6:30 p.m. at City Hall to discuss revisions to the ordinance.

The City Council is also trying to negotiate a settlement over the glut of lawsuits filed by Page Mill over the past two years. A council committee discussed the long list of legal issues in a closed session Tuesday, said Abrica, a member of the committee.

Though Abrica alluded to several difficult "sticking points" in the negotiations, he said Wells Fargo's ownership of the properties would bring some welcome clarity to the process.

"At least, now it's clear who the owner is," Abrica said. "Now that it's clear that Wells Fargo is in control, the negotiations can be much more direct."

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

Comments

Posted by Yay!, a resident of East Palo Alto
on Mar 3, 2010 at 10:35 am

This is better news than continuation of ownership by Page Mill Properties. However, the property management service needs to get the heave-ho. They are incompetent and rude, for the most part. They continually violate tenant rights and put their employer in legal jeopardy.


Posted by Chris Lund, a resident of East Palo Alto
on Mar 3, 2010 at 10:44 am

Please visit www.epa-tenants.org for more information on Page Mill Properties and the East Palo Alto apartment portfolio.


Posted by Arn Cenedella, a resident of East Palo Alto
on Mar 3, 2010 at 3:50 pm

I represented 3 East Palo Alto property owners who sold their properties to Page Mill Properties. In my opinion, Page Mill paid very high prices for the properties purchased. Hopefully, Wells Fargo will be able to sell these properties to smaller more local investors and potential owner occupants who will take better care of these properties and help the West of 101 neighborhood improve. There has been much positive progress in East Palo Alto over the past 10 years - the construction of the IKEA/Home Depot east of the freeway and of the new office buildings at University Circle west of the freeway in the area formerly known as Whisky Gulch.
Arn Cenedella
acenedella@cbnorcal.com


Posted by Raze It, a resident of Another Palo Alto neighborhood
on Mar 3, 2010 at 6:13 pm

The new businesses are fantastic but they are on an island. EPA is still crime-ridden. [Portion removed by Palo Alto Online staff].


Posted by good job, a resident of Green Acres
on Mar 4, 2010 at 5:17 am

Wow, what a great outcome from all that "tenants' rights" agitation!

Bankrupt and now gone owners...

and wait till you see how great a BANK is at managing properties, and how quickly they sell..to no matter whom...for as little as possible to unload the properties..and do you think that the new owners will have any money left to indulge in fictional "rights" of tenants?

good luck with that!

good job!!

I suspect the next time someone wants to agitate for more "tenants rights", all the neighbors will rise up, duct tape him/her, and shut the closet door!


Posted by Economist, a resident of Old Palo Alto
on Mar 4, 2010 at 9:18 am

Shocking logic, makes absolutely no sense! Zero understanding how investments in real estate work. People want a subsidy, but who will pay for it? WF can afford the write off?


Posted by Yay!, a resident of East Palo Alto
on Mar 4, 2010 at 10:45 am

Hey good job, clearly, you don't know what you're writing about. EPA has rent stabilization, which means tenants' rights matter. We have a good rent board and tenants' rights groups as well as infomed city council members working on a variety of issues. Page Mill Properties thought they could swoop in and prey on us, but it didn't work the way they wanted, for many reasons. Predatory equity is awful because everyone pays for it - us as taxpayers, as bank customers, as people with retirement plans, as tenants, as property owners.

I deeply appreciate the hard work of the tenant activists, whether they donated money, time or talent to these issues. Tenants on the west side are lucky to have epa-tenants.org, YUCA and to recognize that standing up for our legal rights was important.

EPA also gets a say in the matter about who Wells sells to. While some of it is a crapshoot, not all of it is.

Funny that people outside of EPA and/or those who lack knowledge of the city, county and state laws and workings of housing don't know how it all works. Educate yourself by visiting epa-tenants.org, by reading the bill Ammiano has introduced about predatory equity investment, read the WSJ articles. You might learn enough to write a better-informed opinion.


Posted by P.A. Native, a resident of Mountain View
on Mar 4, 2010 at 11:23 am

Dear Editor,

Your censorship policy makes abosolutely no sense to me. How is it that portions of my post are removed when I tell someone that using the word "retarded" isn't very classy, but when someone says...

"If all the apartments were burned down and then rebuilt with new tenants, that would be positive progress."

...that's cool. I guess you agree with this perspective. That's what I take from it.


Posted by Yay!, a resident of East Palo Alto
on Mar 4, 2010 at 1:07 pm

P.A. Native - fwiw, I agree with you. Sometimes the editors are, imo, a little short-sighted.


Posted by Rebecca, a resident of College Terrace
on Mar 5, 2010 at 11:19 am

"Page Mill Properties thought they could swoop in and prey on us" - this is a really funny comment, reminds me of Soviet Union's anti-capitalist grotesque caricatures depicting fat-cat capitalists holding bags of dollars in one hand and squeezing the neck of proletariat by the other:) Martin Luther King once said that "nothing in the world is more dangerous than sincere ignorance". It is pure ignorance that made people angry at Page Mill, they believe that real estate investing is a predatory practice and not just a pure "numbers and sense":) Page Mill was losing money on this investment and had no other choice but walk away from this investment (losing a lot of money in downpayment) because it was a private venture and they couldn't afford to subsidize rent. Just like people walk away from foreclosures they can no longer afford. Who loses in all this? The investors lose downpayments, banks lose on price differential and the government (or we the people) have to pay to bail the banks out.... So people who demand rent control demand that the rest of world pays for it. Redistribution of wealth as we know it. Hooray, revolution! Let't take the money from the rich and divide it all!


Posted by Yay!, a resident of East Palo Alto
on Mar 6, 2010 at 12:08 am

Rebecca, I don't know where you've been getting your info, but clearly not from anywhere legit. EPA has had rent control for many years, for both the good and bad sides of it. Page Mill wasn't investing, they were preying. They didn't walk away, they defaulted, knowing for a long time they'd miss their 50 mil payment because they bought too much property at inflated prices, had a high burn rate and had plenty of legal fees. They were damaging, fly-by-night landlords. Real estate ventures are always risky where there's rent control, so no pity. They did prey on many people. Their actions of harassment, illegal evictions, illegal rent increases, illegal LLC formation, nasty lawsuits, spying on a tenant activist, ignoring serious habitability violations and poor treatment of their own staff are all well known in town. EPA has some good landlords, and Page Mill wasn't one of them. They have badly messed over CalPERS as well as their lenders, through no fault of their tenants or the City. The blame lies with them for their illegal tactics and with the housing market for bad timing. In other words, a perfect storm of greed, bad management, illegal tactics, incompetence and terrible timing, leading to default. he Page Mill officers should be forced to live in one of their worst complexes as some bad landlords have been punished in the past by the judge sentencing them.

Educate yourself about this issue so that you can at least post informed opinions.


Posted by BigBusiness, a resident of East Palo Alto
on Mar 6, 2010 at 6:21 am

The bigger picture and goal for this neighborhood will remain the same. Wells Fargo and any developer that owns the portfolio of properties is out to make money. This is how it will be done:
1) Unincorporate the city's entire western side
2) Property values automatically increase
3) Raise entire neighborhood
4) Devlop McMansions in a gated community or Law Offices


Posted by Hmmm, a resident of East Palo Alto
on Mar 7, 2010 at 12:03 am

Hey BigBusiness - Page Mill Properties just tried to remove the west side of EPA from EPA and the county wouldn't agree. They found the request appalling and ridiculous. If you are interested in info on that recent process, I can post some links.

The bank does need to make money off of the portfolio of properties, but their retention of BRIDGE Housing as a consultant is a pretty decent sign that they mean well. Time will tell...and people who care have to remain vigilant.


Posted by Sam, a resident of Downtown North
on Mar 13, 2010 at 5:58 pm

What people continue to ignore about East Palo Alto is this: the county is required by the state to have affordable housing, and the county has labelled much of the city of EPA as meeting its requirement. So these bizarre fantasies of tearing everything down and driving out the poor (or doing worse, shame on you people!) are just sick revenge fantasies about hating the poor. It is possible to be constructive in the pursuit of affordable housing, and the City of EPA is trying to do just that.

Page Mill was not interested in playing along. They were disgusting, law-breaking bunch that had a sideline in terror. They knew nothing about responsible management and did everything incorrectly. Wachovia gave them way too much money because they were convinced that "if you can only break rent control, you'll make a killing." Well guess what, Page Mill's decline had nothing to do with rent control: they just didn't improve the units enough (or have the right units) to get back what they paid.

Folks, when a broker comes on line and tells you that Page Mill overpaid, they definitely overpaid. They weren't looking to improve the housing, they were looking to use nasty methods to terrorize people out. That's not fair dealing, any more than blackmail, extortion, kidnapping or racketeering are: they were using the banks money to run people out of town, and they knew they could walk away (non-recourse loan) to do it. Truth is if an individual owned those properties, they wouldn't not have behaved in the nasty aggressive way Page Mill did. But an individual would actually have to pick up the tab. Page Mill will probably walk away from it, unless the investors and bank wise up and investigate these bozos for fraud, which, if you watched these guys in action, almost had to be part of the game.

I wish EPA luck in cleaning up this mess. The Page Mill people were a disaster, and they exercised zero responsibility as part of doing business/fraud. Weren't these the guys who, after all, electrocuted one of their workers because they couldn't be bothered with basic OSHA regulations?

Shame on Wells/Wachovia for backing these guys. The scheme couldn't have worked either in the law of EPA or according to the laws of the pure marketplace. Let's hope that Wells shows some real leadership and sells the portfolio to honest, non-speculative investors.

-Sam


Posted by good job, a resident of Meadow Park
on Mar 13, 2010 at 6:12 pm

tenants "rights" shmights...

the bottom line is, are the tenants better off or worse off now than 3 years ago? Will they be better off or worse off in 3 more years?

I am making my bet that the answer to both questions are "no".

So, "tenants rights", "workers rights", "students rights" blah blah blah..is all from the same ideological ilk, from Marx to Mao, from Stalin to Castro to Chavez...always with the same results.

enjoy them


Posted by Doris, a resident of East Palo Alto
on May 10, 2010 at 2:23 pm

I too have been victimized even though my rent was increased through the housing authority, from $700.00 to $1300.00. I was told that due to me being on housing that the reduction will not be directed to me, cause of the state law on the Housing Guide lines. Is this true, if anyone knows something that might help me to also get what is deserved to me too. I just don't see how this could not apply to me. The increase is o.k but the reduction is not? Who can I take my case to.

Please advise.


If you were a member and logged in you could track comments from this story.

Post a comment

Posting an item on Town Square is simple and requires no registration. Just complete this form and hit "submit" and your topic will appear online. Please be respectful and truthful in your postings so Town Square will continue to be a thoughtful gathering place for sharing community information and opinion. All postings are subject to our TERMS OF USE, and may be deleted if deemed inappropriate by our staff.

We prefer that you use your real name, but you may use any "member" name you wish.

Name: *

Select your neighborhood or school community: * Not sure?

Comment: *

Verification code: *
Enter the verification code exactly as shown, using capital and lowercase letters, in the multi-colored box.

*Required Fields