Palo Alto Weekly

News - October 1, 2010

Documents detail CalPERS' $100 million Page Mill loss

Pension fund had invested in Page Mill Properties of Palo Alto

by Gennady Sheyner

In December 2008, about nine months before Page Mill Properties lost control of its 1,800 housing units in East Palo Alto, Warren Otto of Stockbridge Capital Group wrote an e-mail to Page Mill Properties CEO David Taran asking him about a $50 million debt in Page Mill's books.

Otto had recently been hired by CalPERS, the nation's largest retirement fund, to analyze Page Mill's East Palo Alto portfolio, which the Palo Alto-based company began accumulating in 2007. By late 2008, the company had steeply raised rents, displacing many of the residents in the Woodland Park neighborhood and enraging tenant activists. The Palo Alto-based company had also launched a flurry of lawsuits against East Palo Alto, challenging the city's rent-control ordinance.

CalPERS, which stands for California Public Employees' Retirement System and provides retirement and health-benefit services to more than 1.6 million members, had invested $100 million in the Page Mill Properties II portfolio in 2006. As time wore on, however, it became concerned about Page Mill's strategy and the fallout its investment has caused in the media and among tenants.

As Otto began to comb through Page Mill's numbers in 2008, the due date for a $50 million loan to Wachovia (which later was acquired by Wells Fargo) caught his attention.

"David, I'd like to talk with you about the status of the debt on the portfolio whenever you have a minute," Otto wrote. "If you have an abstract which summarizes the terms of the debt that would be helpful. If not, I will need a copy of the debt documents. We are concerned about the $50 million of debt which apparently comes due before the term of the loan is over. Thanks."

The e-mail was one of hundreds of documents CalPERS was forced to release this week because of a legal challenge from the nonprofit group First Amendment Coalition. The 1,175 pages include business reports, Page Mill memorandums, complaints from Page Mill tenants and e-mail exchanges between CalPERS officials and Page Mill executives in the frantic months before September 2009. That's when the company ran out of money and its property managers vacated the apartment buildings, leaving trash cans overflowing and confused residents lined up near empty rental offices, wondering what to do with their rent checks.

The documents, which the First Amendment Coalition posted on its website, indicate that CalPERS sensed trouble with its East Palo Alto investment about two years before Page Mill's collapse but was largely powerless to do anything about it. By late 2008, Page Mill which had become East Palo Alto's biggest landlord with about 1,800 units was entangled in litigation and fighting off allegations from displaced tenants and tenant activists, who called its strategy "predatory equity."

According to a private-placement memorandum that Page Mill tried to keep confidential but was made public in a lawsuit from other Page Mill investors earlier this year, the company saw the East Palo Alto neighborhood as an area "poised for growth and gentrification." Its plans included developing condominiums, fixing up the infrastructure and "further developing community-oriented retail and service business."

By late 2008, CalPERS had grown weary of what Taran called its "opportunistic investment" and asked Otto to take a closer look at the company's numbers. The move irked some Page Mill executives. In June 2009, Otto wrote Page Mill a letter saying it "seems a bit counter-intuitive to be incurring thousands of dollars of expenses to evict good long-term tenants when the portfolio is already suffering from high vacancy" and asked for an explanation.

Page Mill's General Counsel James Shore wrote back three days later, essentially asking Otto to trust the company.

"As I explained in our conversation last week, I cannot stress enough how difficult it is to have our business judgment second guessed by CalPERS every time a tenant or a tenant advocate makes an inquiry to CalPERS," Shore wrote. "Warren, during these very challenging economic times, it is more important than ever that the General Partner stays focused on the investments and is not questioned or interfered with whenever some dissident contacts CalPERS."

CalPERS officials also demanded more information about the $50 million payment Page Mill was due to pay Wachovia. Laurie Weir, CalPERS' portfolio manager, had sent a letter to Taran in March 2009 asking about the payment.

"We are concerned about the risks this debt maturity poses for our partnership investments with you," Weir wrote. "Could you please share with us your plans for handling this debt maturity and how this debt maturity could impact our partnership strategy?"

But despite their growing anxiety, CalPERS officials had few options for saving their investment. The pension fund's role as one of several limited partners in the investment gave it little power to do anything about Page Mill's actions, company officials explained in response to tenant pressure.

In October 2008, Tenants Together organizer Andy Blue wrote a letter to CalPERS saying the pension fund's investment poses a "significant risk for CalPERS both financially and reputationally." In March 2009, Priya Mathur, member of the CalPERS Board of Administration, responded by saying the pension fund's role "limits our ability to act."

"Nonetheless, staff continues to work to influence Page Mill," Mathur wrote. "I understand that it feels painfully slow, particularly to the tenants."

Page Mill's fortunes in East Palo Alto crashed in August 2009 when it defaulted on its loan to Wells Fargo, which by then owned Wachovia. Page Mill had held meetings with bank officials in spring of 2009 in hopes of getting the loan's due date extended (in April, Taran wrote that he was "cautiously optimistic that these discussions will be successful"), but the effort ultimately faltered.

On Sept. 4, 2009, CalPERS received an e-mail from state Assemblyman Ira Ruskin's office describing the chaos and confusion in Page Mill's buildings, with tenants not knowing whom to call for maintenance or emergency issues.

A month later, Page Mill was considering bankruptcy and reorganization. Taran wrote CalPERS a letter saying the reorganization would require "fresh equity" of about $25 million to $40 million. CalPERS declined.

"As previously indicated, CalPERS has no interest in providing any additional capital to the Partnership," Weir wrote to Taran. "We trust that the General Partner and its affiliates will manage this process and the property in the best interests of the Partnership and its creditors."

In March of this year, Wells Fargo officially took ownership of East Palo Alto's apartments after a foreclosure auction for the properties brought forth no bids.

Though CalPERS' failed investment in Page Mill attracted major scrutiny from the public and the media, both the pension fund and the company had resisted releasing any documents relating to the investment strategy in East Palo Alto. In January 2008, after CalPERS received multiple requests to publicize Page Mill's private placement memoranda, Taran wrote a letter to Weir urging her not to disclose "any portion of the PPMs or any other trade secret or confidential information of Page Mill."

"As you know, the PPMs are trade secrets, highly confidential, and their disclosure to those other than investors could cause significant harm to Page Mill," he wrote.

CalPERS agreed and responded to one information request by stating that the release of the documents "could negatively affect the return on CalPERS investments" and "jeopardize its relationship with its business partners."

But San Francisco Superior Court Judge Charlotte W. Woolard rejected CalPERS' argument that the documents are subject to confidentiality agreements and ruled on Sept. 14 that the pension fund had to release the documents.

Peter Scheer, president of First Amendment Coalition, said CalPERS is expected to produce more documents, which the pension fund claims are subject to the attorney-client privilege. The court would then determine which of these documents could be publicized.

To view the documents, go to scr.bi/cJlaDK.

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com. This article was first posted on Palo Alto Online on Tuesday, Sept. 28. Go to www.PaloAltoOnline.com to be the first to know.

Comments

Posted by Train Neighbor, a resident of Ventura
on Sep 28, 2010 at 6:29 pm

What a colossal investment scam Page Mill Partners was running.
Send all the PMP managers to jail (they can bunk with Bernie!)

This scheme raises a few questions:
Where did their $50M loan go?

Who at CalPERS makes these investment decisions?

How is it going with Wells Fargo managing the rental units? Are the maintenance problems getting fixed? Are the rents increasing or staying stable?


Posted by Ken, a resident of Midtown
on Sep 28, 2010 at 7:02 pm

It's too bad that Page Mill was defeated by the statist forces in EPA. EPA badly needs gentrification. CalPERS knowingly invested in this model. Now CalPERS seems to be claiming that its hands were tied. Can't have it both ways....


Posted by Hmmm, a resident of East Palo Alto
on Sep 28, 2010 at 7:30 pm

PMP are criminals, flat out criminals. They hoodwinked many, many people who might otherwise have figured out this scam if they weren't blinded by greed. If a bunch of us lowly EPA residents could figure out that there was something nasty in the woodshed, the investors should've been able to.

CalPERS asked for an aggressive investment fund to put money into, but they got way more than they bargained for,

Ken, not sure where you get your info, but you're wrong. We don't need gentrification, we need affordable housing. That's our value, that's how we've voted and we're responsible for the good and bad that goes along with it.

Train Neighbor, things have improved w/WF as landlords, but the staff at the property management company they've hired has some real morons. It can pretty scary trying to deal with them, because many aren't versed in tenant-landlord laws at the most basic level. Some are rude, unhelpful and frankly, unintelligent.

You can probably find out who at CalPERS is responsible by checking out the public docs. There is a lot of finger pointing, of course. Huge loses, PMP lied about rate of return on the investments, they lied about improvements on properties and they were paying themselves a lot of money. They had consultants making a lot, as well. The CEO made out like the bandit he is. The scumbag General Counsel deserves the same kind of cell the folks he prosecuted ended up in. Truly, the whole scheme was despicable and ripped off many, many people, displaced people and will cost the taxpayer for some time to come.


Posted by Ken, a resident of Midtown
on Sep 28, 2010 at 7:46 pm

"We don't need gentrification, we need affordable housing"

You gotta explain that one.

Resources need to be allocated according to supply and demand, not personality.


Posted by Hmmm, a resident of East Palo Alto
on Sep 28, 2010 at 8:06 pm

It's simple, Ken. It's our city and we make the rules. The rules reflect our values. One of those values is affordable housing, hence being a city with rent control. Gentrification vs. rent control are always opponents. Predatory equity schemes such as PMPs' cost a lot when they don't work. EPA needs affordable housing more than ever. We still have it because voters want it. Rent control can work with thoughtful business development. But again - we need, and have, affordable value because it's of value to the voters. It's our supply/demand at work, and we take the good and bad that comes with it, just as those w/out rent control take their good and bad.


Posted by what?, a resident of Greater Miranda
on Sep 28, 2010 at 10:38 pm

You are aware that rent control raises the rents and the cost of housing?

It moves the cost from existing tenants to new ones.




Posted by Hmmm, a resident of East Palo Alto
on Sep 28, 2010 at 11:50 pm

I'm not here to debate rent control law and its effects with anyone, espec those not informed about EPA's rent control specifics. This article is about the release of documents re PMP and CalPERS. These documents are shedding a great deal of needed light onto the specifics of the PMP-CalPERS relationship, the hardships experienced by tenants, the investment scheme PMP & CalPERS were engaged in and how some of the monies were used. It'll be interesting to see how those who've been short shrifted by PMP use the information contained in these documents, as well as those w/money in CalPERS. The investors who have the latest suit against PMP are mighty interested as well. If there's fraud involved, I hope the mighty fall mighty hard.


Posted by Chris Lund, a resident of another community
on Sep 29, 2010 at 8:47 am

Please visit www.epa-tenants.org for more information on this story.


Posted by Ken, a resident of Midtown
on Sep 29, 2010 at 10:19 am

"It's our city and we make the rules"

You should also consider, as you make those rules, that you will be constraining your tax base...thus your city services. Whenever personality gets injected into macroeconomic decisions (like rent control schemes), there will be a large class of losers, oftentimes including those who think of themselves as winners.


Posted by Where's-the-Money?, a resident of Evergreen Park
on Sep 29, 2010 at 10:30 am

> PMP are criminals, flat out criminals.

So much for due process, and the Rule of Law.

This article demonstrates virtually nothing except that CalPERS freely, and openly, entered into a business deal that gave it very little leverage in the how the money was to be used. When loaning someone $100M, it would seem to be CalPERS obligation to make certain that the entity requesting the loan was able to repay the loan (like requiring repayment default insurance). So, CalPERS' exercise of "due diligence" is being called into question here--but little else.

Somewhere these should be some spreadsheets that show revenue vs expenditure .. where are those?

The basic question of: "where's the money" still is not answered. Maybe it's in the 1200-odd pages produced by PMP, maybe not. If the Weekly is to be useful, maybe they should be asking that question.
If PMP has squirreled the money away in the Caymans, then maybe they are criminals, otherwise .. it's more likely they are bad at their businesses.


Posted by the_punnisher, a resident of Mountain View
on Sep 29, 2010 at 10:54 am

Look up the word FIDUCIARY. Then the word RESPONSIBILITY ( I know, that word is new to many liberal types on the Left Coast ).

Then the term FIDUCIARY RESPONSIBILITY.

That is the core issue here, just as it was in the Madoff case.

It looks like the PMP folks said " trust us " just like bernie did.

when someone TRIED to exercise their " due diligence " rights, PMP blew them off....

When you get down to the basics, CalPERS got scammed. EPA WOULD have got scammed, but have the laws to stop it.

[Portion removed by Palo Alto Online staff.]


Posted by SP, a resident of East Palo Alto
on Sep 29, 2010 at 11:59 am

> When loaning someone $100M

CalPERS did not loan the money. They invested it in a partnership. They were expecting big returns, but with big returns comes big risk. CalPERS did the same thing in a failed investment that attempted gentrification in New York. Someone at CalPERS is responsible for this strategy.

I would love to see the documents on who from CalPERS agreed to this, and how that happened. What was the nature of the relationships between the decision makers and PMP directors? They are the ones that should be in the hot seat now.

PMP directors had a long history of high return real estate investments. However, those investments were all in commercial property. Their Web site at one time showed off a tower in San Francisco, and one in Colorado I believe, that they turned around by forcing out bad business tenants, refacing the structure and giving it a new appeal, moving in higher-rent, more upscale businesses, (mostly law offices I think), and then selling at a big profit. Why people at CalPERS trusted that PMP could pull this off in a market that PMP knew nothing about I would really like to know.


Posted by Where's-the-Money?, a resident of Evergreen Park
on Sep 29, 2010 at 12:54 pm

> CalPERS did not loan the money.
> They invested it in a partnership.

Care to look at the paperwork that went along with the "investment". It's difficult to believe any paper work carries the word "investment", whereas it's not hard to believe that the word "loan" (or equivalent) does appear.

> Someone at CalPERS is responsible for this strategy.

Actually, there are several such real estate deals that fell through at CalPERS during the last year, or two:

CalPERS Fund Details Billions in Real Estate Losses:
Web Link

Some of the managers responsible for these losses are supposedly dismissed --

CalPERS axing investment managers over real estate losses:
Web Link

But little seems to have changed in the "internals" of CalPERS .. and unless there is some sort of "revolution" probably little will change when the economy noses up in the future.


Posted by Hmmm, a resident of East Palo Alto
on Sep 29, 2010 at 3:55 pm

Many of you are preaching to the choir - we are aware of what CalPERS was up to, w/PMP & in other places. It wasn't a loan, it was an investment for which they expected a high return on their money, which they didn't get.

The money PMP received from loans & investors was spent on "overhead" - attorneys fees, high executive salaries and bonuses, "consultants", buying the actual properties at incredibly overinflated prices, insurance, superficial cosmetic improvements to the properties. But really, very inflated property prices that they offered ate up a huge amount. It was a high risk venture which lost & the financial damage is still being accrued.

Yep, criminals. If I were a betting person, I'd lay my money on them being involved in criminal activity - fraud, kickbacks. CalPERS isn't necessarily PMPs victims, either. They were blinded by greed & realized too late that they couldn't control PMP. CalPERS allowed themselves to get scammed, but the decision makers were complicit.


Posted by Where's-the-Money?, a resident of Evergreen Park
on Sep 29, 2010 at 6:26 pm

[Post removed by Palo Alto Online staff.]


Posted by Hmmm, a resident of East Palo Alto
on Sep 29, 2010 at 6:37 pm

Your info is outdated by what, more than a decade? Since you think EPA has problems, you would know that adding to the criminal element is not a good idea. You should also be concerned that these criminals were operating out of your city. Cleaning up your own town is a good idea - you have plenty of problems. Perhaps you can direct some energy towards something useful, such as helping prevent young people from committing suicide.


Posted by Resident One, a resident of East Palo Alto
on Sep 30, 2010 at 12:53 am

From an East Palo Alto resident, EPA's problem is affordable housing. We have enough affordable housing. Why is it that other cities can't do their part and take on some of this affordable housing. EPA has enough. Did you know that the majority of all police calls are from affordable housing. The city will never get in shape if it is constantly trying to overcome the issues that affordable housing brings. Saturation is maxed. When people can do better they move out. SO, what does that get you? Another trouble maker and all the trouble they bring. It needs to stop. EPA will never become the city it could be if we save it all to help folks who always want a handout, drive nice SUV's and live it county paid housing authority housing or reduced rents/rent controlled. And, look who's in the EPA rent control housing did you think people of color NO whites. Get it right.

Get a education, get a job and do the right thing. Easier said than done. Many of us long time residents have done it with no hand outs. My Mom cleaned houses in Atherton. I made it. Double Masters degrees job homeowner. Its harder than waiting for everything free or discounted but you will feel more accomplished.

PageMill was just bad business all the blame goes to gullable CalPERS and all the public workers who's retirement funds were wasted. CalPERS needs their butt kicked.


Posted by Hmmm, a resident of East Palo Alto
on Sep 30, 2010 at 10:33 am

Resident One, you may have a lot of education & a good head on your shoulders, but your facts about affordable housing are incorrect.


Posted by Joseph E. Davis, a resident of another community
on Sep 30, 2010 at 3:21 pm

CalPERS is a fraud. Everyone there with an ounce of authority should be in jail. The fund should be wound down and converted into safe investments.


Posted by Anony Mouse, a resident of East Palo Alto
on Sep 30, 2010 at 4:20 pm

So much crime and poverty yet so much resistance to change. I feel bad for EPA.

If the sliver of EPA west of 101 had been gentrified, the tax base would have increased, resulting in better funding all city services, and the demand for police services and damage due to crime would have decreased (because the new neighborhood would be higher income and create less crime). Doesn't everyone want that for their city?

In return, most of the current residents west of 101 would have been displaced to other parts of EPA or nearby communities. Whether they moved to elsewhere in EPA or a nearby town, the displaced residents would most likely be living in a similar neighborhood to their current community: no worse and no better.

This sacrifice would have at least increased the quality of life at least a little for all of EPA and not decreased the quality of life for the displaced residents.

Now that it failed, major residential redevelopers will be scared off from undertaking projects in EPA for quite a while. It seems that major redevelopment projects of any kind in EPA are attempted about every 5 years (e.g., Ravenswood Shopping Center, University Circle, PMP, etc.). But now it may skip a cycle.

Hope you're ready for the wait, EPA.

Residential redevelopment also seems completely out of the picture for a while, so what's EPA's next move? Perhaps a boardwalk of waterfront restaurants and bars along Bay Road near the water? Commercial redevelopment of University Ave? I don't know of any major work being done on anything in EPA.

Does it just want to stay the same EPA that it is? I, for one, say no.


Posted by Ken, a resident of Midtown
on Sep 30, 2010 at 4:32 pm

Anony,

You just nailed it. Thanks for your insight.


Posted by Hmmm, a resident of East Palo Alto
on Sep 30, 2010 at 4:32 pm

Anony Mouse, there are other redevelopment projects in the works in EPA.

Your solution is simplistic and unworkable. Gentrification is a loose term. PMP was engaged in predatory equity, not gentrification. One may beget the other, but residents and city officials were against it. Developers who are less crooked will be more successful. Perhaps you can lead the way to gentrification by volunteering to be relocated, whether you are a renter or a homeowner. Feel free to lead the charge!


Posted by Anony Mouse, a resident of East Palo Alto
on Sep 30, 2010 at 11:17 pm

Hmmm,

What other current redevelopment projects in EPA are on the scale of redevelopment of the slice of land west of 101, the Four Seasons, or the Ravenswood Shopping Center project?

What was my solution you're referring to, and why was it "simplistic and unworkable"?

I am a renter, and I have moved because my landlord jacked up the rent, and I would move if my landlord was a bad landlord.

I have a contract with the landowner. When it expires I need to sign a new contract if I want to continue to borrow their real estate in exchange for my money. If someone else wants to pay more than I can, why should I still be allowed to live there? That's not predatory to me, that's the free market.

Turn the tables: would you like it if you wanted to move at the end of your lease, but the government made you stay?

Or how about if you were trying to sell your car for $4,000 and the government stepped in and said you're not allowed to sell it for more than $2,500 because the first offeror wanted to pay $2,500 but not $4,000...even though the second offeror was willing to pay $4,000?

Worse yet, this behavoir is hurting EPA as whole because the current tennants of that redevelopment area would rather fight than move.


Posted by Hmmm, a resident of East Palo Alto
on Sep 30, 2010 at 11:37 pm

You have it backwards, with regard to how you're viewing this. Rent control was in existence before PMP tried to take over. They violated the rent control ordinance, harassed and ignored tenants, ignored maintenance and lied. Many of the units ended up empty, something Wells Fargo is still trying to deal with. That's not the way to effect workable change - that's a scheme that failed.

If someone wants to be a landlord in a rent controlled town, you have to know the laws and decide if the investment is worth it or not. Rents of course can be raised and can be raised more for a new tenant if the previous tenant moves out. Tenants have a responsibility and so do the landlords. It's a contract on both sides. PMP violated their side of multiple contracts constantly. They were not the right type of landlord for EPA. There are some very positive aspects to the ordinance for the landlords - if you haven't read the new ordinance, you may be interested in doing so, especially the portion about vacancy decontrol.

Commercial development in EPA has gone pretty well in EPA imo. What do you think?

There isn't current redevelopment on the west side, but there is on the east side, where there's available land and the impact on residents is less.

Frankly, residential redevelopers are likely more scared because of rent control, which has been in place for a long time. However, less than two years ago, I read a report, current at that time, which stated that EPA was the fastest growing city in San Mateo County.

It's a hard thing to balance - how to have a good quality of life and an affordable (always a relative term) place to live.

None of the tenant activists I ever interacted with were against improvements or some change, but the changes need to happen legally. I lived with rent control and without it and there are pros and cons for each.


Posted by its my city and I will cry if I want to..., a resident of Barron Park
on Oct 1, 2010 at 7:46 am

Hmmm....like you said, its your city and you can do what you want.

But, don't cry as it goes down, down, down as a direct result of doing what you want.

There are consequences to every decision. Look around in 20 years, see if you like what you've done.


Posted by Anony Mouse, a resident of East Palo Alto
on Oct 1, 2010 at 11:56 am

"its my city and I will cry if I want to..." stated it perfectly. EPA has the right to remain as it is, but then it's going to remain as it is.

Menlo Park, Mountain View and Redwood City all have areas of high, middle and lower cost housing (relative to Bay Area standards, of course) so there's a balance. But with EPA there's no high cost housing, and not much of what I'd consider middle cost housing either - even though it's in a prime location, and there's lots of demand for it.

Unless Palo Alto is going to annex EPA - which I don't imagine is ever going to happen - EPA has to figure out on its own how to balance out the property values in the city limits if it wants to get better.

I'm not saying flush everyone out of town and start over, but obviously some people have got to move to make space for nicer properties.

If I have to move to Menlo Park as a result, but the crime rate for the mid-Penninsula as a whole goes down, that's a trade I'm very willing to make.

What other town around here has rent control? If that's what's in the way, let's do away with it. Laws are meant to evolve for the better. That's what generates progress.

Or we can just remain the local center for crime, drugs and despair.


Posted by Hmmm, a resident of East Palo Alto
on Oct 1, 2010 at 1:17 pm

Anony Mouse, you're elected! You can move and start the change. There is a lot more room for development on the east side rather than the west. Also, if you don't like what rent control creates here, did you vote against it? Work to prevent the new ordinance from being voted in? Or are you just pointing out, after the fact, w/out having the facts, what the down side is in your not fully informed opinion? I don't think rent control is a cure all, but rent control can be effective and balanced, and rent control is NOT responsible for the lack of commercial development or additional residential development or even redevelopment. There are ways to do redevelopment in a town w/rent control and have some economic diversity in rental units. But this is where PMP screwed it up for others: since they bought so many units, places where rent control didn't used to apply now do. So please, direct your venom at them.

Yeah, I've been in EPA for a long time and like how it has improved. Redevelopment of rental property is not the cure-all morons think it is. The PMP landlords were crooks because they violated many laws and have been caught doing so. There will continue to be fallout based on how they "mismanaged" funds. They were not the right type of landlord for EPA.

Once again, people, the subject here is not YOUR opinions on what EPA should do. The subject is what these criminals attempted to do but failed, and how the cost is high to many, many innocent people, from employees, tenants, people who had loans in the same places, people whose funds were w/CalPERS, taxpayers, etc.


Posted by observer, a resident of Menlo Park
on Oct 4, 2010 at 1:43 am

I've read through about 3/4 of the disclosed documents. They indicate that PMP was within it's rights to raise the rents (to the amounts of the rental certificates). PMP claimed that EPA was intent on fighting PMP rental increases but lost in court every time. PMP may well have been within legal bounds. The evictions, as portrayed, are heartbreaking. They seem unfair, but may well have been legal (the two don't always coincide).
A more humane approach might have been to raise rents only through attrition, but PMP's strategy and leverage probably didn't allow for that. Also, EPA's [purportedly illegal] actions to thwart the rent increases caused PMP to accelerate them to protect itself.

It seems EPA and it's residents really do prefer and value the low rents. This may explain why EPA really hasn't changed or improved all that much in the 25 years that I've lived on the peninsula. I still cannot believe the level of crime that exists in that community. That's not fair to the residents either.

Perhaps there are aspects of the situation I don't fully understand. But I do understand that the level of crime in the community is totally unacceptable and generally has been for a long time.


Posted by Hmmm, a resident of East Palo Alto
on Oct 4, 2010 at 12:37 pm

Observer, your thoughtful overview is appreciated, at least by me. It isn't always easy living in a high crime community, or a community that everyone thinks is just about crime, not noticing the good things that happen and the great people who live here. I have noticed an overall improvement in city services, shopping and general safety in EPA. I'm still quite cautious, but a lot of the more dramatic crime here happens to people who are criminals themselves.

It was never determined, overall, if PMP's rent increases were legal or not. This was for many reasons, including potential poor behavior/rulings of the judge (there's a lot more to that, but obviously, it's not incl in the documents, so you wouldn't know that). Also, the city couldn't afford any longer to fight PMP on that front, but there was no penultimate ruling that said PMP was in the right. It was also due in part to PMP refusing to file certificates of rent on many of the properties and their many violations of rent control ordinances in their dealings with the rent control board. Many of the multiple suits involving PMP and the city have been settled. Another significant suit that was settled in the tenants favor involved PMP using LLCs on duplexes to dodge rent control laws. They were caught out and are now having to pay hundreds of thousands in court costs vs. comparatively little in back rent owed to the tenants who rents were definitely illegally raised.

There's also an oversimplified viewpoint about rent control & crime at work here, because no one has bothered to look at the connections between owned properties and crime. I'm not saying that in a lower income, more peripatetic population that there is NOT a connection with crime, but I have found it easier to help get rid of the neighborhood criminals who rent vs. criminals who own, or are related to homeowners who allow them to stay.

There are also a lot of community benefits to rent control when tenants aren't treated as as if they don't matter. I for one believe that rent increases are necessary and don't dispute that. But a landlord's lies, harassment and misuse of the justice system are not ok. PMP was indeed caught raising rents illegally, and using other means to drive out tenants who paid their rent on time. They also tried these tactics against number of tenants who fought back and are still in EPA. One of the huge downsides is the incredible mess they left for Wells Fargo, as the tenancies were down, among other things, there were no records on tenants to which to refer and so much maintenance had been lied about, but they were backlogged with requests. These are issues that affect taxpayers, as they go beyond tenants.

I would much rather expect a legal, consistent rent increase minus harassment, fear and illegal tactics so that my quality of life isn't so affected. I would also hope that at some point, instead of pointing fingers at rent control, the crime and the tenants, outsiders would understand the breadth and depth of crookedness that PMP has gone to. Or, if not understand, at least be open to the probability that widespread financial crime has occurred here. I hope time and attention by the authorities reveals what many of us more than suspect.


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