East Palo Alto prepares for Page Mill lawsuit negotiations
City and court-appointed receiver set to begin settlement talks next week
East Palo Alto officials and the city's biggest landlord will begin negotiations next week in hopes of settling more than a dozen lawsuits between the two parties.
Most of the lawsuits between East Palo Alto and Page Mill Properties were initiated by Page Mill and challenge the city's rent-control ordinance. The Palo Alto-based company lost control of its East Palo Alto properties last fall after it missed a $50 million payment to Wells Fargo. The San Mateo County Superior Court appointed a receiver, Wald Realty Advisers, to oversee the more than 1,700 units.
The East Palo Alto City Council has recently received an offer to settle the suits from Wald Realty and has already met in several closed-door sessions to discuss the offer. The council has also appointed a two-member subcommittee to convey the council's position to Wald Realty, said Councilman Ruben Abrica, a member of the subcommittee.
"The city has always been willing to sit down and try to mediate some of the issues with Page Mill, but Page Mill was always on a warpath, always attacking," said Abrica — himself a Page Mill tenant. "Now, the city is willing, in good faith, to talk to the court-appointed receiver about anything that can be mediated and that can avoid further financial cost to the city."
Abrica said the subcommittee — which also includes Mayor David Woods — would have its first meeting with Wald Realty officials next week, at which times the parties will discuss the pending litigation and Page Mill's outstanding fees. The company had failed to pay close to $360,000 in registration fees and now owes the city more than $1 million — the bulk of it in penalties.
He said the city would not negotiate away any of its current laws or consider waiving the fees owed by Page Mill. The penalty, however, could be up for discussion when the two sides meet next week. The city also has the option of placing a lien on Page Mill's properties, he said.
David Wald, president of Wald Realty, declined to discuss the negotiations between his company and the city, citing a company policy not to comment on pending litigation. Page Mill did not respond to calls seeking comment.
The legal conflict between Page Mill Properties and East Palo Alto had snowballed in the past two years as Page Mill filed a flurry of lawsuits challenging the city's rent-control ordinance and the City Council's efforts to moderate the company's rent increases.
A recent City Council agenda listed 14 pending lawsuits between Page Mill and the city.
Most of the lawsuits focus on whether Page Mill acted legally when it spiked the rates at its apartment buildings — in some cases by more than 50 percent.
The company and the city also went to court over a rent-control measure that city officials had planned on placing on the ballot last November. The city had to delay the ordinance after a legal challenge from Page Mill.
Last year, the company had also sought to remove the entire Woodland Park neighborhood from East Palo Alto's sphere of influence. The San Mateo County Local Agency Formation Commission had rejected the company's request to separate the neighborhood in October.
Amid growing financial woes, the company temporarily abandoned its apartment buildings last September, leaving overflowing trash cans, malfunctioning fire-alarm systems and confused tenants in its wake. Wald Realty was then appointed to oversee the properties.
Wells Fargo is scheduled to begin auctioning off the properties on Feb. 1. Earlier this month, tenants had received "notices of sale" informing them that the foreclosure process has begun on Page Mill's properties.
"If you are renting this property, the new property owner may either give you a new lease or rental agreement or provide you with a 60-day eviction notice," the notices said.
Well Fargo had subsequently assured city officials that the foreclosure process would not affect the rents of current tenants.
Chris Lund, a tenant advocate who had long accused Page Mill of being involved in a "predatory equity" scheme, said the foreclosure proceedings would be closely followed both in East Palo Alto and at other cities where rent-control laws had been in the headlines. Lund said Page Mill's recent crash is among the first national cases in which a "predatory equity" scheme leads to all of the company's properties being sold.
"This could set a national precedent on how these types of deals unwind," Lund said. "People across the country, including many groups in New York and Washington, D.C., are paying close attention to what's happening here."
Staff Writer Gennady Sheyner can be e-mailed at email@example.com.