Palo Alto Weekly

News - August 26, 2011

East Palo Alto residents protest sale of apartments

Residents, activists riled by Wells Fargo's plan to sell about 1,800 units to Equity Residential

by Gennady Sheyner

As Wells Fargo prepares to unload its huge apartment portfolio in East Palo Alto, city residents, officials and tenant activists are gearing up for another battle to preserve rent control in the city's Woodland Park neighborhood.

Dozens of critics of the proposed sale marched from East Palo Alto to Wells Fargo's branch in downtown Palo Alto Monday afternoon, Aug. 22, in protest of the bank's selection of Equity Residential as a finalist in the sale of about 1,800 units about 70 percent of the city's total stock of affordable housing. The apartment portfolio was previously owned by Page Mill Properties, a Palo Alto-based firm that lost control of the units after it defaulted on a $50 million loan to Well Fargo in August 2009.

Equity Residential is a real-estate investment trust that specializes in apartment complexes. Its portfolio includes apartments in Berkeley, Sunnyvale and Santa Clara. Wells Fargo called Equity in a statement "a very experienced owner of apartments" and "an exceptionally well-capitalized firm with an extensive track record of handling large, complicated transactions." The bank also said it would "continue to maintain a dialogue with the community."

But on Monday, many of the protesters voiced frustrations that the bank has ignored their input particularly their request that the apartment portfolio be split up and not sold in aggregate to one buyer. They also said they were worried about the fact that the bank has chosen Equity as its finalist. The company is chaired by Sam Zell, a real-estate magnate whose companies have a history of challenging rent-control laws and making profits off distressed assets.

Equity is now reportedly in the due diligence phase of the negotiations. It has already held several meetings with East Palo Alto officials but has not yet proposed a specific development plan. Residents and several council members said Monday that they fear the plan would ultimately include a dramatic reduction of rent-control units and potential displacement of thousands of East Palo Alto residents.

Armed with bullhorns and picket signs, more than 50 residents and tenant activists marched from Newell Court in East Palo Alto to the Wells Fargo branch on Hamilton Avenue in Palo Alto, where dozens more joined them in protest chants ("Don't sell to Zell," "Wells Fargo, you can't hide/ We can see your greedy side," and "If we sell out, they'll kick us out."). The crowd included Mayor Carlos Romero, Councilman Reuben Abrica and members of a tenant-rights coalition that includes the groups Youth United for Community Action, Community Legal Services and the Fair Rent Coalition.

Matthew Fremont, who sits on East Palo Alto's Rent Stabilization Board, said Monday that Equity officials have proposed doubling the density in the neighborhood. This, he said, would inevitably mean reducing the number of rent-control units in Woodland Park. Fremont, who is a tenant at one of the buildings that would be sold, said the new apartments would be far out of the price range of the neighborhood's current residents.

"Do you think they'll build the new buildings for the tenants who live there today?" Fremont asked the protesters as they gathered in front of Wells Fargo branch. "Of course not!"

Mayor Carlos Romero said his biggest issue with the proposed sale isn't so much that Equity is the buyer as the fact that all the properties would remain under one owner. This, he said, gives the developer enormous leverage when dealing with the city.

Romero was one of several city officials who have met with Equity and Wells Fargo representatives in recent weeks to discuss the pending sale. He said Equity officials said they would respect the laws of the city and would continue to discuss their plans with the community. But the company's deep pockets and potential ownership of more than half of the city's affordable-housing stock would give Equity "tremendous power" in these discussions, Romero said.

"I am the first to admit that change is inevitable in any urban environment," Romero said. "The ability of the city to negotiate with the developer about this change is what this community is fighting for.

"The aggregation makes for a very disparate power-sharing agreement between the community and the developer," Romero said.

Abrica, who is also a Wells Fargo tenant, voiced similar concerns and said he is worried about Equity's long-term plans for the neighborhood particularly about the possibility of rent-control being abolished.

"I am afraid it could be a repeat of Page Mill Properties behavior possibly on a bigger scale and possibly not right away," Abrica said. "In terms of change, a new developer can do away with a low- and moderate-income housing."

SEE MORE ONLINE

Watch video of Monday's protest on Palo Alto Online.

Staff Writer Gennady Sheyner can be emailed at gsheyner@paweekly.com.

Comments

Posted by Arch Conservative, a resident of Menlo Park
on Aug 23, 2011 at 10:40 am

Wells Fargo has no business in running apartments. It is not their job. The activists believe that they can pressure Wells in "seeing the light" and being nice and keeping rents below market. Banks do not like having property on their books, they are in the business of lending- not property mangaging.


Posted by rainbow, a resident of Mountain View
on Aug 23, 2011 at 10:43 am

Tenants and Palo Alto City officials should be very concerned about the possibility of Sam Zell's Equity Residential getting control of any, much less most, of Palo Alto's rental property. It's strongly suggested that the history of Zell's property management be researched thoroughly. His reputation is well-known by the mobilehome communities that he purchased.


Posted by chris, a resident of University South
on Aug 23, 2011 at 10:55 am

rainbow,

you are mixing up Palo Alto and East Palo Alto


Posted by JustMe, a resident of Duveneck/St. Francis
on Aug 23, 2011 at 11:10 am

I have to agree that having one entity control such a large proportion of EPA's rental property is probably not a good idea in that it gives them too much bargaining power with the city.

The idea that the chosen entity has a less-then-desirable history in dealing fairly with tenants would tend to make one's skin crawl.

I would advocate a re-think and a break-up of the block of real estate. I am not in favor of giving anyone an unfair advantage over others.


Posted by unhappy tenant at Southwood Apartments, a resident of Midtown
on Aug 23, 2011 at 11:39 am

Southwood Apartments at 2850 Middlefield opposite Safeway is an Equity Residential property, and I can say from first hand experience management is only interested in jacking up the rent, imposing onerous fees. Everything is stacked against the tenant. For instance, I told them at the beginning of a month that I would be late in paying my rent. I tried to make a partial payment, which they refused to accept. I assured them both verbally and in writing that I would pay in full by the end of the month. Nevertheless, they imposed at $145 penalty at 5 days, and served a suit with $500 lawyers fees. They are also requiring I pay next month's rent before it is due. They must want me to move out, so they can increase the rent for the next tenant. I dread dealing with the unreasonable office staff. Pity, as the location is great.


Posted by John, a resident of Mountain View
on Aug 23, 2011 at 1:54 pm

Does anyone know what Reuben Abrica's position on the sale was in 2006 when Page Mill Properties acquired the same real estate? Abrica was the mayor of EPA during that time. Unless I have missed something...


Posted by ella, a resident of Crescent Park
on Aug 23, 2011 at 1:59 pm

A community works when all voices are heard. These people that run in these real estate circles are all buddies.........lets not kid ourselves. You let Zell in you might has well be sleeping with Walmart too! You can't have one big money buy at the controls. His biggest talent is exploiting little workers that just know how to care about their families and community. He knows how to scare people and leverage their futures////////to his advantage. Business needs stable families.....Stable families create stable businesses. People first! Money that goes to jacked up rent leaves the community. Responding to "its not Wells Fargo's job to be in the rental business" it is to protect their customers.


Posted by Hmmm, a resident of East Palo Alto
on Aug 23, 2011 at 2:16 pm

This portfolio doesn't work as one property portfolio. It should be broken up- some are large apt. complexes, some are small ones, some are single family homes, a number of them are duplexes and fourplexes - but the lousy management applies the same type of "management" attitude to all of them, which doesn't work. They are also violating Calif civil codes (as I & many others have experienced both w/Page Mill & Wells) and it's continued ever since Wells took over - through two management companies who supposedly were "professionals". It's really sad when I know the law better than these "professionals" & I'm merely a tenant, not a real estate management employee, manager or executive.

Arch Conservative - no one in EPA thinks that Wells should be realtors. Our arguments w/them, among others, are mainly that they lied to us, led us on (us being the community & the tenants) & refuse to break up the portfolio, which is an unnaturally constructed entity (for lack of a better term).

JustMe's post is excellent & the folks here posting who are aware of Zell's egregious poor record w/mobile home parks & apt rentals are right - his company is bad news. Read any apt ratings site & you'll see how these people are bad.

Breaking up the portfolio would be excellent, because we could once again have the mix of mom & pop types of landlords among larger companies. This would, imo, also make it easier for landlords to make a profit w/rent controlled property.

As for Abrica's perpective in 06, I believe he had to recuse himself from some City activities since he became a Page Mill tenant. Also, it wasn't as if Page Mill came to EPA & sat down & laid out their real estate plans w/City Council, the Rent Stabilization Board or the City Manager.


Posted by jb, a resident of Leland Manor/Garland Drive
on Aug 23, 2011 at 5:27 pm

The capitalistss are taking over. Universities should be run like businesses. Get richer customers; make more money. Bigger is better and produces profits more efficiently. If you are not making profits, why are you in business? If you aim to do good, do it someplace where we don't have to see your poverty.


Posted by Walter_E_Wallis, a resident of Midtown
on Aug 28, 2011 at 6:13 am

Walter_E_Wallis is a registered user.

Communism, here we come!


Posted by palo alto mom, a resident of Duveneck/St. Francis
on Aug 28, 2011 at 9:38 am

Unhappy tenant at Southwood - could it be that Equity Residential is merely interested in getting the rent on time? A perfectly reasonable expectation for a landlord.


Posted by Resident, a resident of Duveneck/St. Francis
on Aug 28, 2011 at 12:35 pm

palo alto mom - I can't speak for that tenant, but I ave reviewed the apartment ratings for Equity and they are terrible! They sound like neglectful and disinterested owners whose staff's skills are uneven, ranging from competent to very incompetent. This is not a landlord that should be owning more peninsula property.


Posted by Walter_E_Wallis, a resident of Midtown
on Aug 30, 2011 at 5:34 am

Walter_E_Wallis is a registered user.

Does any landlord OWE a house to a tenant? I always thought it was a mutual benefit. How many of those whining tenants would feel bound to stay in their units if they found a better deal somewhere else?


Posted by Grannyknowsbest, a resident of Duveneck/St. Francis
on Aug 30, 2011 at 7:45 pm

Walter's the whiner, not these tenants. The tenants are taking action, standing up for what they believe in and walking their talk. These potential landlords aren't - they've lied to city officials as well as residents - typically despicable of Wells Fargo and Zell and his henchpeople.


Posted by Walter_E_Wallis, a resident of Midtown
on Sep 4, 2011 at 7:48 am

Walter_E_Wallis is a registered user.

Sorry Granny, but what happens to owner's rights when there is a 10% vacancy rate? I saw that years ago in Southern California where tenant were demanding the first year rent free, and getting it. You really want lower rents? Vote for development.


Posted by Grannyknowsbest, a resident of Duveneck/St. Francis
on Sep 5, 2011 at 6:52 pm

Yeah, right, Walter. You didn't even know it was all rent controlled. You're just a crankypants.


Posted by Walter_E_Wallis, a resident of Midtown
on Sep 6, 2011 at 5:35 am

Walter_E_Wallis is a registered user.

For your information I'm a Great Grandpa several times over, but to the point. As for tenant action, this amounts to confiscation of owner equity. "From each according to his ability, to each according to his need?" Where have I heard that before?


Posted by Hmmm, a resident of East Palo Alto
on Sep 14, 2011 at 12:42 pm

Wells has really screwed up. Tenants haven't received their Certificates of Maximum Rent. Wells & their lame-o property management company, Laramar, have admitted this. It's a violation that they are NOT committed to correct, hoping to quickly sell while being in violation. I hope that the City NAILS them for this.

Wells was only able to purchase this distressed, defaulted portfolio (again, a portfolio that was never intended to be one grouping of multiple properties) WITH taxpayer assistance, gaining many advantages as a result. Now they have violated their own promises to the community, demonstrating that they're liars unworthy of taxpayers trust.

We will NEVER do business w/Wells Fargo as a direct result of their consorting w/vulture capitalists, their lies and their lack of compliance w/EPA's ordinances.

It's unfortunate that the County can't get involved at this point, since this is a private sale. However, if Equity reduces the amount of affordable housing in SM County, the County will have to get involved.

The ignorant opinions from non-residents who don't truly understand what's happening & violations currently taking place don't matter. What matters is that residents stay as informed as possible so that Wells Fargo & Equity get NAILED for everything that they do wrong. Given the current Wells behavior & Equity's track record, we can look forward to more wrongdoing.


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