Monday, September 28, 2009

Not pretty.

See update at the bottom.

Man - I just wish all of this would stop.

So yesterday at breakfast Mr S. and I walked past a news paper stand. Front page was an article about how half of the rental properties in a crappy little city called East Palo Alto were going to be foreclosed upon. Half!

The properties are owned by a company called Page Mill Properties.

The article caught my attention, because of it's sheer magnitude. Sure East Palo Alto is a small city, but a 50% foreclosure of all rental housing in any city is notable. Also, I technically lived in EPA for a while when I was first starting my career. I say technically, because my zip was EPA, but I lived on the frontage road bordering the freeway on the Palo Alto side. It was a rent controlled area.

People think rent control is great. It isn't. And it's only something you can completely grasp until you live it. You understand the philosophy of how landlords can't raise rents so they never do repairs. Yet, you can't understand the magnitude until you experience it.

Anyway, the article made me wonder how many Page Mill Properties there were out there. Companies that moved into low income underdeveloped areas and just started buying cheap real estate. So I plugged Page Mill into a search engine, and much to my shock actually - the word CalPERS popped up. My mouth immediately dropped. CalPERS folks is the California Pension plan! Odd, I didn't see it mentioned in the newspaper article.

From The Registry.

"Palo Alto developer Page Mill Properties and CalPERS, its equity partner, may lose control of more than 1,700 apartments acquired since 2006 as part of a more than $340 million play in East Palo Alto."

The article goes onto to say:

"The California Public Employees’ Retirement System also has remained stubbornly mute on Page Mill’s activities or plans. CalPERS invested $100 million in the Page Mill fund. According to public record, it has written down the value by $40 million."

To me it looks like the pension fund will loose it's entire investment in East Palo Alto. Makes you wonder what else there is out there for them to loose?

Update: This is all happening on the street I used to live. Story here. Man, I haven't been in that neighborhood forever. Now I'm going to have to go look. That street never looked so nice. Photos at the link.

2nd update:

I couldn't believe that I missed the connection between CalPERS and Page Mill Properties when I read the article in the San Jose Mercury News paper. It is something that would have stood out to me. So, I re-read the article tonight. I guess I shouldn't be that surpised that the Mercury News carefully worded the article to make no connection between the two entities. This is what they say about the CalPERS investment into Page Mill.

"Another trashed apartment is the last thing Page Mill Properties needs right now. After using other people's money the past three years to buy and improve nearly half the rental units in this hardscrabble community wedged between the bay and the gleaming city of Palo Alto, a lot more than spray paint has hit a wall. "

When they say "other people's money" - they mean the retirement fund of California State employees and taxpayers.

The Article goes on to say:

"CalPERS, the California Public Employees' Retirement System, helped fuel the buying by investing $100 million, and Page Mill got a quarter-billion-dollar loan from Wachovia, now part of Wells Fargo. CalPERS, under pressure by city officials and activists in East Palo Alto to end its involvement with Page Mill, would not comment. Neither would Wells Fargo, saying only that "the safety and quality of life of the tenants at Woodland Park is of primary concern to Wells Fargo."

Like that? They do mention CalPERS, but not that CalPERS actually gave Page Mill any money. That tidbit I ran across accidentally.

No wonder the employees of the State have no idea how screwed they are. And, just as a side note - by definition CalPERS is a slumlord. They are catagorised as an "equity partner". Partner to me is 50/50 ownership, but perhaps the definition has changed.

Also from the Mercury News article:

"Nobody knows what's going on," says Norma Rodriquez, 32, who lives with her husband and their five children, shoehorned into a bug-infested one-bedroom apartment. With the temporary closing of the management office early this month, "I worry about my rent check and I don't know if it's going to the owner.'' "


  1. Page Mill Properties, at the behest of CalPERS, started buying up rental properties in EPA, on the west side. They own about 1800 units, incl duplexes and single family homes, in addition to apt. complexes. They have only made cosmetic improvements to the grounds of some of the properties - only some of the properties. They ILLLEGALLY raised rents. Those of us in EPA WANTED rent stabilization, which is why why adopted ordinances when we incorporated & our ordinances are fair to both tenant & landlord. Landlords can get registration exemptions in order to improve properties. Some of us are even winning our lawsuits because of Page Mill's egregious violations. CalPERS is also despicable for choosing a high-risk investment called predatory equity. Check out to educate yourself.

  2. Oh for shits sakes. EPA probably has a full time staff to deal with these apartments. I hadn't really thought of that place is years - but it looks to be exactly the same thing that was happening when I lived there. The landlords raise the rents anyway, and everyone gets shuffled into court to get their money back. All the time the landlords don't do any repairs. Rent control only does harm. And it doesn't work anyway.

    The only people that live in those places are college kids and poor people. But, someone must make a lot of money - because that situation never seems to change.

    The people who owned the place when I lived there must have fallen on the ground and cried when they realized Page Mill and CalPERS wanted to buy those apartments. It's a constant shit storm of hassle.