Wells Fargo aquires half of East Palo Alto rentals

March 3, 2010 11:07:21 AM PST
About half the rental housing in East Palo Alto - some 1,800 units formerly owned by Page Mill Properties - has moved into the hands of Wells Fargo as a result of a foreclosure auction Tuesday.

San Francisco-based Wells Fargo became the winning bidder and the owner of 101 properties containing the 1,800 units when no one else offered to pay more than the minimum opening bids set by the bank.

The price was only a little more than half of what Palo Alto-based Page Mill Properties paid for the buildings between 2006 and 2008, according to the East Palo Alto Fair Rent Coalition.

Coalition spokesman Chris Lund said the group's research showed that Page Mill paid $269 million for the properties in the Woodland Park neighborhood, while the total auction price was $142 million.

The foreclosure process began last year when Page Mill defaulted on a $50 million balloon payment on its Wells Fargo loan and management of the properties was assigned to a court-appointed receiver.

The Fair Rent Coalition contends Page Mill raised rents, increased turnover, evictions and vacancies and caused a loss of affordable housing.

Lund said, "As the news spreads, there is a collective sigh of relief that this chapter is closed.

"Going forward, we hope Wells Fargo will step up to the plate and do the right thing by the community and transfer the properties to a responsible owner interested in owning and operating affordable housing," Lund said.

Page Mill Properties spokesman Sam Singer said he had no comment on the auction or on the company's former project in East Palo Alto.

Asked about future plans for the properties, Wells Fargo spokeswoman Elise Wilkinson said, "The quality of life of the tenants at Woodland Park has been important to Wells Fargo from the beginning of this process."

"Over the coming months, we will thoughtfully evaluate all options for the properties and have engaged BRIDGE Housing to assist us," Wilkinson said. BRIDGE Housing is an affordable housing developer.

Page Mill Properties embarked on its acquisition of the East Palo Alto properties at the height of the real estate boom. The company had a $243 million loan from Wachovia Bank, which was later acquired by Wells Fargo, and a $100 million investment from the California Public Employees' Retirement System.

In another development, a state appeals court ruled Friday that East Palo Alto doesn't have to pay two Page Mill affiliates a total of $472,000 in attorneys' fees in two cases concerning the city's Rent Stabilization Ordinance.

The two cases were among about a dozen San Mateo County Superior Court lawsuits in which Page Mill Properties challenged various aspects of the city's rent control law.

Page Mill won the two cases, which had sought to block a six-month moratorium on rent increases above 3.2 percent and certain new regulations, and a trial judge awarded the company the legal fees.

But in Friday's ruling, a three-judge panel of the Court of Appeal overturned the award, saying that the city's rent law allows for payment of attorney fees only in landlord-tenant disputes and not in other kinds of lawsuits.

East Palo Alto City Attorney Vincent Ewing said, "The appellate court got it right. It's the correct interpretation of the law."

Ewing added, "In this dire financial time for cities, a ruling that says a city doesn't have to pay nearly half a million dollars is significant."

Christine Griffith, an attorney for Page Mill Properties, and Singer, the company's spokesman, declined to comment on the case.

The appeals panel based its decision on the reasoning of a Feb. 1 ruling in which the same panel overturned another attorneys' fee award of $20,000 to Page Mill.

In the earlier case, Page Mill challenged the East Palo Alto rent stabilization board's June 18, 2008, increase of the annual landlord registration fee for rental units from $135 to $240 per unit. Page Mill successfully argued it shouldn't have to pay the higher fee that year because the bills weren't sent out by June 1 as required by the law.

Ewing said that approximately eight other lawsuits filed by Page Mill are still pending in Superior Court.