CalPERS, a leader in socially responsible investing, gave $100 million to a firm accused by activists and city officials of pushing low-income tenants out of rent-controlled housing in East Palo Alto.
The plan to improve more than 1,700 rental units in a crime-ridden neighborhood, with poorly maintained apartments, has produced charges and counter-charges from a community activist and the developer.
The activist, Chris Lund, told the CalPERS board that the firm receiving the CalPERS funding, Page Mill Properties, offered to give him $25,000 if he would stop complaining to the giant pension fund.
“We were being shaken down for money by this guy,” Jim Shore, Page Mill general counsel, said in an e-mail. “The ‘offer’ was made at the direction of the police as part of their extortion investigation of Chris Lund. That’s all I can say at this time.”
Lund said a man he has seen with Page Mill officials tried to intimidate him by blocking his car in a parking lot, then later by loitering around Lund’s rental unit. A Shore spokesman said Lund may have posted fliers at Shore’s home and followed Shore’s wife in an auto.
The California Public Employees Retirement System reported in November that its housing investments have taken a big hit, a 35 percent loss dropping the value to $6.1 billion by last June.
The Wall Street Journal reported in December that CalPERS made ill-timed real estate investments, some with borrowed money, and was facing a potential $1 billion loss on one deal in Southern California.
But it was a loss of another kind, the big fund’s social values, that seemed to disturb board members when Lund and a delegation from East Palo Alto spoke to the CalPERS investment committee in December.
Ruben Abrica, the East Palo Alto mayor, told the CalPERS investment committee that he wanted to “strongly protest” the use of pension funds to finance “displacing residents,” causing “pain and hardship.”
The committee chairman, George Diehr, told the East Palo Alto delegation he believed he was speaking for all of the committee when he said, “We don’t condone these kind of practices.”
The committee vice chairwoman, Priya Mathur, said the allegations have “tarnished” the reputation of Page Mill. “I am deeply distressed by this situation,” she said.
The CalPERS senior real estate investment officer, Ted Eliopoulos, told the committee that a consultant has been hired to help investigate the allegations made by the East Palo Alto delegation.
“We will look into every fact and disputed point brought to our attention,” said Eliopoulos. Board members told the East Palo Alto delegation that CalPERS, because of legal contracts, may have few options for remedy.
Page Mill, with funding from CalPERS and other investors such as Wachovia, purchased the rental units in a strip of land cut off by Highway 101 from the rest of East Palo Alto, a low-income area once predominantly African-American but now heavily Latino.
University Avenue, after its freeway exit, goes through the middle of the parcels purchased by Page Mill, running on to wealthy Palo Alto and the magnificent sprawl of the Stanford University campus.
Page Mill says it’s improving the rental units in an area troubled by gangs, drug dealing and a number of landlords who let their property deteriorate into slum conditions, some with garbage in the hallway.
New apartment fence
Remodeled 60-unit apartment
Russell Schaadt, Page Mill portfolio director, said about $13 million has been spent on improving rental units, strengthening buildings against earthquakes and adding 24-hour security, with fences, cameras, and external lighting.
It hasn’t been easy. Page Mill says that after exhausting other options to get rid of gang-related drug dealers in one apartment building, it finally tore down the building to remove the unwanted tenants.
Schaadt gave a reporter a tour, showing improved apartments, newly painted buildings, massive steel beams added for seismic safety, new landscaping, one of 15 rehabilitated swimming pools, security cameras and fencing with card-controlled gates.
He also noted clashes with city officials over Page Mill’s paving of some alleys and the installation of security fences, which has stalled as the developer negotiates with the city.
Page Mill contends that city officials reneged on an agreement to allow rent increases, triggering a series of lawsuits in which Page Mill prevailed. The city’s rent control law allows small annual rent increases.
But many previous landlords did not raise rents, apparently because of complex procedures and other reasons. Page Mill retroactively applied the unused annual increases, raising some rents from 2 to 38 percent.
Page Mill says the average rent increase was $107 a month, about 12 percent, and rents were only raised in about 62 percent of the more than 1,700 units, which range from single houses to the 223-unit West Park Apartments.
When he met a reporter, Lund was joined by a half dozen tenants and a lawyer from Community Legal Services of East Palo Alto — a move to illustrate his point that he is not a lone shakedown artist trying to enrich himself.
Lund said he is a Stanford graduate, with a doctorate in biosciences, who became progressively outraged by Page Mill’s drive to push out low-income tenants. He and others have a web site, www.epa-tenants.org, that outlines their Page Mill complaints.
One Latino tenant, Louis Roman, praised Lund and his colleagues for fighting to protect the rights of the many tenants who are illegal immigrants, wary of authority and easily pushed out of low-rent units.
When a rent-controlled apartment becomes vacant, the rent can be raised and reset at market rates. Schaadt said the vacancy rate in the Page Mill units is 15 to 16 percent, some empty for remodeling.
Lund said his surveys show a much higher vacancy rate, about 24 percent. He thinks Page Mill revenue is falling well below projections, making its loan repayments difficult.
Schaadt said the tenant turnover rate in the Page Mill units is “exceptionally low,” about 20 percent a year compared to an industry average of around 50 percent. “We are not losing a ton of people,” he said.
In the last six months, Schaadt said, Page Mill has only evicted about 60 tenants for non-payment of rent. He said about 15 or 20 of them are still in their units because they signed legal agreements to pay off back rent.
Lund and his colleagues contend that Page Mill “harasses” tenants into leaving by posting notices of late payment on their doors or an official-looking notice of “unlawful detainer” eviction proceedings.
They said the tactic amounts to a legal threat that can cause tenants, who lack the means to pay for a court fight and fear legal entanglements, to voluntarily vacate their rental units.
Schaadt said Page Mill issues standard notices of late payment and is willing to work out payment arrangements with tenants having financial difficulty, if they reply to the rental office.
Lund has personal knowledge of one way Page Mill gets around rent control. Properties with no more than four rental units were purchased through limited liability corporations, which Page Mill contends are not covered by rent control.
The rent Lund pays for his unit jumped Feb. 1 from $800 a month to $1,400 a month. He thinks this Page Mill evasion of rent control will eventually be overturned by the courts.
Meanwhile, Lund said, “I have to pay it or I’m going to get an eviction.” Schaadt said Lund has “one of the more high quality” rental units and was given more than the required 60-day notice for a rent increase.
Buckled balcony
Gaye Mitcham's bath tub
Another way Page Mill pushes out tenants, Lund and his colleagues contend, is to leave some units in disrepair. He said Page Mill ignored a request from tenants to be moved to other units when a balcony buckled.
Schaadt said Page Mill did move two tenants. He said others chose to stay in their units while the balcony, which buckled recently, is repaired after Page Mill obtains the proper permits.
One long-time tenant, Gaye Mitcham, said she has been trying for months to get her bath tub repaired.
Schaadt said tenants can request repairs by going to the rental office or using the telephone or Internet. He said he was unaware of Mitcham’s complaint, but would dispatch repairmen.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 2 Feb 09
Calpensions 
February 2, 2009 at 2:41 pm
Lund is “fighting for the rights of many tenants who are illegal immigrants” who largely live in the apartments, which means in plain English that he is fighting to keep the community a run-down slum filled with illegal aliens and drug-dealers – what a dipstick! My opinion – let CALPers upgrade the neighborhood and rent to American citizens who pay their taxes and will pay for upgraded/renovated apartments instead fighting to keep 20 illegals living in a trashed 1 bedroom apartment!
February 2, 2009 at 11:01 pm
Hey WL – what would you do if your rent, in an apartment supposedly under the control of a ‘rent stabilization ordinance’ went from $800/month to $1400/month? That doesnt sound very stable to me. I would do the same as Lund. And you may not like illegal immigrants, but who do you think washes your dishes after your meal at some chic downtown PA restaurant? Where are these folks supposed to live – commute in from Tracy? As a Cal State employee, I am loathe to see my pension funds being used to support activities that are socially irresponsible at minimum, and likely illegal. Mr. Lund, keep up the good fight!
February 2, 2009 at 11:27 pm
I’d like to point out that there are plenty of legal immigrants, not to mention Americans, seniors on fixed incomes with health issues, low income families with health issues, etc who are also too frightened or don’t have the time and resources to stand up for themselves. Pagemill is not pushing out only illegal immigrants,gangs and drug dealers. I am a long time resident of this community and my neighbors and friends, all good,honest, upstanding people are being bullied,harassed and pushed out of their homes. Hit the streets, visit the buildings, listen to peoples’ stories, watch people move out in mass exodus….I can’t understand how Pagemill can paint the picture they are of themselves with a clear conscience…..What they are doing by legal and moral standards is nothing but wrong. Chris Lund has the education,resources, and smarts to show what’s really happening. He is backed by many people who care about their community and the welfare of their neighbors. He’s a good man with a kind and generous heart. If only Pagemill were as decent as him.
February 3, 2009 at 12:35 am
WL’s comment is based on selective information and shows tremendous ignorance. I too am a long-time resident of the East Palo Alto neighborhood that has been bought by Page Mill and can attest that the majority of residents are honest, hard-working people. This is one neighborhood that has been affordable for low-income workers and people with fixed incomes. What will the wealthy people of Silicon Valley people do when no more service workers can afford to live here? They’ll have to start paying living wages!!! Great job to Chris and others who are willing to put themselves on the line to stand up for justice. East Palo Alto’s laws are clear, and Page Mill’s motives are just as clear: they say they care about tenants, but it’s the bottom line – pure and simple that has been apparent in all of their actions. They made their investment with a plan to make the most money and the only way they knew they could accomplish this is by exploiting the poor. This is the sleaziest of tactics.
February 3, 2009 at 1:35 am
Where were the bleeding heart liberals when the African-American (legal U.S. citizens) were pushed out by the illegals? Now that the illegals are being moved out, the neighborhood upgraded, and most importantly to Lund, Lund’s rent increased, only then does this crusader for social justice spring into action! Let’s be clear here – Lund is not “willing to put (himself) on the line to stand up for justice” – Lund is standing up to keep the slum conditions so long as he continues to get cheap digs along with his beloved illegals! When the blacks were forced out by the illegals, where was Lund then?
I understand in LA, the illegal alien gangbangers are now targeting blacks for death if they do not move out of the gang territory – will Lund “stand for Justice” and buck the Latino gangs doing this, or only the safe targets of CALPers and Pagemill?
February 3, 2009 at 5:06 am
Please people, show some decorum and do not fight amongst yourselves on stupid racial lines. Racism is always a tool to oppress the poor. This issue has nothing to do with racism except of the sort practiced by Page Mill. There are community activists in East Palo Alto of every ethnicity, and as far as I have ever seen they work together pretty darned well. Save your attacks on who the “true Americans” are or who should be beaten up by whom for some school-yard fight. Geeez. Keep your eyes on the prize, which is decency, respect, legality, and equality.
The real issue here is that Page Mill, Jim Shore, David Taran and Russell Schaat sure look like a bunch of second-rate criminals and schemers who have no business receiving money from the state employee retirement system. They are not playing fair or acting according to the law, and they are not providing upgrades to low-income housing. What they are trying to do is drive hard working people out of their homes. I’ve lived in this community, and think it is wholly unfair what Page Mill is doing, and I think it is downright wretched that CalPers has money in these guys. And the city council, mayor, and just about every community activist agrees with this judgment. Page Mill is rotten to the core.
Calpers needs to reclaim the project. If they are partners to the project (and it looks like they are), then Calpers needs to do some or all of the following:
a) formally sanction Page Mill for their mismanagement and abuse. This is best done in conjunction with the other institutional investors that are part of Page Mill. CalPers should not just try to pretend their hands are tied, they should get on the horn with their fellow pension funds that have invested in these monsters and plan a smack-down. I am going to bet that Calpers plus another retirement or two have MUCH more in the project than Page Mill does. Show them who is boss, don’t hide behind contracts, Mr. Eliopoulos. Sanction them.
b) Show the public how you take this seriously by launching a investigation into Page Mill’s business practices and their putative “Public Private Partnership”. Are they living up to their claims? Or does Calpers just give investors like this a free pass for making up stuff like that? Not good, guys.
c) Unilaterally publish for all to see the business plan that they have invested in. I don’t care if Page Mill threatens to sue you, you have lawyers and you’d be doing everyone a favor. Putting Page Mill’s plan in the public would improve their behavior. Calpers should take an active role in establishing for the public record answer whether Page Mill’s intentions for the community indeed are. The onus should rest with Page Mill to show whether their business model contains intentions that fit (and whether they still fit) within the framework of the law and the ethical responsibility code of CalPers.
d) require Page Mill to stop harassing tenants, and to cut their vacancy rate by two-thirds (to get it in other words to something like a mere 3 times what it had historically been). Otherwise, Calpers will sue them for breach of contract.
e) Conduct an audit of Page Mill’s business plans and accounting practices. Is this one company or many? Have true “firewalls” really been placed between Page Mill’s management system, all of its subsidiary LLCs, and its various investment funds? Or is there a systematic fraud and conspiracy going on? From the ground, these guys look like the new Enron. 800 million dollars in investment money, plus loans from the Royal Bank of Scotland and Wachovia!!!! Warning! Who wants to bet the books reflect systematic fraud of every sort–assessment, lying about rent roles, embezzling of money between funds, what else?
f) require that Page Mill Properties (the investment fund) disband Page Mill Property Management (the management company) and hire an independent, established company to manage the properties in accordance with the laws. Require audits and formal, public reporting of board meetings.
g) If these steps fail or encounter sovereign resistance, unilaterally demand Calpers money back. Sue Page Mill. Seize part of their assets and negotiate a deal with the banks to liquidate the partnership. The Limited Partnership structure allows for a reassertion of active management by the passive member. Calpers needs to assert some moral and legal backbone here; it’s their money, and their responsibility.
Taking these steps will start to disinfect this disease. Otherwise Calpers is just letting it fester, and this cancer will consume more and more of the money of public employees, and it will destroy the reputation of Calpers. This is not like the Arizona real estate deals. This is vested racism in CalPers own back yard, destroying the lives of its own members.
Wake up CalPERs. And fix this before it destroys you. All of your investors are concerned about this, and you should become concerned too, before you start being served discovery for your role in this.
Everyone else: write letters to your State Representatives and the Attorney General. They not only have a responsibility to uphold the law, they have a responsibility to police the retirement system of which they are, as private persons, a part.
February 19, 2009 at 5:55 pm
I lived in this neighborhood for 7 long years before PageMill Properties bought my previous residence and so many others on the same street. The many people and neighbors I knew in the neighborhood are LEGAL, US-born citizens who perhaps just don’t make as much money as the average person living on the peninsula. Some are seniors, some are disabled, many are unemployed and not by choice. They are good, hard-working, decent people who are community-minded, watch out for one another, organize for the safety and well-being of each other, and anyone who doesn’t live there cannot attest to what they are going through. This is an atrocity. I have seen first hand by my friends and relatives who still live on this street how disgraceful this landlord has been to it’s tenants.
April 9, 2009 at 9:37 pm
Illegal aliens displace Americans from affordable rent. go to numbersusa.com and find out how many immigrants and illegals aliens we have in this country. or immigrationcounters.com
then do the math. No illegal aliens should be allowed to rent in the United States.
all it has done is ruin the lives of Americans.
and by the way the gang members are mostly mexican: those anchor babies of illegals and illegal aliens are the ones who have created the crime.
September 5, 2009 at 10:47 am
The one point I would like to emphasize and that is the concept of “the commons” that Page Mill Properties and their ilk are constantly invading.
We all know that “the commons” are what every human being on planet earth should have like basic economic viability, food, clothes, shelter, health care, potable water, sanitation, energy, communications, general access to branches of government through vote or activism, infrastructure, education, freedom from criminal acts or territorial invasion, a clean environment and protection from entities like Page Mill Properties to keep them from taking all or a portion of these things away.
“The commons” exist for the good of all humans not just the poor. They should not belong exclusively to anyone. Call me crazy but here is what I mean: East Palo Alto is one of the very few islands of housing affordability here in Silicon Valley where some mediocre housing carries what, to a poor family, are astronomical prices. Why not protect these islands since they are so very few and in some cases are just one step up from homelessness.
Why hammer such a municipality to destroy the means of maintaining housing affordability in a city where many of its residents exist on a lower economic scale just to make greater profits? The Rent Stabilization Ordinance is only a form of protection that enables store clerks, childcare staff, maintenance workers, waitresses, seniors, immigrants, the disabled etc. to live near Silicon Valley where many of them are employed. The big question is this: is there ever a point at which a wealthy entity or person has enough? The answer is obviously no.
Further, “the commons” at this stage of history are being eaten alive globally. You know what I’m talking about. Some would say that in a capitalist country, everything should be up for grabs. I really don’t understand this because running regular non-wealthy folks from pillar to post means they won’t be able to buy as many goods, pay their bills, pay their mortgages or rent, effectively tanking the so-called roll of capitalist growth. We all have to also remember that civil society begins to unravel when “the commons” shrink and a growing portion of the population gets less and less of what it needs