East
Palo Alto's biggest landlord's approximately 1,800 rental units are
scheduled to hit the auction block Feb. 1, Wells Fargo Bank confirmed
Wednesday.
Notices of sale were posted Wednesday at Palo
Alto-based Page Mill Properties' East Palo Alto buildings, stating
there will be a public auction of the 101 properties, Wells Fargo
spokeswoman Elise Wilkinson said.
"This is a procedural notice,"
said Dave Wald, a court-appointed receiver who took over management of
the portfolio in September after Page Mill missed a $50 million balloon
payment to Wells Fargo. The loan went into default in September.
"Nothing changes as the result of the notice of sale, and it has no impact on tenants," Wald said in an e-mail.
First
American Title Insurance Co.'s Redwood City office will handle the
auctions, which are to occur individually because each building has a
separate deed of trust, Wilkinson said.
"The properties technically aren't in foreclosure until the trustee sale," Wilkinson said.
Page
Mill and East Palo Alto have been involved in a bitter legal dispute
for the past two years over rent hikes and other issues related to the
city's decades-old rent control law, with about 10 lawsuits pending
between the two parties. The city council has been discussing in closed
session whether to accept a settlement offer Wald made late last year.
"Whatever happens during negotiations or through the legal system and the courts to determine
the maximum allowable rent would have a big effect on the value of
those properties," Mayor David Woods said Wednesday. "Especially for
Wells Fargo, if you have 1,800 units and you're up in the air on what
you can charge for rent, then it would be very hard."
Woods,
who works in real estate, estimated Page Mill's portfolio has dropped
in value by about 20 percent over the last few years. He noted that the
city and tenants would likely fare better if Page Mill's holdings went
to a number of different owners.
"I personally don't want to see
it under one ownership that puts us in the potential situation that
we're in now," Woods said, referring to the legal battles and apparent
attempts to pull units out of the rent stabilization program.
Council
Member Ruben Abrica said he hopes whoever buys the properties will work
to build "a much more professional relationship with the city."
"In
the past, things were already pretty calm until Page Mill bought the
properties, not only with the tenants but with the city," Abrica said.
"It's in the interests of both the residents, the tenants, the
landlords and the city to work together."
A sale of the
properties could take some time because multiple auction delays are
possible, said Jennifer Flores Tasto, president of the San Mateo County
Association of REALTORS.
But "there's always a buyer for every property," she said. "What it all comes down to is if the price is right."
Flores Tasto called the auction of such a large portfolio "huge," something she would expect only in a large city like New York.
A Page Mill spokesman said the company couldn't comment at this time but might in the future.
Members
of the Fair Rent Coalition tenants' group said they hope East Palo Alto
would issue a memo detailing tenants' rights in case of a foreclosure.
"Ideally,
we would like to see the 1,800 units sold to an organization dedicated
to owning and operating affordable housing," the group's spokesman,
Chris Lund, said in a statement. "If such a buyer proves difficult to
find, at a minimum, we would like to see the portfolio broken up and
sold in small pieces."
Both Woods and Housing Specialist Stephen Ford said the city's good cause for eviction protections would keep tenants safe.
"The
tenants are protected," Ford said. "Ideally, there would be no real
difference. It would be like ships passing in the night."
Meanwhile,
East Palo Alto officials were preparing to put a lien on Page Mill's
buildings, saying the company failed to pay an annual $362,607 fee to
the rent stabilization program, and penalties for the missed payment
have now swelled to $1,087,821.
It remains unclear who, if anyone, will pay that sum if the properties are sold at auction or revert to the bank.
Ford
and Flores Tasto predicted that either the new owners or Wells Fargo
Bank would have to assume the debt, but Mayor Woods said the liens
could be "wiped out."
Woods added that he is optimistic the city could reach an agreement with the receiver about the penalties in the coming weeks.
Page Mill will likely delay the auction process, and it could be difficult to find buyers, Woods said.
"With
the issues regarding the rent stabilization, I really doubt anyone
would take (the properties) on unless they can get a really, really
rock low price," he said. "With Wells Fargo that's probably not going
to happen."
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