Wells Fargo took ownership of more than 1,800 housing units in East Palo Alto's Woodland Park neighborhood Tuesday afternoon, officially becoming that city's largest landlord.
The bank's foreclosure auction for the properties, which were previously owned by Palo Alto-based firm Page Mill Properties, attracted no bidders Tuesday, said Elise Wilkinson, Wells Fargo spokesperson. As a result, Wells Fargo officially took ownership of the properties, which the bank valued at $142 million.
Page Mill has been vehemently criticized by its tenants and by city officials for repeatedly raising rents at the properties. Some have accused the company of "predatory equity" and demanded rent reductions. Page Mill had maintained that the raised rents are needed to fund security upgrades, seismic retrofits and other improvements at the properties.
The company is also embroiled in more than a dozen lawsuits with East Palo Alto over rent control at these properties -- lawsuits that the city officials hope to settle in the coming weeks.
Page Mill lost control of its properties last fall, after it defaulted on a $50 million balloon payment to Wells Fargo. In September, the company's property managers temporarily abandoned their buildings because the company had insufficient cash flow. A San Mateo County judge then appointed an overseer for the properties.
Wells Fargo said in a statement that it does not expect the auction results to have much impact on the building residents. The firm Investors' Property Services will continue to manage the properties, the bank announced.
"After speaking with many members of the East Palo Alto community and carefully weighing the options, we believe Wells Fargo's acquisition of these properties will provide the best possible outcome for the residents and the community," Wells Fargo Managing Director Sean Barlas said in a statement. "In the short-term, we expect little or no impact to tenants at Woodland Park Apartments or the community."
Chris Lund, a tenant advocate and leading opponent of Page Mill's rent hikes, said the bank's ownership of the properties comes as a "sigh of relief" for the tenants. He said Page Mill had spent about $269 million to buy up the properties.
On Tuesday, the prices for the opening bids for the housing units ranged from $323,079 for the property at 640 Circle Drive, to $17.6 million for the large apartment building at 1 Newell Court. Lund said he was heartened by the fact that the bank's opening bids closely reflected the building's value, not Page Mill's purchasing price.
"I think the bank genuinely wants to do the right thing," Lund said. "It has closed the Page Mill chapter and that's a positive thing for the community."
Wilkinson said the bank enlisted BRIDGE Housing Corporation, a leading affordable-housing developer, to help it consider long-term strategies for the properties. She said it's too early to tell if, when and to whom these properties would ultimately be sold.
"Together, we will thoughtfully look at what makes sense for the properties," Wilkinson said. "We'll take our time and look at all the options."
Lydia Tan, BRIDGE executive vice president, said in a statement that the first step will be gathering as much input as possible about community concerns and possible solutions. The group now plans to meet with building residents and other stakeholders.
"We are just starting our outreach, and we will be looking forward to connecting with all stakeholders through individuals as well as town-hall meetings," Tan said.
Meanwhile, the East Palo Alto City Council is looking to tighten up the city's rent-control ordinance to make it more consistent with state law. City officials also hope to clarify some of the language about allowable rent increases -- issues that prompted a flurry of lawsuits from Page Mill.
East Palo Alto officials were forced to cancel last year's attempt to revise the ordinance after a court challenge from Page Mill. Councilman Ruben Abrica said the city now plans to place the revised rent-control ordinance on the June ballot.
Abrica said the city has scheduled a public meeting on March 11 at 6:30 p.m. at City Hall to discuss revisions to the ordinance.
The City Council is also trying to negotiate a settlement over the glut of lawsuits filed by Page Mill over the past two years. A council committee discussed the long list of legal issues in a closed session Tuesday, said Abrica, a member of the committee.
Though Abrica alluded to several difficult "sticking points" in the negotiations, he said Wells Fargo's ownership of the properties would bring some welcome clarity to the process.
"At least, now it's clear who the owner is," Abrica said. "Now that it's clear that Wells Fargo is in control, the negotiations can be much more direct."