Triumph of tenacity - Page 2

The Lembi empire teeters after tenants resisted a business plan based on forcing them out
Darin Dawson fought a CitiApartments eviction

There was the time he was ordered to vacate his apartment for two weeks during a seismic retrofit only to find it trashed when he returned. "The floors were ripped up," he said. "The ceiling was hanging in some places. There was black grease smeared all over the walls." He repaired it himself. Then came the constant phone calls, which started off artificially cheerful but turned threatening if he refused to accept money to relocate.

Dawson pays a base amount of $635 per month for his rent-controlled studio, so he suspected he might be a target. Once a residential manager discreetly warned him that his name was on a "hit list" of tenants whom the owners wanted gone, he said.

According to a confidential document leaked to advocates by an anonymous source, tenants who paid the least came under the greatest pressure to relocate since San Francisco rent-control laws prohibit raising existing occupants' rents to market rate. The document outlines how loan repayment and estimated profits were calculated wholly on the expectation that existing tenants would vacate, rather than relying on normal projections like natural turnover.

"Tenants with significantly below market rents are chosen for thorough screening to see if they might be relocated," according to the document, a 2008 Credit Suisse prospectus concerning a pool of 24 buildings under Lembi ownership that have since been foreclosed. "Those tenants most below market and/or with the longest history are the priority for relocation."

All 24 buildings in question — including properties on Larkin, Market, Cesar Chavez, Post, and Leavenworth streets, in addition to others — were subject to rent control. "At acquisition [Aug. 30, 2007], the portfolio was approximately 5 percent vacant," it notes. "As of May 2008 the portfolio was 19 percent vacant, as a result of Lembi successfully executing their business plan of vacating units and rolling them to market."

Although the paperwork spelling this out in stark terms didn't surface until recently, advocates who worked on the CitiStop campaign essentially figured it out years ago. A collaboration between the Tenants Union, Pride at Work, and other advocacy groups, the campaign sent organizers door-to-door to inform tenants of their rights, hosted potlucks where people could swap horror stories and forge alliances, and staged demonstrations outside CitiApartments' Market Street offices.

They tracked public records from the Assessor-Recorder Office and swooped in to warn tenants whose buildings had fallen into the Lembis' clutches. It didn't always work. According to the Credit Suisse document, Lembi had relocated 2,500 units as of August 2008, a fact pointed to as evidence of its "successful track record." But the relocation team only drove out a small number of the lowest-paying tenants; the vast majority of those who took buyout offers left units that paid closer to market rate.

"They really needed to get more turnover than what they accomplished," Gullicksen said. "The fact that they couldn't is attributable to the CitiStop campaign."

Singer rejected this assessment, saying the real problem was the economic downturn and the loss of capital availability. "I can see why they want to say that, why they want to take credit for bringing down the Lembis," he said. "But I don't think it would have made any difference if [tenants] left or not."

A common complaint nowadays is that former tenants haven't gotten their security deposits back, a matter that has spurred a class-action lawsuit against 57 corporate defendants associated with the Lembi Group.