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Document6
From: Carrillo, Diego
Sent: Monday, June 22, 2009 1:26 PM
To: Pacheco, Brad
Cc: Weir, Laurie
Subject: FW: Scanned doc
Attachments: DoC[1].pdf
Brad,
Laurie has made some edits to the attached Pagemill document. Please review.
Thanks,
Diego
Hey Diego,
ffi
Docll].pdf (32 KB)
Thanks,
Ãtb
CalPF.RS
Bianca Rodriguez
lnvestments - Global Real Estate
Tel: (916)-795-2254
bianca_rodriguez@calpers.ca. gov
PM-0058
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PM-0059
Page I of2
Langhi, Taryn
here is warren's memo. he did a great job, but it needs to be edited for public consumption. if we could get this
by noon lomorrow pst, it would be greal. thanks L
Laurie, I've attached a word document entitled "Page Míll Summary" for your review and edíting as need be. I
really struggled with this document, ljust am not sure what its main purpose will be- So I wrote it as though it
were intended for an elected representative with a natural interest in CaIPERS and its investments, but also wìth
an interest in the weffare of the people of East Palo Alto.
Itried to keep this document short, but it's impossible to do Page Mill justice without a fair amount of facts,
background and context. As you can see, l've tried to make it as current as possible, so the reader will
understand how precarious the investment ís now, wÍth the portfolio performing so poorly and the debt pay
down looming. Feel free to circulate this draft however you wish to solicit feedback from others you want to
involve in the document.
l'll be in all day Monday should you want to discuss this document at alf, but feel free to edit it however you
wish to make ¡t serve íts purpose. I'll be in our SF office Tuesday afternoon and all day Wednesday, and then in
PM-0129
Page2 of2
Regards, W.
The contents of this message, together with any attachments, are intended only for the use of the
individual or entit5r to which they are addressed and may contain information that is legally privileged,
confidential and exempt from disclosule. If you are not the intended recipient, you are hereby notified
that any dissemination, distribution, or copying of this message, or any attachment, is strictly prohibited.
If you have received this message in error, please notify the original sender or the Pillsbury tù/inthrop
Shaw Pittman Help Desk at Tel: 800-477-0770 x4860 immediately by telephone orby retum E-mail and
delete this message, along with any attachments, from your computer. Thank you.
+ Intemal Revenue Service regulations generallyprovide that, for the purpose of avoiding federal tær
penalties, a taxpayer may rely only on formal written advice meeting specific requirements. Any tax
advice in this message does not meet those requirements. Accordingly, any such tax advice was not
intended or written to be used, and it cannot be used, for the purpose of avoiding federal tax penalties
that may be imposed on you or for the purpose of promoting, marketing or recommending to another
party any tax-related matters-
-_.-_------
PM-0130
Page I ofl
Langhi, Taryn
Laurie, l've attached a word document entitled "Page Mill Summary" for your review and editing as need be. I
really struggled with this document. ljust am not sure what its main purpose will be. So I wrote ìt as though it
were intended for an elected representative with a natural interest in CaIPERS and its investrnents, but also with
an interest in the welfare of the people of East Palo Alto.
Itried to keep this document short, but it's impossible to do Page Mill justice without a fair amount of facts,
background and context. As you can see, l've tried to make it as current as possible, so the reader will
understand how precarious the investment is now, with the porl.fol¡o performing so poorly and the debt pay
down looming. Feel free to circulate this draft however you wish to solicit feedback from others you want to
involve ín the document.
l'll be in all day Monday should you want to discuss this documeni at all, but feel free to edit it however you
wish to make it serve its purpose. l'll be ín our 5F office Tuesday afternoon and all day Wednesday, and then ín
your neck of the woods most ofThursday.
Regards, W.
PM-0133
Page MilI Summary and Update
June 8,2009
PMP-II is managed and controlled by the general partner, Page Mill Properties (PM), a private
company controlled byDavid Taran.
CaIPERS has committed $100 million, or 86 percent, of the total equity, $95 million of which
has been funded as of June 8th,2009. The remaining equity has come from a number of private
high-net-worth individuals and David Taran.
Over a tv/o-year period ftom2006 to 2008, PMP-II acquired a lmge and diverse portfolio of
properties in East Palo Alto in 101 separate transactions encompassing:
a) 1 l4 parcels of land, dispersed throughout 180 acres in East Palo Alto
b) 185 buildings with an average age over 50 years
c) 1,810 residential units of all shapes and sizes, including l7 single family resídences
About 1,600 of the 1,810 residential units are subject to East Palo Alto's Rent Stabilization
Ordinance, which limits rent increases in occupied units to a rate roughly equivaìent to the Bay
Area's overall rate of inflation.
Since acquísition, PMP-II has spent about $14 million improving the properties and the
Woodland Park neighborhood in which they are located.
The properties were acquired as real estate values were peaking throughout the country. A year-
end 2008 appraisal estimated the value of the properties at $250 million, representing a drip in
value of about 29 percent. This valuation reduces the value of the partnership's invested equity
by 93 percent, from $ I l0 million to $8 million.
A more recent discounted cash flow analysís of the portfolio, which takes ínto account the
portfoiio's recent operating performance and status, estimates its value at less than 8225 million,
which would render the partnership's equity rvorthless, and indicate that the lender will not
recover its full loan principal.
PMP-II's $242 million loan has a $50 million pay down due August 1,2009. The partnership
does not have the equity required to meet this obligation, which could throw the partnership into
bankruptcy and ìikely liquidation.
PM-0134
Original Stratew
PM's original strategy was to aggregate a large number of properties in the Woodland Park
neighborhood of East Palo Alto and add value by:
a) Improving the properties and neighborhood
b) Bringing below-market rents to market and raising overall rent levels
c) Evicting tenants engaged in drug-dealing or other criminal activities to improve the safety
and resident profile of the properties
d) Controlling large contiguous land areas in East Palo Alto and change the zoning if
possible to profìtably redevelop some of the properties
e) Consolidating the ownership of many small properties into one large investment, for
which a REIT or other institutional investor would pay a premium
PM believed it could successfirlly execute its strategy and exit the investment before the
partnership's loan became due in 201 l. lt believed a successful execution of this strategy would
enable it to sell the portfolio for over $400 million and generate a retum of 13o/o to lTYo for its
investors.
One of the keys to PM's strategy was to boost revenues by bríngíng below-market-rents to
market within the bounds of EPA's Rent Stabjlization Ordinance (RSO). This ordinance sets a
"legal maximum rent" for each occupied unit which goes up every year, regardless of whether
the landlord chooses to raise the rent or not. Over the years, many previous landlords did not
raise rents, allowing the "legal maximum rent" to rise well above the actual rent being charged.
PM's strategy was to raise the rents of these units to the maximum allowed, which, in many
cases, resulted in dramatic rent increases and absolute rents which were beyond the ability of the
existing tenants to pay. As a result, many tenants vacated their units or were evicted when they
could no ionger afford the rent.
PM did not anticipate the social and political fallout from its actions. As the evictions mounted,
tenant groups formed to protest thc rent increases and the City of East Palo Alto began to
actively resist PM's efforts to raise rents. The city and the Rent Stabilization Board took actions
to slow down and block PM's efforts to raise rents. PM fought back with a series of lawsuits
which have all prevailed, and have cost EPA hundreds of thousands of dollars in legal fees,
which the city cannot afford.
However, these fìghts have also cost PMP-II dearly. Not only has PMP-II incurred lcgal fees,
but the city's tactics slowed PM's ability to rent units, as units car¡not be improvecl or rented
without pennits. As a result, the partnership's vacancies have soared to over 400 units (22o/r),
rvhich costs PMP-II over $500,000 per month in lost revenue-
PM's most aggressivc tactic has been to sue the city to remove about 1,200 units from the
jurisdiction of the RSO, under a provision of the RSO that allows units to be removed from its
control if a suffìcient amount of capital has been spent rerlovating the unit. PM is arguing that ìt
has spent the capital required to trigger this release.
PM-0135
Should PM prevail in this legal action, it would gut EPA's RSO, as it rvould remove a sizable
majority of the total number of units in EPA's rent stabilization program, and make it much more
difficult to administer as the program woulcl no longer generate sufficient fees to pay for the
costs of administering the ordinance. This lawsuit is still pending.
Besides the legal troubles with EPA and the negative publicity from the tenant groups which
have tarnished PM's reputation, the economic downtum and credit crisis have severely impacted
the partnership's strategy.
The economic downturn has forced many lower-income households to double up or leave the
Bay Area altogether, reducing demand for housing and causing rents to drop- The rents forecast
by PM to drive the value of its properties up are simply no longer achievable. A slow and
gradual recovery in rents is now forecast for the Bay Area. Also, the reduced demand has
contributed to the porÈfolio's high vacancy rate whích is very costly to PMPJI. The high
vacancy rate will contribute to PMP's very poor economic performance in2009, where propefy
operations are now expected to generate only S5.9 million in net operating income,77 percent
below PM's budgeted-amount of $20.0 million.
The credit crisis has dramatically increased the cost of credit and virhrally eliminated the
availabilíty of credit for large real estate transactions. This development makes the looming S50
million Wachovia loan pay down problematic, at best. Unless Wachovía grants PMP-II an
extension to this pay down, the lender will seize the property and likely proceed with a
liquidation which, in today's environment, would generate proceeds of less than5225 million.
And even if Wachovia grants the partnership an extension, the properties generate so little cash
that PMP-II wíll eventually face a liquidity crisis and be forced to sell its properties at vaiues
insufficient to repay the lender.
As a limited partner, CaIPERS has no rights to manage or direct the affairs of PMP-II. CaIPERS
staff llave met with PM on several occasions to voice their concems over PM's actions which
have aggravated East Palo Alto and displaced many low-incorne residents. In addition, CaIPERS
fonned a dedicated team of staff and consultants to evaluate PM and identifo steps required to
make well-informed decisions on the inveshnent. There has been no evidence of wrong-doing or
illegal actions by PM, yet the manager's actions have and continue to aggravate EPA and create
an impression of "predatory equity" investing, which bríng it negative publicity and, by virtue of
CaIPERS's investment in the PMP-ll, bring CaIPERS adverse publicity.
Per PMP-lI's limited partnership agreement, CaIPERS has no rights to direct or control the
affairs of the partnership as a limited partner. However, per the partnership's original
documentation, CaIPERS negotiated for, and was granted, the right to replace PM as the
partnership's general partner at àny time after January 28th , 2009. CaIPERS has carefully
PM-0136
evaluated this right, and may yet exercise it if necessary, but to date has refrained from doing so
due to the potential liability which would come with such replacement and the risks of having to
take over the operations of the partnership. Replacing PM is especially problematic now, given
the $50 million loan pay down due August 1,2.009 and the partnership's poor operating
performance and high rísk of bankruptcy-
In the last month, PM has approached East Palo Alto and invited the city to engage in mediation
to sort out their differences. Given the partnership's impending capital crisis, it is not clear what
can be gained from this mediation, which will undoubtedly take many months and whose
outcome is uncertain, at best. CaIPERS continues to believe that its interests are best served by
maintaining its status as a limited partner in the partnership and carefully monitoring the
situation as it develops-
PM-0137
Page I of I
Langhi, Taryn
Frorn: WanenOtto[Otto@sbfund.com]
Sent: Tuesday, June 02, 2OO9 12:34 PM
To: Weir, Laurie; Schlenker, Eríc;Stocking, Barbara; Yrure, Edward;Pottle, Randy;Eliopoulos,
Theodore; Alexander, Judy
Cc: Mateo, Michele; Bow, Sharol
Subject: Page Mill,
I am working with Michele to coordinate meetíngs in your offices next Thursday afternoon on Page Mill, ,
; but ljust wanted to give all of you a heads up that we're hopíng to meet with you then from 1 pm
through 5 pm.
Parts of each of these meetings will be ímportant for Ted and Randy to attend, namely:
1- Page Millvaluation and recommended strategy - say 20 minutes.
REÐÆGTEf}
4,
dr
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Additional emaíß regarÕlrrg these meetings will come from Michele as she and I work together to get them I
scheduled.
t
PM-0149
CALIFORNIA PUBLIC EMPLOtræES,
RETIREMENT SYSTEM"
PAGE MILL PRO
INDEPENDENT A ANTS'REPORT
ON APPLYING A
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PM-0306
CALIFORNIA PUBLI c. BtVl pr,oyEES' RETIREMENT sysrEM
.: PAG-E MILL FROPERTIES II, L-P.
INDEPENDENT ACCOUNTANTS, REPORT
. ON APPLYING AGREED-UPON PROCEDURES
TABLE OF CONTENTS
Paqe
t- 2
3- 7
8 - ll
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PM-0307
5'6,*rft Nl iLñrn
Mr. LarryJensen
Chief Officer of Audit Selwice
California Public Employees' Retirørient Systern
Sacramento, CA
PM-O3OB
ùlr- Larry Jensên.
Chief Officcr of Àudit Service
Page2
We were not engaged to, and did not perform an examination, the objective of which
would be the expression of an opinion on the specjfied elements, accounts, or items of the
Partnership. Accordingly, we do not express such an opinion. FIad we performed
additional procedures, other matters might have come to our attention that would have
been reported to you.
This report is intended solely for the use of CaIPERS and Page Mill and is not intended to
be, and should not be used by anyone other than those specified above.
PM-0309
Executive Summaryof
Findin gs and Recommeiäafions
for . :t:,'
Page Milt Propeities.ll, L.p,,
PM-0310
':'''..'. .:.':.
CALIFORNIA'PUBTICEMP.LOYEES'RETIREMEÑTSYSTEM '' J ' i
PM-0311
T
"'i;¡
renrs: .:;-1,
.iiì* , ='$|'
,Æt
:
Conrments:
.r.,;il:jÊ,, =_,r;+ $.
l. our review I
5' Our review of the Partnership's books and records for accuracy,
cornpìeteness,
timeliness and general compliance with GAAP requirernents
resulted in no
exceptions-
PM-0312
CAIIFORNIA' PUB I ;I C EMPLOYEES''RETIREM ENT SYSTEM
PAGE MILL PROPERTIES II, L.P.
INDEPENDENT ACCOUNTa-lvrs] RXPORT ON Appl,yrNc Ácnnno_woN pRocEDURES
# Above oZ
%o Below
Address: Units Annraisal Acg- Priee Market Market _
1-8 Newell Ct. 221 $ 34,700,000 '$ 35,411,s51 2.Lyo
s 5,:,945,439 4.4%;o
s 3,89s,000 l6.2yo
$ 2,0s1,842 3.6yo
s 996,226 9.4yo
s gt2,8g1 33_6yo
"'ìii¡'''
røirr provided its lnçiffil"irt committee Memoranda (..ICM')
f+e9 for each of the
IClr-4sr'" were prepared by page vìil prior ro
:tl_ Pi,:P"ttt"r'. . Tr. individuar
acquisiti-ons and included "boirer-plate,, ianguage (sarre write ui for
each of the six
properties) suggesting- that eacll of the investlnent assets
were being purch ased 40To
below market value As reflected in our above analysis, three
of the properties were
acguired at a price above the appraised fair market value
and none were purchascd
for prices thar were 40%o beìor.v the appraiseci value_ The use of ..boiler_prate,,.
Ianguage is misleading when used in undlnvriting clocuments
such as the ICMs. The
PPM provides that "Page Mill employs a thorough due
diligcnce and conservative
undenvriting process to determinè the value of potential
învestments, involving
asset lnanagement, leasing, devcloprlent, construction,
property management, and
finance disciplines to examine prorp"ctive i¡rvestment to ánsure that it meets
mjnimum underwrìting standards, "u"ú physical/structural,
envjronmentar a'd legal
requirements". We obsetve that industry standard would
call for each ICM to be
draftecl with inforrnation crescribinþ the u'ique nature
representing the irigh level of ciue diligence the General
of the asset, better
Partner plecìged to conduct
Squar Milner Reai Estate Senices, Gp
See !ndependcnt /ccountants' Re¡ton o,t
ó- Ápp l.vi ry Å greetl - tJpon pt oced u res
PM-0313
PIIGE MILL PROPERTIES II, L.P.
INDEPEN DENT ACCOUN'I'ANTS' REPORT ON APPLYING AGREED- UPON
PROCEDURES
8. The PPM provides for an lnvestment Management Fee a¡d allows for other property
related fees to the Advisor, or an affiliatq provided the terms are at least as
favorable to the Partnership as the terms reasonably-expected to be available in an
arm's length transaction with an independent third ,p*y- The cumulative fees
incur¡ed from JuIy26,2006 (inception) rhrough the of2007 are:
Amount in
Type ofFee Method of $1,000's
Investment Managernent Fee l.5o/o of Avail $ 1,909
Property Management Fee Greater of
ìr¿'l*-'.
ofproj y revenuesii,.l::iji' 690
Leasing Fee Greater of h's rent or
3%o of aggregale 241
Construction Management Fee Greatcr of ,5%ó of cost of
labor or$10O 278
RedevelopmentFee .:..: ,;,,., 3%o of the project budget 4,019
. ,j-:,r:.
..:::
.riÊ"
::
tjr. i:;r
$ 7.137
rr':, , .j',.
,; :..1;r ì.
..,r;;...:r.
.
PM-0314
CALI FORNIA PUß LI C EM PLO YEES' RBTIR-ET,'I
TNi SYSTE M
I PACE MILL PROPERTIES II, L.P.
INDEPENDENT ÀCCOUNTANTS' REPOIT
ON APPLYINC ÁCNUBN-UPON PROCEDURES
EXIIIBIT I
CatpERS
REAL ESTATE PARTNER PROGRAM APPLIED TO
' PAGE MILI. PROPERTIES II, L.p. (..FLIND II'),
AND RELATED
AGREEMENT OF LIMITED PARTNERSHIP
(THE'?ARTNERSHIP AGREEMENT,)
PM-0315
'. .......:.- jr.'. .j .. .;,. I -.
8. oblain and review policies and procedures rerating to the process used
to apÞrove portfolio investments; note any contradictions to industry
standáids; note policy weaknesses and make recommendations as
necessai¡r to strengthen policies and procedures.
PM-0316
'., -:.j-'. , : {-'' :.-, ,, . : --:,
CALI TFORNIA
FORÑIN PUI
PUN I, Tò NNIiiO.VEËS' RNTTREMEN T
SYS TEM
PAGE MILL PROPERTItrS IL L.P.
¡NDEPENDENT ACCOUNTANTS' REPORT ON
APPLYING AGREED.UPON PROCEDURES
11.
9..91"i1
and review (i) rax firings, (ii)
quarrerry financiar statemenrs,
(iii) the two most recent quartãrly r.pórt, on Fund II activities
and
individual investments' (iv) any investment taffic logs, (v)
rist of
acquired/disposed assets, and (vi) quarterry statement
of fees paid by
Fund II; note the Generar p*orá'r timeliness. ir pr"pJö
documents a¡rd/or delivering same to interesied puii"r;'r"pon
*"r,
findings. Review and recalculate manageme¡rt fees to tne
lníestment
Advisor and determine compriar"" wiú the partnersh¡
Ãg.""rn*,.
Review the detailed generar re{eer ai the portforio t"ua
and/or unusual transactions-
îo, urg"
,. .'
._",
.. .
.i.
PM-0317
B. Matters Relating to Asset and Loan Management
l. obtain and review project file with focus on the process emproyed
to underwrite the lhe
individual investments; note inconsistencies with
Fmd II's standard poricies and procedures used to underwrite
qualiffing investments. Focus on matters including the commitment
letter/memorandlm of understanding; purchu." *ã sare agreement;
development or business plans; underwriting processj due
dirigence
performed; and closing process; sarnpre six- aìquisitions and
,"po*
findings. Interview the Fund II investment officei(s) who manage the
invesünents- -
PM-0318
Page I ofl
Langhi, Taryn
PM-0323
CalFER9
GONFIDENTIAL
lnvestment Office
P.O. Box2Z49
Sacramento, CA 95912_27 49
(e16) 795_3647
FAX (916) 795_3e65
Telecommunications Device for the
Deaf - (9i 6) 7gS_3240
.
Date: January 29,2OOB
To: Members of the lnvestment Committee
RË&&ürHw
4l
PM-0333
PAGE MILL PROPERTIES II, L.P.
ln 2006 CaIPERS Real Estate entered into an investment pgrtnership committing $100
million to Page Mill Properties ll, L.P. Page Mill has amassed almost 100 existing
apartment buildings in East Palo Alto aggregaling ovei' 1,800 units housing over 6,000
residents. Page Míllembarked on a building rehabilitation program, including new roofs,
se¡sm¡c upgrades, and ímprovement to common areas and landscape.
Page Mill has recently come under harsh criticism for raising rents on tenants who are
primarily low income and working familíes. Community leaders have expressed fear that
Page Mill's strategy may include replacing some of the last available affordable housing
with more expensive housing stock.
All of Page Míll's properties are under East Palo Alto's Rent Stabilization Board which
limits frequency and size of rent increases. ln response to concems that Page Mill might
increase rents, the city proposed to restrict the ability of Page Millto do so. (Allowable
rent increases under the rent stabilization ordinance is in dispute.) Page Mill reacted by
increasing rents up to their understanding of allowable rents the week before Christmas.
I
The City Council passed an urgency ordinance imposing a six-month retroactive rent
treeze on rent controlled apartments. ln response, Page Mill has filed a lawsuit in San
Mateo County Superior Court to force the city of East Palo Alto to rescind the urgency
ordinance. The Court has agreed to hear the case and ordered an expedited process for
reaching a conclusion. A hearing is scheduled for February 21,2007.
Staff has conveyed concern and disappointment to Page Míll for their recent actíons.
Notably, staff has told Page Mill that the investment of CaIPERS funds should not result
in the involuntary displacement of low income or work force households. Staff ís
currently seeking legal advice on CaIPERS' rights under the partnership agreement, and
has asked to meet with Page Mill to reiterate our concerns.
The Page Mill rent increase and litigation has generated a lot of press, and a few calls to
CaIPERS Office of Publíc Affairs. Public Affairs has referred all calls to the Real Estate
Office. Staff has received a Public Records Act request which has been fon¡rarded to
Legal for response.
PM-0334
CaIPERS
CONFIDENTIAL
lnvestment Office
P.O.Box2749
Sacramento, CA gSB12-27 49
(e16) 7es-3647
FAX (916) 795-3965
Telecommunications Device for the Deaf _ (916) 795_3240
Date: December 2,200g
To: Members of the lnvestment Commiüee
BACKGROUND
PM-0336
RECENT EVENTS
Page Mill and the city of East Palo Alto have sued and
countersued one another five
times thus far. The stanford community Law clinicrepresented
the tenants in one of
the court cases against bolh Page Miil ánd east pan
Álià, page Milt has prevaited in
each case' ln response, East pã¡o Rtto has partnereo
wùn the city of Berkeley for
advice and assistance on.how to improve the administration
of East pato Alto,s rent
stabilization ordinance. The stanfoid commun¡tt
further in new litigation efforts- The te¡ants
ü; ðil"ic intends to press their case
álso represented by Tenants Together, a
"re
tenant rights group headquartered in San Francir"o.'--.-
on August 18, 2008 ReaJ Estate staff presented the Strategic plan
lmplementation
update to the lnvestment Committee in closed session.
Th"e update included staf¡s
identification of Page Míll as a non-strategic urban
Program partnership that is identified
for evaluation' The agenda item noted investment purtiur"
to act as consultant advisors
to assist staff with this process. Subsequently, staff
has retained the services of
stockbridge as consultant, and Pillsbury wínt-hrop as
outs¡de legal counsel for page Mill.
The consultant and counsel will advise rtuff on ialPERS'
rights under the partnership
agreement_
PM-0337
The other Page Mill investors consist of a parallel fund that is a group of high net worth
individuals. Staff has spoken with several of these investors, each of which has
expressed support for Page Mill's strategy-
On severaloccasions, mindful of CaIPERS role as limited partner, staff has spoken wíth
and conveyed concem and disappointment to Page Mill foi their recent actions. Notably,
staff has told Page Millthat the investment of CaIPERS funds are not intended to result
in the involuntary displacement of low income or workforce households. page Mill
contends that they have done nothing inappropriate, all of their actions are lðgal, and
their investment strategy is performing as anticipated.
ln conclusion, staff has met wíth and heard the concerns from interested parties. Staff
has hired consultants for evaluatíon and recommendation of the page Miil investment
partnership. Staff continues to work closely with the Legal and Communicatíons
offices
on the Page Millmatter. Staff will keep the lnvestment Commíttee informed as actíons
are taken relating to the Page Mill investment partnership.
Q-ue-stions regarding these issues should be directed to Ted Eliopoulos at (g16) 7gS-
3647.
PM-0338
þ 5itus [ompanies
Overview
In.conducting the due dirlgence of page Miil Fund II, we began with a review of
subscríption documents for the fund includlng:
PM-0644
[!e !itul fompanier
our summary report presents signiñcãnt highrights of our due dirigence findings
and recommendations to GIpERS pertainiñg io consideration ofi prospective
¡nvestment ¡n Page Mfll Fund IL
PM-0645
Ihe Jitu¡ [rrrnpanies
I. Executive Summary
II. Overall Fund Strategic plans
il. Fund Tactical Plans ¿nd Methods of Execution
IV. Affìliates to the Fund and Intenelationships
V. History and Track Record of Fund principals and Managers
VI. Transaction Sourcing Methods and Market Access
vII. Organizational and Reporting structure
PM-0646
(þ
5ìtus fompanies
L Executive Summary
Summary of Fíndinqs
PM-0647
f itus [ompaniel
PM-0648
i:g ,'þ
The planned focus on_technology drlven markets orlginated over 15 years ago
with Davíd raran, cEo of page Mill properties, through his recognition of
dynamíc u.s. markets affected by the trajectory of technòlogy broadly and the
resulting real esrdte investment opportunib'es due to shifu in demand ano zuppty
within these technology driven markets, as well as the growth and dislocation of
participants in the technology sectors.
The fund will focus on new opportuníties created from growth in 11 rargeted
bechnology driven markets across the u.s., with focus oñ changing real estate
requ,rements among companles involved in blotechnolog¿ healthcare
technology, consumer technology, and the network of suppliers to ãacr, of these
sectors.
The Fund's goal is to target coreplus ínvestrnents which the cFo defines as
"less speculative or opportunistic" and more basic opportun¡ties to create value
through focus on repositloning, redevelopment or conversion along with actual
development of real estate assets ¡n order to create addit¡onal value. Through
closely associated sourcing channels, most opportunities are identjfied through a
network of local market contacts w¡th awareness of off-market opportunities
such as local governmental representatives, corporate leaders, real estate
owners and investment brokers. As such, compeb't¡on for targeted investment
opportunities is described by the CFO as minimal.
The planned term for ¡nvestments is an average eight to ten year horizon, with a
targeted IRR of t2 to 14 percent achieved through adding value to core assets
acquired and repositioned or realigned over the holding period.
The fund structure is similar to the page Mill Fund I in terms of a limited number
of investors, tradit¡onal General parlner/ Límited partner format, and
monetization of investmenls over the life cycle of the Fund. The previously
proposed public exit or conversion to a REIT is not part of the current Fund
strategy.
PM-0649
/R
r.Y
þe Situs [rrrnpanies
The long term vlsion and mission of the managemenl team is to contínue their
success from Page Miil FundI with a consisteni investment strategy of apprying
their on-goíng entrepreneurial approach to value creation in bevelopment
opportun¡t¡es in technology driven U.S. markets.
Conclusions
Page Mill has deveroped an above average and welr documented strategy in
subscription documents provided.
The targeted leverage and returns of the Fund are consistent witl¡ calpERS'
expected net return universe for core plus and Value Added investments which
lie in the range of 7.5 to 15 percent, based on leverage within a range of 25 to
65 percent.
3 out of 5 team members in management for page Mill Fund II were newly hired
in 2006.
The Fund's defìned focus on eleven technology driven markets may require
broader overall backing of market trends and reãl estate market fundamentals in
order to make investment declsions and source opportunities broadly throughout
thís range of target markets.
PM-0650
tþ
litut Iornpanies
In consÍderation of the tacUcal plans and methods of execution for page Mill
Fund II, we evaluated the following critería:
- investmentguidelines
- planned deal pipeline
- leverage targets
- financial modeling and anal;als of proposed deals
- preparation of buslness plans on prospective investments
- review of investrnent approach and decision making on proposed
¡nvestments
- approach to value cJeation
- monitoring and management of investments
Hlohliqhts
The fund Þrgets lnvesùnents with a total potential vatue range of g25 to g50
mllllon, Minimum equity investment parameters are not prescribed, with the
exception of a general contribution threshold of greater than g5 milllon.
PM-0651
fht 5itus fompaniel
The Fund does not plan to add staff pursuant to new investments, but rather rely
on external strateg¡c partners to support on-going investment analytics and
monitoring requirements.
Conclusions
The addition of Fund staff with sole focus on the asset-specifìc strategies may
prove beneficlal as investinents are added to the porúoilo; thereby Éssening
reliance on external parties for implementation' or monitorinj of asset
performance.
PM-0652
The Situs fompanier
Hiqhliqhts
The structure of the asset management fee to the General partner from
Limited
Partners includes l.s percent per annum of unfunded commitments during
the
lnv.estment períod (except that Limited partners committing at least g75
million
will pay 1'25 percent per annum) or 1.5 percent per annum of funded
commitments.
The planned report¡ng structure for the Fund to Limrted partners incrudes
annuar
audited fìnancial statements and a statement of changes in the net asset
of Fund; quarterly report¡ng of the Fund's baranðe sheet, varue of value each
investment, distributions to the General partner, performarrce measurement
retums; and monthly reporting on operatíons and cash flow.
Third parÇ appraisals are contracted at the discretion of the Generar partner
and
are provided to Limíted partners as received.
PM-0653
e Iitu¡ [ompaníes
Conclusions
PM-0654
ïhe fitu¡ [ornpanier
Hiohliohts
The following references for David Taran and page Mirr properties
were provided
to us for contact:
- Tad Taube, president, Taube Investments Inc.
Diane Ferguson, Senior V¡ce president, Royal Bank of Scofland
- Michael McCoolç Former Director of Real Estate, CalpERS.
Additional famíliar individuals were also contacted as well as public
data being
collected on Fund.principars through research services such as Lexus
Nexus.
Prior entities led by David raran include Divco west properties, various joint
ventures w¡th fnsiltutional investors and opportunity funds, eage
Mitt properties,
Page Mill Fund I, among other investments_
PM-0655
Ihe Siru¡ (ompanies
Conclusions
Investigation into the history and track record of Fund princìpals fndlcated that
as experlenced GB and Investrnent Advisors, they understand the various issues
of confllct of interest as regards fidudary responsibilities and have adeguate legal
representation to guide the process of conflicl adjudication. Add¡tiona¡V. the -Lp
Advisory committee establlshment allows for ã forum to deal with'knornn
confllcts.
PM-0656
lhe 5itul [ornpanirs
- strategy for identifoing metro regions/ areas for rear est¿te investrnent
- network for deal flow and expected competition for deals
- development of conÞcts within target markets
- proactive sourcing of real estate investment opportuniües
- marketing of lnvestment criteria for the Fund
- monitoring of technology developments withln target markets
- monitortng of real estate fundamentals withln targret markets
'Hlohllqhts
The Fund will focus on ma¡nta¡ning a network of contacts and partners within
the
areas where Page Mill would consíder investment. These contacts include
financial institutions, brokerage and agency representatives, corporate
relationships, and public aovernmental officials. The Fund w¡ll seåk to source
off-market deals with superior tnvestment potent¡al via these contacts in targeted
markets, whlch often are not competitively bid and enable in-depth plannlng
and
analysis of the situation.
PM-0657
(.Þ
e Situ¡ [ompanies
The Fund does not activery engage in the marketing of their ínvestment
strategy
or real estate investment criteria.
Conclusions
Markets whích are new. target.markets to page Miil, based on the technorogy
lriven focus phirosophy, wirl require extãnsive proactive research and
investigation to develop a network of proprietary contacts on which
rely to deliver a broader breadth of off-market opportunitieitheworÜ,y
Fund c¿n
or
consideration.
PM-0658
[!e 5itus (ompanies
PM-0659
i3
lhe Sirus [ompanies
Conclusions
PM-0660
,lñ
tj9
litul (onrpanies
App¡¡¡n¡x To rHE
SuMMnny Rrponr oF THE Due D¡ucrNcE oN
Paee Mru- pRoprnr¡rs Fuwo If
Pnrpenro ron CalpERS ns or 27 Juw 2OO6
PM-0661
M
CaIPERS CONFIDENTIAL
Mernorandum
Caljfomia Public Employees' Reùrement System Date: January 13,2O10
ln September, a receiver was appointed by the San Mateo Superior Court at the
request of Wells Fargo Bank to oversee the management of Pãge Mill Froperties'
rental units- The receiver, David wald, hired lnvestors' property services io
manage the property. Our consultant, Warren Otto, of Stockbriðge Capital Group
reports that Page Mill management claims that it is not making añy further efforts
to regain control of the properties and has no involvement in the aisets ín any way
other than to respond to occasional informational ínquiries from the receiver.
ln October 2009, Page Mill inquired whether CaIPERS would consider committing
$25 million of additional capitatto the page Mill investment (beyond the g100
million already funded) which they represented would be neäessary to negotiate
with Wells Fargo on the maturity of the existing $240 million loan. CalpEñS staff,
with the concurrence of its consultants, decideà against investing additional money
in Page Mill.
on January 6, 2010, notíces of rrustee sales were posted for each of the 101
properties owned by Page Mill properties Fund ll (pMp ll). Each notice
lists
indebtedness of $239 million whÍch is the total outstanding principal balance of
the
Wells Fargo (Wachovia) loan as of August, when the loan went into default. All
of
the properties are cross-collateralized.
PM-0692
lnvestment Committee
January 13,2A1O
Page 2
The Trustee Sale is scheduled for February 1,2a1o. The bank may choose to bid
its loan balance at the sale and if it is not outbid, it could take ownership of the
properties which would terminate any Page Mill properties Fund ll (including
CaIPERS) ownership of the properties.
Staff and its consultants will continue to monitor this investment through its
resolution. Staffwill update the lnvestment Committee as soon as more complete
information is available
Please contact Ted Eliopoulos at (916)795-3647 wtth any questions that you have
regarding this matter.
PM-0693
CONFIDENTIAL
lnvestment Office
P.O,Box2749
Sacramento, CA 9581 2-27 49
(916) 79$3647
FAX (916) 795-3965
Telecommunicalions Dev¡ce for the Deaf - (916) 795-3240
Date: January 8,.?91.Q ffi
To: Members of the lnvestment Committee
The purpose of this memo is lo update the lnvestment committee on recent events
regarding Page Mill Properties in East Palo Alto.
Background
PM-0695
Recent Events
on January 6,20'10, notices of rrustee sales were posted for each of the 101 properties
owned by PMP ll- Each notice lists índebtedness of $239 million which is the total
ortstanding principal balanc.e of the wells Fargo (wachovia) loan as of August, when
the
loan went into default. All of the propertiés áre ôross-collateralized.
The Truslee Sale is scheduled for February 1,z}rc- lf the bank chooses to
credit bid its
loan balance at the sale, it could take ownérship of lhe properties which
would terminate
any PMP ll ownershíp of the propeñies- calpERS owns eðø or pt\4p ll which would
exlirpuìsh.any of our equity in the project since the v?þe of tþ p
below the loan balance-
we understand that wells Fargo is in discussions with Bridge Housing to manage the
Property following the Trustee Sale. As one of the leading ãffordable-housing piovÍders
intheSanFranciscoBayArea,Brid.geJpsl.¡:eçepabili(vIo_effectivety_r_npfrgõçthig
property which would greafly benefìr the residenti ano _ - 'r--
$eaiériommliniry.
Althouoh Bridge Housíng. is one of manaqers in its urban proqram. carpERS_is
Del€tedr
pursuinganyfurtherinvo|vementintheproperty.- l-,g!. .. . ..
,i1."_T.r19
-"r .qoJ!.rl,gn,*.ryJ'çol,in.u.çtg,,r,pn',o.
tni" ,nu".,mqn, ,l.rorg,l !,ç ,çgo,u,jp!. AttæH pteæe fnd a
Staffwillupdatethelnvestmentiomm¡iieeãõIbonãJffi--.'.. -- __ Delet€d:
n€B story lhat appeared in The
available. Mercury Neffi on June 3 reoardlm
Page Mitl. The article stateithat
-
Page Mill lEs sent lease tem¡nation
Please contact Ted Eliopoulos at (916)795-3647 with any questions that you have notices to sevtraltmanls imlud¡no
ælþisl aod organízer Ctris Lurxt. -fl
regarding this matter.
Deleted: has stârted an ¡Nesttoetion
of lhe lãcts
PM-0696
From: Wanen Otto [Otto@sbfúnd-com]
Sent: Tuesday, December 29, 2009 3:S2 pM
To: Weir, Laurie
Subject: RE: Follow up on public cornment - page MÍll / PCV-ST
Laurie, I caught up wich .rim shore yesterday and have an update for you. There's really
not much t.o report. !üe1ls Fargo is proceeding cauLiously and has noi sought ownership åf
the property. The bank has also t.oned down the licigatión activity, as you would expãct,
but has not uniformly given up on the various lawsuiLs initiated ¡y-page Mill againri epe.
operaEions at the property leve1 appear poor, wi.th all the at.tendãnt problems: crime,
t.rash, vandaì.ism, etc. . '
Don'È hesitate to ask for anythingr else you need on page MilI or anyLhing e1se.
Happy New Year, tÂr.
P-s. Hope you're féeling better; you sounded very congested last time we talked.
-----Original Message.-----
From: l¡ùeir, Laurie Imailto:Laurie_!rteir@Ca]-pERS. ca. govJ
Sent: lvednesday, December l-6, ZOOq 1:50 pM
To: l¡Iarren Otto; Schlenker, Eric
subject: Ft¡t: Fol-low up on public conment - page Þrill / pcv-sr
Hi t^rarren,
r know Eric has asked you for draft Page Mill update for L.he Board. rf you coutd put a feh¡
paragraphs together we wÍ11 take it from there. (l know you have nothing better io do.-.)
Thanks L
ffiffiffi&ffiTffiffi
PM-0708
Call in infonnation for Pagemill meeting Page I of2
l-anghi, Taryn
From: WanenOtlo[Otto@sbfund.comJ
Sent: Tuesday, Decernber 16,200S 7:09 PM
To: Weir, Laurie
Subject: RE: Page MillAgenda
Laurie, I'll lead or follow, as you prefer. I heard from Page Mill about the East Palo Alto group that appeared in
Sacramento yesterday. Needless to say, Page Mill is concerned about all of this, as they should be (a líttle late,
maybe?). Page Mill called me to ask if I had heard anything about it, and expressed their concern. lt was easy
for me to tell them I knew nothing about it, as I had not heard anything about it until they called.
Feel free to call me at any time or look for me before the meeting, as I will be in your offices no later than g:30
am. See you then, W.
' To: Warren Otto; Carrillo, Diego; dulcie.brand@pillsburylaw.com; Plasencia, Javier; Pechtel, Patricia
Cc: Mateo, Michele
Subjech RE: Page MillAgenda
We appreciate your willingness to lead the díscussion. I think Ted will want to take the lead based on disiussions
that occurred in lC yesterday. Thanks again. L
Attached hereto is the agenda for tomonow's meeting with Page Mill Properties- I will be.arriving in CaIPERS's
offices around 9 am to prepare for the meeting, which is scheduled to start at 10 am. I intend to
moderate/orchestrate the meeting to make sure we get through the agenda by noon, when an investor's
conference call with Phoenix regarding the San Diego Smart Growth Fund is scheduled to begin. I intend to keep
the meeting on a good pace so we don't dwell too long on some of these issues, which could be discussed
endlessly if we let them drag on.
Should any of you need to talk to me before the meeting, I can be reached on my cell phone at 630 441-8387. )
c lao t-^1
^
RËfrþ&ffirËffi
PM-0769
Call in information for Pagemill meeting Page2 of2
For those who may be calling in, l've placed the inlormation needed below:
Callin # - 80G3693190
Pass code - 27788
Thanks,
Diego Carrillo
'lnvestment Officer
Global Real Estate
CaIPEBS
400 Q sl. LPE 4800
Sacramenlo, CA 95811
(91 6) 795-9236 (direct)
(e1 6) 7e5-3965 (fax)
PM-0770
,'*Þ r
.l
r¡:l
- .,'
Situs [ornpanies
27 )uly 2OQ6
Dear Jose,
Although our observauons and conclusÍons are contained ín the body of the full
report, the basic highlights are as follows:
a' The PPM is very articulate, well written and gives a clear picture of the page
Mill strategy and rationale of the Gp and Fund.
b. The time horizon for the Fund holding periods are well thought out and gives
4éó5 louthwest freewa¡
in our opinion, prudent and adequate tirne for execution-as opposed to having
Housron, TX 71027 to resort to more hectic strategies.
il3.il61140
lax:l13.il6)ll46 c- Earlier returns of GP predecessor funds are good and consistent with
competent execution and management.
ww.iifusros.rom
PM-0827
; '--q
:.:4
e. We concur that technology driven markets are an excellent niche in that the
earlier slow adoption period seems to have passed (e.9. broadband orders are up
33o/o ov€r last year) and additionally, naar opportunities in telecommunications,
biomedical, wireless, nanotechnologíes, etc. are experiencing growth and
assimilation, which are capable of producing several opportunities as part of the
real estate "supply chain'.
Usted, as a risk to the Fund is the huge quantity of capital looking for
transactions. Sourcing of"off markef'transactions tend to be ineffìcient and
generally based on close prior relationships. We would recommend looking
into an executable marketing and public relations plan to gain visibílity in
some of the less familiar technology drlven target markets. As real estate is
generally a local activity and some 650/o of propedies are not "instifutíonally''
owned, we would recommend as one possible sfrategy, surveying local
target markets to ldentify real estate owners and operators, whlch are not
nationally known and may be ready to move into a more instifutional format.
It has been our experience that each locale has at least a few key "players"
which fall into this category and should be identifiable.
There are a few items that we are not yet in receipt of or completed namely:
PM-0828
.Jfl
'Év tß
Ihe Iitus [ornpanies
Based on our scope of work in this assignment and our review, we fìnd it
reasonable that calPERS move forward with its contemplated lnvestment in page
Mill Fund II, L.P.
We have approached this assignment withtn the context of our view that
"calPERs'shift in philosophical and strategic real estate portfolio allocatjon is at
tln vanguard of building what míght be termed the Modern Real Estate portfolio
.-.(whidr) adds a more complex asset management and monitoring dimension.,,
Cordially,
Stephen R. Ganns
Managlng Partner
S¡tus Strateglc Advlsors
For Situs Realty Serv¡ces
PM-0829
April,__,2009
David A. Taran
Page Mill Properties
480 Cowper Street, 2nd Floor
Palo Alto, CA 94301
DearDavid:
Thank you for providing updates on your position on the issues wíth the Cify of East Palo Alto
and the tenants who reside in the Parbrership's properties- We believe it is in the best interest of
the Pafnership that you mend your relationships with both groups, and we encourage you to do
so expeditiously. CaIPERS continues to receive complaints from the community and requests
for information and meetings from disgruntled residents. TVebeüeve that the continued
controversy surrounding the propertyis having an adverse effect on the value of the property and
its prospects.
You are coffect that we at CaIPERS a¡e'\¡vorking 'overtime' to protect CaIPERS assets," but we
are particularly concerned about the performance and stability of the Partnership. Simply put, it
is unclea¡ to us whether your implementation of the current invesbnent strategy and operation of
the projecl are effective or yielding appropriate results. We understand, for example, that alarge
number of the units have been vacant for several months and that the curreirt vacancy level
exceeds 20 per cent, which is much higher ihan that of the overall market. The losses from these
vacancies are harmful to the Partnership as a whole, and as a lirnited pahner in the Partnership,
we ¿ìre concemed about the effect of sustained vacancies on the financial performance of the
property.
We are also deeply concerned about the $242 million loan from Wachovia Bank (now Wells
Fargo). We understand that the loan has a $50 million pay down requirement due August i,
2009. While we understand that you are negotiating with the lender in hopes of extending the
70149765?v4
PM-0962
due date, we are not confident, given the present state of the creditmarkets, that your
negotiations will be successful. Accordingl¡ we have asked you to detail your plans for
adãressing the August 1,2009 obligation. We receivbd your $mmary response dated April i0.
Your limiied response suggests that you do,not have a plan to mariage the maturity of this loan
and that you have not adapted your management of the Partnership to present economic
circumstances. This matter is of grave concem to CaIPERS. Because of the ímportance of this
loan to the continuing viability of the Parrnership, we hope that you rviil provide us with your
detaiied plans in the very near future'
Please keep us informed of your progress. CaIPERS is continuing its financial review of the
Partnerships and reserves all applicable rights and remedies.
Sincerely,
I.aurie Weir
7Qla97652v4
PM-0963
April _, 2009
Ðru+FF
David A. Taran
Page Mill Properties
480 Cowper Street, 2nd Flôor
Palo Alto, CA 94301
Dear David:
Thank you forproviding updates on your position on the issues with the City of East Palo AIto
and the tenants who reside in the Partnership's properties. We believe it is in the best interest of
the Pa¡tnership that you mend your relationships with both groups, and we etlcoruage you to do
so expeditiously. CaIPERS continues to receive complaints from the community andrequests
for information and meetings from disgruntted residents. We believe that the continued
controversy surrounding the property is having an adverse effect on the value ofthe property and
its prospects
You a¡e correct that we at CaIPERS are "working 'overtime' to protect CaIPERS assets," but we
are particularly concerned about the performance and stabilify of the Partnership. Simply put, it
is unclear to us whether your implementation of the current investment strategy and operation of
the project are effective or yielding appropriate results- We understand, for example, that tåe
7Ot4916s2vA
PM-0964
We are also deeply concemed about the $242 million loan from Wachovia Bank (now Wells
Fargo). We understand that the loan has a $50 million pay down requirement due A.ugust l,
2009. While we understand that you are negotiating with the lender in hopes of extending the
due datg we are not confident, given the present state of the credit ma¡kets, that your
negotiations will be successful. Accordingly, we have asked you to detail your plans for
addressing the Augtst 7, 2009 obligation. +e¿aterou*+e@is'
aateA anrit tO. Vou response suggests that you do not have a plan to manage the
maturity of this loan and that you have not adapted your management of the Parlnership to
present economic circumstances. This matter is of gr Because of
the importance of this loan to the continuing viability of the Partnership, we hope that you will
provide us with yourdetadc¿ plans in the very near future.
Please keep us informed of your progress- CaIPERS is continuing its financial review of the
Partnerships and reserves ail appiicable rights and remedies.
Sincerely,
Laurie V/eir
701491652v34
PM-0965
Document co DeltaView on Tuesda 14,2OOg 3:49:03 PM
PM-0966
Attachment
dþ,
..'-_iir.'t..1'
-- ç-.1 ;. r ,¡\.¡\
CONFIÞENTIAL
lnvestment Offlce
P.O- Eox2749
Sacramento, C A 9Sg1 2-ZZ 49
(916) 79s-3647
FAX (ef6) 79s-3s6s
Telecommunicaüons Ðevice for the Oeaf _ (9f 6) 7g5l324l
Date: January Zg,2OOg
To: Members of the lnvestment Committee
ffiffiffi&ffiTffiffi
PM-0967
i
I
I
Attachment
ln 2006 CalPËHS Real Estate entered lnto an investment partnership committing $100
million to Þage Mill Properties ll, L.P. Page Mill has amassed almosi 100 existing
apartrnent buildings in East Palo Alto aggregating over 1 ,800 units housing over 6,000
residents. Page Millembarked on a building rehabilitation program, including new roofs,
seismic upgrades, and improvemeht to common areas and landscape.
Page Mlll has recently come under harsh criticism for raising rents on tenants who are
primarily low income and working famifies. Communig leadèrs have expressed fear that
Page Mill's strategy may include replacing some of the last available affôrdable housing
with more expensive housing stock.
All of Page Mill's properties are under East Palo Alto's Rent Stabilization Board which
lirnits frequency and size of rênt increasqs. page Mill might
Jn response to concerns that
increase rents, the cÍty proposed to restrict the ability of Page Millto do so. lAttowaUtõ
rent increases under the rent stabilizâtion ordinance is in dispute.) Page Milireacted by
increasing rents up to their understanding of aflowable rentsihe week before Christmas.
The City Council passed an urgency ordinance imposing a six-month retroactive renl
lreeze on rent controlled apartments. ln response, Pagã Mill has filed a lawsuit in San E
Mateo County Superior Court to force the city of East Palo Alto to{escind the urgency
ordinance, The Court has agreed to hear the case and ordered an expedited process for ¡
t
reaching a conclusion. A hearing is scheduled for February 21, ZOO7. I
Staff has conveyed concern and dísappointrnent to Page Millfor theír recent acilons.
Notably, staff has told Page Mill that the investrnent of CaIPERS funds should nol result
in lhe invbluntary displacement of low income or work force households. Staff is
currently seeking legal advice on CaIPERS' rights under the partnership agreement, and
has asked to meet with Page Míll to reiterate our concerns.
The Page Mill rent increase and litígation has gengrated a lot of press, and a few calls to
. CaIPEFìS office of Public Atfairs. Public Affaírs has referred allcalts to the Real Estate
office. Staff has r¿)Òeaved a Publíc'Records Act request wtlffr trãs b";" i;ürded to
Legal for response.
Questions regarding these issues should be directed to Ted Eliopoulos at (g16) 7gS-
3647 and Pat Machr at (916) 795-38s0.
Russell Reed
Anne Stausboll
Pat Macht
Peler Mixon
94
PM-0968
' RE: P.age Mill - Discuss David Feldstein's concerns Page I of3
Langhi, Taryn
The meetiñg with Ruskin's office is scheduled for 3:00 p.m. on Wednesday. Who should I check with to see if Ted
or Joe are available?
Ted will return Wednesday. I am nol sure of Joe's schedule. Do we know when mtg will be? L
I think Ted or Joe should go to the lra Ruskin meeting.......l would like to go along as well. But we should have a
premeeting belorehand. .
PatrÍcia K. Macht
Assisfanf Ex ec utiv e Offi ce r
Office of Puhlic Affairs
p^q!.__ø_Asht.@qa-lryIS..c--a,!L-o-ÌL
91 6n95-3850; fax : 9 I 6/795'3507
PM-1001
' RE: Page Mill - Discuss David Feldstein's concerns Page2 of3
'.' Cc: Elíopoulos, Theodore; Pottle, Randy; Plasencia, Javier; Schlenker, Eric; Brand, Dulcíe D. ; Warren Otto ;
Moreno, Melanie
Sent; Fri Jun 05 14:34:04 2009
Subject: RE: Page Mill - Discuss David Feldstein's concerns
Hi Laurie - lra Ruskin's offrce called today and would like to schedule a meeling for next Wednesday. What is the
status of the response lhal is being prepared.
We will have a draft by Thursday that we will share with PaÌ Macht on Friday. L
cc: Weir, Laurie; Eliopoulog Theodore; Pottle, Randy; Dear, Joe; M¡xon, Peter; Plasencja, Javier
Laurie please work wíth Public Affairs ín preparíng a response. Pat your insight would be appreciated here.
Danny I concur with you that if we get called by Ruskín, it be only CaIPERS that meets with him. Laurle the
response should be one we could use for other members as well should any contact us.
Thanks for checking this out. Actually I know Member Ruskin and if we need to go talk to him, please be sure to
have me included. He used to work as a contractor for my office in his previous life. He is supportive of CaIPERS,
bul I can undersland why, unaided by what we know on lhe other side of the story, he would be concerned.
Patricia K. Macht
p?-t_naçbf@1c._e.lJ¿e.r_s-ça-,gpu
PM-1002
RE: Page Mill - Discuss David Feldstein's concerns Page 3 of3
cc: weir, Laurie; Eliopoulos, Theodore; potue, Randy; Dea¡, Joe; Mixon, peter; Macht paç plasencia, Javier
Tlhanks Ken -
lf,q¿ q chance to speak with David Felderstein and I think that we are gefling a head or ourselves a lilile bit. So
far he has only received one inquiry and it was from Assembly Member-RusÈ¡n's offíce. He wãnts us to
be
prepared in lhe event we get called into Ruskin's offìce and hê hopes we can make ¡t go away quie¡y.
He does
not recommend we visil Ruskin unless asked
According to David, Ruskin's office has heard the tenants side of lhe slory, so the purpose of calling us
is would
be to find out whether there is another side of the.story to delermine if lhé tenants tomplaints uãlid. My
knowledge of lhe issues is really limited to what I havé heard during public comment at the Board"r" meetinjé.
My recommendation is that.jn the ev_ent we get called into Ruskin's offìce that we be prepared to go in
there
alone. lt wouldn't hurt to talk to the GP with the goal of coming up with a response that Éoth CalpERS and the
Gp
is comfortable with. But I don't see-any advantag*e in bringing f-nu'ep with us'at this point becårre
the end of
the day if Ruskin feels lhe tenanls íssues are valid he hai nò real recourse against tile Gp. lnstead "t he is going to
want to know what can calPERS do to rectiry the situation or why is Ca|PERS involved in such as
investment.
- Danny
PM-1003
. Langhi, Taryn
From: Macht, Pat
Sent: Friday, February 20, 2009 2:14PM
To: McKinle¡ Clark; Pacheco, Brad
Gc: Weir, Laurie
Subject: Page Mill statement
The following statement should be used with any media who call about Page Mill until ffurther notice:
"CaIPERS has met with Page Mill, and varlous interest groups interested in this fund. We have expressed our concerns
about the ¡nvestment to Page Mill. ln addition, we have retained consultants to advise us on the issues raised. Our staff
wll continue to evaluale the situation."
*Pat Macht
PS. lf reporters continue to persist, you may invile them lo check back in 30 days.
Palrícía K; Macht
,Assisfanf Executive Officer
OffÌce of Publîc Affairs
pat m acht@calpers,ca.g-ov
91 6/Ì7 95-3 8 50 ; fax : - I 1 6ff 9&3507
PM-1010
Page I of3
Langhi, Taryn
Laurie,
March 5,2009
David Taran
ln reviewing our portfolio debt maturities, it has come to our attent¡on that the $242 million Wachovia
loan encumbering the property partially owned by Page Mill properties ll, Lp ("pwp ll,,) has a
$50
million pay down due August 1,,2009. As Sgs million of our $tOo m¡llion equity commitment to pMp ll
has been funded, we are concerned about the par:tnership's ability to meet this debt obligation.
We have seen nothing from you indicating how you intend to handle this debt payment and, given the
state of the credit markets, are concerned about the risks this debt maturity poses for our par-tnership
investment with you.
Could you please share with us your plans for handling this debt maturity and how this debt maturity
could impact our partnership's strategy?
Thank you,
Laurie Weir
P\A-1011
'From: Schlenker, Eric
Sent: Thursday, June 18, 2Oe9 3:24 pM
To: Macht, Pat
Cc: Pacheco, Brad; Weir, Laurie
Subject: RE: today's Fair Rent Coalition national press release re CaIPERS and Wells
Fargo
involvement in Page Míll properties ll
>Patricia K. Macht
>Assistant Executive Officer
>Office of PubLic Àffairs
>pat_machtGcalpers . ca . gov
>916/795-3850; fax: 91.6/'t95-35O7
---- -Original Message-----
From: Schlenker, Eric
Sent: Thursday, June IB, ZOO! 1:43 pM
To: Macht, Pat
Cc: Pacheco, Brad; Weir, Laurie
subjecL: FW: today's Fair RenL coarition national press reLease re calpERs and wells
invoLvement in page Mill properties II Fargo
FYI
PM-1015
The open letEer to caIPERs highlighted in the release can be founcl at:
..,http: / /www.epa-tenanLs.orglimages,iCalp¡Rsopenletter.pdf
BesE,
Chris
PM-1016
Page Mill Summary
June 1I,2009
CaIPERS is a limited partner investor in Page Mill Properties II, L.P. (the "Fund").
' $l l6 million of total committed equity in the Fund
' Managed and controlled by its general partner and the operating company Page Mill
Properties ("Page Mill'), which are both controlled by David Taran
r As a limited partner, CaIPERS has committed $100 million (86% of the roral equity); of
which $95 million has been funded to date.
' CaIPERS has limited rights and ability to control the operations of the Fund.
I Remaining l{Vo of equity is from high-net-woÍh individuals, the general partner and its
¿rffìliates.
' From 2006 to 2008, acquired a diverse portfolio of properties in East Palo AIto with
approximately 1,800 various residential units
' Upgrade the properties and boost revenues by increasing rents to the maximums allowed
under East Palo AIto's Rent Stabilization Ordinanee
In some cases, rent increases were dramatic resulting in:
o Vacancies and evictions
o Protests by tenants and other interested parties
' Page Mill also pursued litigation with the City and otlers regarding its ability to raise
rents.
The economic downtunr and credit crisis have also severely impacted the Fund's strategy and
fìnancial condition.
In light of the issues raised by the implementation of the Fund's investnlent strategy, CaIPERS
formed a dedjcated teanr of staff and consultants to regularly monitor and evaluate the Fund and
. identify steps required to make r¡,ell-infomed decisions on rhe invest¡nent. CaIPERS staffand
consultants have been:
' Meeting with Page MilJ to express CaIPERS concerns regarding the implementation of
the investtnent slrategy and the damage to the Fund associated with Page Mill's actions
' Meeting with intereste<.I parties including representatives of tenant organizations and
raising those concenls wjth Page Mill as warranted
. Monitoring and evaluating the Fund's perfonnance
PM-1017
I
Attacbments: PageMill.06.2009.ppt
E
PageM¡11.06.20O9.p
pt (61 KB)
Attached is a message box that we drafEed for E,he Board. Pretty shraight
forward. Let us know if t,his looks ok
-----Original Þfessage--- --
From: Schlenker, Eric
Sent: Thursday, June 18, 2009 3:24 PM
To: MachE, PaÈ
Cc: Pacheco, Brad,'Þ¡eir, IJaurie
Subject: RE: today's Fair RenE, CoaLiE.ion nac.ionaL press release re CaIPERS and l¡Jells Fargo
involvement in Page MiI1 ProperEies. If
Pa E,
>Patricia K. Macht.
>AssiscanÈ Execucive Of ficer
>Offi-ce of Public Affairs
>paE_machE @calpers. ca . gov
>976/795-3 850,' f ax: 976/195-3507
-----Original Message-----
From: Schlenker, Eric
SenL: Thursday, June 18, 2009 7:43 PM
To: Macht, PaL
Cc: Pacheco, Brad; hleir, Laurie
Subject; FW: today's Fair Rent CoaliLion national. press release re Ca1PERS ancl Wells Fargo
jnvolvement in Page Mill ProperE.ies II
FYT
PM-1019
Þ
-----Original Message-----
From: l¡teir, Laurie
SenE: Thursday, June 18, 2009 1:3g pM
To:'OtEo@sbfund.com',-'dulcie.brandGpiJ.lsburyÌaw.com, ; Schlenker, Eric; plasencj-a,
Javier; Eliopoulos,'Iheodore, poEE,Ìe, Randy
Subject: Fw: Loday's Fair RenÈ, Coalition national press reLease re CalPERS and lnlells Fargo
involvement in Page MiJ.I properE,ies II
Eric. Please forward on co paL macht and her team.
----- Original Message -----
From: Christopher Lund <cplund@9rmaiJ..com>
To: rubenxl@aol.com <rubenxrGaol.com>,'cromero-ezlnGyahoo.com <cromero_ezJ.n@yahoo-com>;
Lauramartj-nezforepa@gmail.com <lauramartinezfoiepaGgmail.com>; valerie
<varmenE,oGci tyofepa - or9> ; ralvarado@ci tyofepa - orq .ialvarado@cicyãiãp-. Àrmento
sfordGcityofepa.org_<sford@cicyofepa_orçr>i court..skinnerGgrnail.cãm o.gr,
<court'skinner@grmaí1-com>; christine'gasparacBdoj.ca.gov <chrisEine-gasparac@doj.ca.gov>;
Marsh, Ryan D- <rdmarshGbhlaw.com>; Re'Ànita Burns <reanitaGyouchuniÉeil-net>; charisse
domingo <cÌ¡arisse@youthunited.neE.>; marl4)iaGsbcgloba1 .nee <mårypiaesbcgroral
Alderson <woL framGcollectiveroots. org> i acohen@menlopark. org .lãohen@menlopark. ,net>,- !,rolfram
hgrobinson@menlopark-org <hgrobinson@menlopark.orgr;-c¡narrii""G;iay;;;pa.orç, org>;
<cmart.inez@cit,yofepa.orçt>; Clmthia-D'agosCã <c¡rntñia@greenfoothill-s-orgr;
rharrís@co-sanmateo.ca-us <rharris@co.sarlmat,eo--"".rrrt; kelly.morariu@cityofpaloalto-org
<kel1y-morariuGciryofpaJ-oarto.org>i Ray Lunny <rlunnyGco.sanmateo.ca.us>;
::abbi-mardergbecham.org <rabbi-marder@Èetham.org>; rabbi_altenberggbethãm-org
<rabbi-al lenbergGbeEham.org>; rachel-arnowGmaillhouse.gow <rachel .arnor,y@mail.house.gov>.,.
annagram@hr.house_ gov <arnagramGhr.house-gov>i Burns, Dennis
<dennis.burnsGcityofpal.oalÈo'org>,'dean@tenantstogeEher.org <deaneE.ena¡tstogether.org>;
.Andy Blue <andv@tenalr.scogecher.org>t Juliet arodie <JMBrodieglaw.stanford.edu>,-
j ksceinb@law. stanf o¡d . edu < j ksteinbBLaw. stanf ord. edu> Jeame
;
<JMerino@l-ah,.stanford.edu>,'ndaro@sÈanford.edu <ndaro@stanford.edu>; Merino
<candiceGclsepa.org>,- victor Ramirez-<victorGcJ.sepa-org>; ilon Frohnmayer candice Greenberg
:shuayt. oGs tanf ord . edu <rshuayLoes tanf ord . edu> ; j f powersGstan f ord . edu
<jongcrsepa-org>;
<jfpowersGscanford-edu>,'wtp@stanford.edu <wtp@ãE.anford.edu>; lbuen61aw.sEanford.edu
<lbuenGlaw-st.anford-edu>; Vrreir, Laurie; pacheão, Brad; McKiniey, ClaiÈ;
info@midpen-housÍng.org <infoGmidpen-housing-org>; info@bridgehousing-comKane, Sue,.
<infoGbridgehousing.com>; Daniel pinna <dpiãna@ãopydox.com>; Lesia presEon
<lesiaGehpcares - org>i Mindy Gatoob <mindy@craigsri-stfoundacion org>
- ;
elmer.melgar@bankofameri.ca.com <elmer.melgarGbãnkofamerica.com>; ãaeden.koenigGgrmail.com
<caeden'koenigGgmail'com>; Yana Ernrny Hoy <ehoy@sEanford.edu>; Marnie
<marni ellmn . man aba E@f edex . com> ; nidef avega @ravãn swood . k1 2 . ca . us iyn' uo"o' ManabaE
<mdelavegaeravênswood.kL2.ca-us>i olgaGravenswood-k12-ca.us <oJ.ga@ravenswood-k12.ca.us>;
renae-owensGesa.sccgov.org <renae.owens@esa.sccg,ov.org>; dbaitey@samcera.org
<dbaileyGsarncera.org>; dorntaxGpacbeLl.neE, <dorntðxgpacbell.neci; bnaudnaud@ao1com
<bnaudnaudeaot.com>; vesB597@hormail.com <vesB597@holmail-com>; w¡rosi"liJ;à:;å;-""'
<wbltGsÈ,anford.edu>; bob allen <roberEallen3@gmail.com>; lrlallOmanoaolcom
<hlalloman@aol'com>; wleeGcityofepa.org <w1ee@cityofepa.org>; peter.hartnect.@asm.ca.gov
<peter.hartnetLGasm_ca,gov>,. blowell@smchousing.orq.¡fowã11B^smchousirt.orgr;
dbay@smchousing.org <dbay@smchousing-org>; rmarcherBco.sanmaE.eo.ca_us
<rmarcherGco'sanmateo,ca.us>,'aarmsby@co.sanmateo.ca.us <aarmsby@co.sanmaE.eo-ca.us>;
al'bert'sheldenGdoj'ca-gov <albert'shelden@doj.ca.gov>; ylahn@yaËoo.com <yj-ahn6yahoo.com>;
Lewyêuhab-org <LevyGuhab.org>; susan.saylor@àfeh.ãa.gov <susan.saylorqdfeh.ca-gov>,.
çrrichaneGhì,csmc-org <grichaneGhr.csmc.org>,-sgibsonGlãgar"i¿sÃc.;;á---'
<sgibsonGlegalaidsmc.org>; Laura-cacho@edar-ãorn <Laura.cacho@eda"l.o¡¡r,
I{ilary-Pearson€boxer.senaEe-gov <Hilary-Pearson@boxer.senate.gov>; venLure¡ape6li.,,e.com
<venturetape@live-com>; goroGcdi-usa.org <goroGcdi-usa.orgr>; amy@tandn.org
<amyGtandn.a¡.g>: twatersGcssny.org <twatersGcssny.org>; .minnehän@wclp.org
<cminnehanGwcJ-p-or9>; rrothschirdGwclp.org <rrotñschitder¿cLp.org>;
rr,ãr.anevrclp.org
<rnev¡mancwclp-org>; qfgarcialGyahoo.com <gfgarciaLGyahoo.com>; burns.edwardgsbcglobal.net
<burns'edwardGsbcglobal-neE>; brian.perkj.nsGmail.house.gov <brian.perkinsgmair.house.gov>,.
Americanvoices@mail-house.gov <ÀmericanVoicesGmail.house.gov>,. johngsco.ca.gov
<j ohn@sco . ca . gov> i governor@governor . ca . gov <governor.gorrãr'or .
ãu. gorr, ;
?nator. sl.mit.ianGsen.ca. gov <senauor. simitian@sen. ca. gov> ;
:heduling-feinstein@mail.house-gov <scheduling.ÍeinsLein@mail.house.gov>,.
senat or@boxer. senat e - gov <senator@boxer . senate. gov> ; s f . nancyGmail . hoise. gov
<sf -nancy0mail .house.gov>,. scheduler.pelosi@maii -house.gov
< scheduler - pelosi@mai 1 . house . gov>
; Michael . beardGmai 1 . hãuse. gov
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Plvl-1021
From: Marzion, Ken
Sent: Tuesday, June 09, 2O09 2:ZZ pM
To: Weir, Laurie; Slausboll, Anne; Dear, Joe
Cc: Elíopoulos, Theodore; Pottle, Randy
Subject: RE: Page Mill - evictions
Considering the sensitivity around this subject, I think we need something tomorrow for
the Board. Can one of the
attorneys drafl something that you can edit?
Hi AII,
we have scheduled an urgent Page Mill today at 4:00. That said, we are focusing our efforts on preparalion
the RCP meetings tomorrow mor.ning and1e-eüng
aftern-oon año psc presentation next week. lt riould be very helpful
for
deliver to this group the Page Mill mémo updatíng the lnvestment Committee later thís -- if we could
,""L .
Please advise if that is ok with the group.
Hi All - Will you please pul together a memo to the Board on this, for distribution
tomorrow. Thanks. Anne
ANNE STAUSBOLL
Chief Executive Officer
CaIPERS Executive Office
Lincoln Plaza North
400 Q Street, Room 3340
Sacramento, CA 9581 1
Phone: 91 6-795-3825
Fax: 91 6-795-341 0
Plvl-1024
Erika Wilhehn, a 3l -year-old Hewlett-Packard employee who lives in a three-becl¡oom rental
home at I 909
Cooley Ave-, said she also ¡eceived the notice WeAnáAuy.
V/ilhelm said she and her boyfriencl, a Stanford Ph.D. studenl, and two other roommates were
still in shock and
contemplating what to do. :
"Vy'e're looking on Craigslist right now some of the Palo Alto three-bedrooms rre like $6,000,,, Wilhelm said.
-
The Sroup pays $2,550 for its house and enjoys biking to work and school fronl the convenient
location.
Wilhelm questioned whether Page Mill singled out the household after she made several complaints
about
repairs and her boyfriend was named in coun documents involving a class-action lawsuit against
the landlord.
"We have never been late," she said. "We always pay.n
Eric Coffinan, who lives in a one-bedroom cottage at l9l I Cooley rvith his partner, said he feels
certain he was
targeted because of his involvement in tenant protests and the lawsuit. "They're taryeting
a lot of people,,, said
Coffrnan, 35. 'lThey've purchased way too many properties. They honestly don't knãw what they'ie
dåíng.,,
Coffman said ìe never paid the rent late in the nearly nine years he has lived in the home.
Lunddeclinedtocommentextensivelyonhisplansbutsaid''thenoticestheysentoutspeakforthemselves.
"Givelt that there are individuals in some of these units who have been involved in tenants,rights advocacy,
- think the selectiorl of these units is interesting," he said.
I
Page Mill and the city of East Palo AIto are currently involved in about l0 lawsuits over rent hikes and other
ssues.
Much of the dispute centers on whether Page Mill correctly raised rents to match the legal maximum
that
appeared on certificates kept by the city. In many instances, those amounts were
hundreds of dollars more than
what tenants were aclually payrng rvhe:r the company bought more than 1,700 units in
the city of 32,000.
Randy M. Pottle
Senior Portfolio Manager - Real Estate - CalpERS
LPE, 400 e Str, #E4800, Sacramento, Ca 9SB,l4
Direct Ph: 916 795-2941, Ceil: 916 T69-9715
Email: randyjottle@calpers.ca.gov
PM-1025
Page I of2
Langhi, Taryn
From: WarrenOtto[Olto@sbfund-com]
Sent: WednesdaY, March 04, 2009 5:33 AM
To: Weir, Laurie
Subject: RE: UPdate
The proposal I'm referring to is the mediation concept we discussed last Friday, where Page Mill would agree to
suspend all rent increases and engage in mediatíon with EPA and the tenant's groups. I believe this concept ís
embedded in one of the strategic allernatives our task group reviewed at our last meeting and w¡ll be reflected as
an option in the proposal being wr¡tten up by Dulcie for our group's review this Thursday- I discussed th¡s concept
wilh Dulcie late yesterday afternoon and she does believe it is one of the alternatives conlemplated in the
document she is preparing.
I mentíoned it in my Update email, as lwant everyone to know thatwe regard Page Mill as a top.priority, and this
alternative could be implemented immediately (subject to working out the delails with Page Mill) and would
alleviate lhe pressure staff and the Board are under from EPA and the lenant's groups, and doesn't compromise
any of our other alternatives. I certainly didn't rnean lo 'put you on the spot," ¡f that-ís what my email did, but at
the time I wrote the email I hadn't discussed thís alternative with anyone other than you, so thal is why I said that I
had "a proposal in to" you. I look fonvard to fully vetting this idea with our task force tomorrow, and welcome any
other thoughts or queslions you may have on Page Mill in the meantime.
Hí Warren,
I am a little concerned that you indicate that you have a proposal to me on Page Mill. I assume that you are
refering to the proposal forthcoming from Stqckbridge and Pillsbury this Thursday. Let me know if I have missed
' something along lhe way-
Thanks L
ffiffiffiÆffirffiffi
PM-1034
Page2 oî2
ffiffiffi&ffigffiffi
PM-1035
Page 1 ofl
Langhi, Taryn
From: WanenOtto[Otto@sbfund.com]
Sent: Frìday, March 20, 2009 6:37 AM
To: Doug Sturiale; Josh Callahan
Gc: 'Leiva, Bill';'Shore, Jim'
Subject: Page Míll
Doug, I spoke with Bill Leiva and Jlm Shore of Page Mill yesterday, and they are prepared to work with us to
develop a new budget for 2009 which would include two months of actual results (Jan. & Feb.), estimate March,
and then forecast the remaÍnder of the year using new assumptions about leasing and occupancy levels.. They
will also provide us with an updated rent roll.
I have also asked them for their most recent estimale of market rent for all units. Given lhe large number of
vacant units (390+ a couple of weeks ago), it's critical that they meel currenl market rent levels to fill their
vacancies. Wth a new leasing director on board as of March 1sr, whose success depends on leasing, loday's
estimale of market rents may be somewhat different from lhose we first received. We need lo understand how
concessions are being used in lhe market, and how long we expecl these concessions to last. Are they only
needed for new leases, or are'they also being offered on renewals?
This budget should include capital expenditures for the year. l'm sure there are several projects which Page Mill
would like to undertake bul wíll not have the cash to fund, so we need to identify those projecls which are critical
to leasing or safety and break those out from projects which can be delayed.
Bill Leiva is expectÍng a call from you to schedule a working session when he can provide you with a new budget,
rent roll, and market rent levels. Russ, who runs the property management operation, will probably join you to
explain the operatíng costs of the budget. You should also get some time with lhe new marketing director, as
lease-up assumptions should be driven by what she thinks she can do leasing up the vacancies and minímizing
turnover.
l'll be in the Bay Area for several days next week, and may join you if I have the time, but don't wait on me to
schedule a meeting with Page Mill. We need to have this meeting and develop this new budget as soon as we
possibly can. lwould like to present CaIPERS with our underwriting and financial analysis no later than Aprìl 15th,
so we need a good 2009 budget by lhe end of March. Bill Leiva's direcl phone number is 650 833-3818. Thanks-
PM-1036
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CONFIDENTIAL
lñvestmeiìt Offlce
P.O. Box 2749
Sacramenlo, CA 95812-27 49
(e'!6) 795;3647
FAX (9'r6) 7s5-3965
Telocommunications Device for the Deaf - (916) 795-3240
Date: December 2,2008
ln January of th¡s year, slaff provided the lnvestment Committee wilh a memo that
outlined GaIPERS investment partnership with Page Mill Properties Fund ll (please see
memo atlached). The memo bummarized rent increases, litigation between Page Mill
and the City of East Palo Alto, and crílical press resulting from the inveslment strategy.
The purpose of this memo is to update the lnvestment Committee on recent events
relating to Page Mill.
BACKGROUND
ln 2006 CaIPERS Real Eslate entered into an investment partnership committing $100
million to Page Mill Properties ll, L.P. Page Míll has amassed almosl 100 existing
apartment buíldings in East Palo Alto aggregating over 1,800 units housing over 6,000
residents. Page Mill embarked on a building rehabilitatíon program, íncluding new roofs,
seismic upgrades, and improvement to comrnon areas and landscape.
Page Millhas come under criticism for raising rents on tenants who are primarily low
income and working families. Community leaders have expressed concern that Page
Mill's strategy may include replacing sorne of the lasl avaílable affordable housing wilh
more expensive housing stock.
PM-1041
Attachment
Staff has maintained open communication with Page Mill and all interesled parties. ln
August of this year staff met with Tenanls Together and tenants from the apartments to
hear their comments and concerns. The tenants related issues including hÍgh rent
increases, lack of timely responses to requesls for maintenance and repairs, and injuries
that have occurred resulling from lack of appropriate maintenance. They provided staff a
booklet titled Homeless Now that oullines renl increases and habitability issues.
Over the past three months, staff has had severalconversations with a tenant who
appears to be a Stanford law student that is involved with the Stanford Community Law
Clinic. He informed staff that there are CaIPERS system members living in some of lhe
Page Mill apartment unils. Ho also stated thât thê Law Clinic ís dratting a letter to
CaIPEBS waming against predatory investment practices. The letter is based on a New
York City Comptroller letler to investors regarding lhe Peter Cooper Vílláge projecl in
New York C¡ty (as you are aware, CaIPERS is an investor in the Peter Cooper project
through our parlnership with Blackrock). The Law Cliníc expects lhe letter will be signed
by Congresswornan Anna G. Eshoo, of California's 14th Congressional Dislrict, They
hope Ìhe letter will also be signed by Senators Boxer and Feinstein, and other local
elected olficials such as the Mayor of East Palo Alto. The letter will most likely be
addressed to Board Presídent Rob Feckner and lnveslment Committee Chair George
Diehr.
On August 18, 2008 Real Estate staff presented the Strategic Plan lmplementat¡on
Update to the lnvestment Committee in closed session. The Update included staff's
identification of Page Mill as a non-strategic Urban Program partnership that is identilíed
for evaluation. The agenda item noted inveslment parlners to act as consultanl advísors
to assist statf with this process. Subsequently, staff has retained the services of
Stockbridge as consullant, and Pillsbury Winlhrop as outside legalcounselfor Page Mill.
The consultant and counselwill advise staff on CaIPERS' rights under the parlnership
agreement.
Starting in November 2008, staff has spoken several times with representatives from
SEIU that state that their members are tenants in Page Millowned properties. SEIU
íntends to parlícipate in efforts to raise awareness of tenant ríghts and demands. SEIU
noles that this effort wíll be coordinated around the holiday season.
91
Plvl-1042
Attachment
The other Page Mill ínvestors consist of a parallelfund that is a group of high net worth
individuals. Staff has spoken with severalof these inveslors, each of which has
expressed support for Page Mill's strategy.
On several occasions, mindfulof CaIPERS rofe as limited partner, staff has spoken with
and conveyed concern and disappointmenl lo Page Millfor their recent actions. Notably,
stafl has told Page Mill that the investment of CaIPEBS funds are not intended to resutt
in the involuntary displacement of low Íncome or workforce households. Page Mill
conlends that they have done nothing inappropriate, all of their aclions are legal, and
their investment strategy is performing as anticipated.
ln conclusion, staff has met with and heard the concerns from interested parties. Staff
has hired consullants for evaluation and recommendation of the Page Mill investment
partnership. Staff continues to work closely w¡th the Legal and Communicalions offices
on the Page Mill matter. Staff will keep the lnvestment Committee informed as aclions
are taken relating to the Page Mill investment partnership.
Questions regarding these issues should be directed to Ted Eliopoulos atl9tO¡ ZSS-
3647. )
Anne Stausboll
Pat Macht
-@ Peter Mixon
92
PM-1043
,Attachmenf
CONFIDENTIAL
lnvestrnent Otllce
P.O.Box2749
Sacramento, CA 9581 2-27 49
(9:16) 79S3647 :
ln January and December 2008, slaff províded the lnvestment Committee wilh
memoranda (attached) that outlined CaIPEBS investment partnership with Page Mill
Properties Fund ll, surnmarízed rent increases, outlined litigation between eagb Mi¡ and
the Cíty of East Palo Alto, and criticalpress resulting from the investment strategy. Staff
has reported on Page Mill issues to the lnveslment Gommittee in closed session, and the
Committee has heard public cornment from East Palo Alto Mayor Rubin Abrica, Tenant's
Together, and Page Mill tenant Chris Lund. The purpose of this memo is to update the
lnvestmenl Committee on lhe process that slaff has established to address th'e issues
relating lo Page Mill.
Staff has formed a leam lead by Real Estate Unit (BEU) Portfolio Manager Laurie Weír.
The team includes FìEU consultant Warren Otto of Stockbridge, Javier Plasencia from
the Legal Unit, DulcÍe Brand as external legal counsel from Pillsbury Winlhrop, and Clark
McKinley from Public Affairs. The team will be meel¡ng regularly to discuss progress and
strategy relaling to Page Mill. Thus far, the process has accomplished the following:
. ln August 2008, stafl met with Tenant's Togelher to discuss their concerns.
PM-1044
Attachment
Page Mill Fund ll
February 1'1, 2009
Page 2
ln December 2008, staff with consultant Stockbridge met with executives of Page
Mill to relay sígnificant concerns regarding the investrnent strategy. Page Mill
agreed to respond in writing to the allegations made against them by lsnants and
local governme nt off icials.
REU has retained the legalcounselof Pillsbury Winthrop. Allorney Dulcie Brand
is currently reviewing legalallernatives available to CaIPERS under the contracl
documents.
On February 10, 2009 staff received the wrilten responsê from Page Millto the
allegations made by the tenanls and local government officials. That document
has been fonn¡arded out to the team for review and comment.
Stockbridge and Pillsbury are currently working to craft strategic alternalives for
the CaIPERS in connection with its investmerit in Page Mill. Such alternatives
must take into account the complicaling faclor that there are other limiled partners
in the fund that ímpact GaIPERS options.
. Slalf and the team willwork closely with corisultants to review the information
provided, the alternatives available to CaIPERS and the risks associated with
those alternatives to develop the best course of action for CaIPERS wíth respect
lo the Page Mill invastment.
Staff will keep the lnvestment Committee informed as events relating to Page Mill move
forward. Questions regarding these issues should be directed to Ted Eliopoulos at (916)
795-3647_
B9
PM-1045
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.1:il
CONFIDENTIAL
lnvestment Ofllce
P.O. Box2749
Säcram ento, C A 95812-27 49
(916) 795-3647
FAX (916) 7ss-3s65
Telecomrnunicalions Device for lhe Deaf - (9J6) 795-3240
Date: February 24,2OAg
The pu¡pose of lh¡s memo is to provide a further update lo our príor merno dated'
February 12,2009 on staff activílies regarding the Page Mill investment fund. Staff and
consultanls are working diligently to develop a resolution of the íssues surrounding Page
Mill. We view this as a hígh priority, and we are moving forward wilh all possíble speed.
CaIPERS'ínveslment in Page Mill is via a límited partnership. Our altematives are
limited by our limited partner status with other limíted partners in the fund. Consequently
CaIPEBS does not control the fund. Unless we can reach a negotiated resull, Page Mill
is likely to litigate, and other limited partners may litigate, regardless of the slrategy stafl
chooses to pursue. Staff intends to update the lnvestment Committee on our proposed
actions in closed sessíon on April 20,2ÐO9.
There are nurnerous interest groups pressíng lheir concerns regarding Page Míll. Staff
understands thal lnvestment Committee members have been and are likely lo be
contacted with questions on Page Míll. Public Atfairs staff has drafted a communication
plan for Page Mill. Stafl will present that plan to the lnvestmenl Committee as a part of
the update in Aprí|. ln the inlerim, please conlact Ted Eliopoulos with any questions that
you have regarding lhis investment at (916) 795-3647.
PM-1046
PRESENTATION: UPDATE ON PAGE MILL PROPERTIES II
external legal counsel on the team. Staff also works ciosely with
PCA on decisions related to the Page Mill investment.
PM.1OB7
Staff anticipates that discussions with Page Milt will commence
coming months. The purpose of the discussions will be to
determine Page Mill's willingness to revise their investment
strategy to address CaIPERS financial concerns and issues raised
by the community. If these discussions are not fruitful, it is likely
that the decision will be made to remove the general partner. If
amicable separation is not possible, staff will initiate the process to
REÐACTEÐ
-,ffiffiffiffiffffi
PM-1088
L"nghi, Turyn . _, .
.
,_
From: Stausboll, Anne
Sent: Tuesday, March 02, 2Q't012:3T pM
To: Weir, Laurie
Cc: Dear, Joe; Brown, Dann¡4 Macht, Pat
Subfect: RE: Page Mill
Thanks for the update. lf this is public, Danny should let the author of the new divestrnent bill (the one on predatory
lending) knowasap. Thanks, Anne
Hi Everyone,
All Page Mill units were sold at auctlon today. Wachovia was only bidder at approx S0% purchase price. We no longer
own Page Mill assets.
Eric, please schedule meeting for the Page Mill dedicated team- One hour, with call ín info. (Vickie is out today and
tomorrow, but Crystal can help).
On the call we need to discuss winding down partnership activities, final audit (?), accounting, public comment, memo to
Board, and any other action items.
Thanks everyone.
916-195-9428 pltone
916-795-3965 fax
Vîsit our \ryebsite: htto//wvw.calperscovemance-oro/
Follcw us on Twiiter: htto://twitter.com/Ca|PERS ffiffiffi&ffirffiffi
.B_ecoT9 a
Fan on Facebook: htto//facebook-com/mvcalpERS
Mew r/ideos on YouTuba: http://voutube.com/CatpERgñetwolk
^$Þ"
}IPLRS
Pl\A-1212
From: McKinley, Clark
Sent: Thursda¡ December 20,2007 8:40 AM
To: Weir, Laurie
Subject: SJ Bus Journal & our partner
Laurie,
Eileen Goodwin iust confirmed that she will call the reporter on behalf of our partner. She will give her the messages for
"the other side of the story' that we discussed. However, Eileen says this reporter may very well dísregard the fadts and
slant the story as she has done in the past. She also said the reporter may come back to CaIPERS for comment.
I've already told the Business Journal our preference lo have partners discuss their activities directly. l've thoughl about
adding the followÍng, lf pressed:
"CaIPERS has spoken with our partner. We are satísfÍed that our partner is complying with the law and following sound
business practices.'
Please advise with any comment about this stalement. lf there's any problem with it, you can suggest other language or we
can simply decline comment, deferríng to our partner - as we typically do in such case.
Clark McKinley
lnformation Officer
CaIPERS Office of Public.Affairs
91 6/795-41 96; fax: 91 61195-3507
Pf\A-1225
From: McKinley, Clark
Sent: Friday, December 28,2007 1:26 PM
To: Macht, Pat
Gc: Eliopoulos, Theodore; Weir, Laurie; Pacheco, Brad
Subject: CaIPERS, Page Mill & East Palo Alto: Biz Joumal
Pat,
Attached is the Silicon Valley/San Jose Business Journal story of Dec. 28th on activities of Page Mill real estate in East
Palo Alto. lt was sent to us by Lance lgnon (Lance_lgnon@sitrick-com; 415-388-8525), who's handling the rnedia on thls
issue for Page Mill's David Taran. From Page Mill's standpoint, lgnon says the story is factually accuráe and reasonably
balanced - although its not something we would have inítíated in the media. lt's a follow-up loprevious stories in the Sãn
Jose Merctrry News and other media that didn't mention the CaIPERS connection. CaIPEFiS is the new angle here, but
there's also a fairly thorough account of the issue of improving low-rent property.
lgnon believes Business Jog'nal competitors may try to follow up this story, which may work well for us. He sa1æ crime
statistics are down for East Palo Alto, and one can,make a strong case thât Page Mill actions were a fáctor in íhat. The
críme reduction impact of property improvements míght be a good lead angle for following stories to the Journal's piece.
Meanwhile, the City Council could act on the rent issue as early as January 3rd.
It appears there is nothing furlher for CaIPERS to do with this issue. I don't think we would get any traction by vriting a
letter to the Journal editor - unless there is some serious error in its story. Othérwise, calling atteirtion to the issue úouldn't
serye us, I believe.
ffiiEt
r==l
CaIPERS backs
Page Mill plan.d...
Clark McKinley
tnformation Officer
CaIPERS Offlce of Fublic Affairs
91 6/79S41 96; fax: 91 6/795-3507
Dec.28,2OO7
Prvl-1226
"rom: Macht, Pat
,êlìtl Tuesday, Februaryl7, 2oO92:17 PM
To: Weir, Laurie
Subject: RE; EPA housing crisis - Page Mill Properties
please CeIl hi¡n to remove our 1ogo. IE is copyright.ed a¡d r¡te are concerned Ehat viewers
will think Ehis is a communication from us- Thanks,---Original Message-----
From: V'Jeir, Laurie
SenE: Tuesday, February tT, 2009 2:15 PM
To: ftarren otto,' Brand, Dulcie D.
èc: nliopoulos, Theodore; Pottle, Randy; Plasencia, 'Javier; Schlenker, Eric; Macht, Pat
Subjects: F1¡1: EPÀ housing crisis - Page Mi]l ProperÈies
I am forwardíng FyI. I noEe the long addressee fist, and others from CaIPERS including
Sue Kane, and Brad and Ctark from Pat's staff
Where- are \^¡e with the confidenciality agreemenE?
Thanks r.
Pl\tl-1237
From: Kane, Sue
Sent: Friday, February20,2009 12:37 PM
To: Macht, Pat McKinley, Clark
Cc: Weir, Laurie
Subject: RE: Chris Lund: E. Falo Alto activist inquíry
Hi Pa¿lC1ark/Laurie -- I will respond to Chris Lund's e-mail (he already has mÍne anyway)
and will forward my response so you know what I have said.
-----Original Message-- ---
From: Macht, Pat
SenL: Friday, Februaty 20' 2009 l-2:34 PM
lo: McKinleY, Clark
Cc: Ialeir, Laurie; Kane, Sue
Subject: RE: Chris Lr¡nd: E' Palo Alto activist ]-nqurry
I an concerned that Chris is calling loLs of different people here. I don't thínk C1ark
you should rgply unless Laurie or Sue wishes us Eo get involved- Lau¡ie and Sue will work
ãut how to handle. ff he emails again, who should we refer him to?
>Patricia K. Macht
>ÀssístanE Executive Officer
>Of fice of .zub1ic Àf faÍrs
>par.-machLGcalPers . ca. gov
>916/795-3850; fax: 9L6/795-j507
-----originaÌ Message-- -- -
'rom: McKinleY, Clark
Sent: Friday, February 20, 2OO9 12:24 PYI
To: Macht. Pat
Cc: üleir, Laurie; Kane, Sue
SubjecE: Chris I,und: E. Palo À1to activist inquiry
PaÈ,
Here's the latest from Chris Lund, who hrants Eo know if Rob Feckner goE his last e-mail-.
reca11 from the Last IC meeting thaE Board members wanE. Eo be spared lobbyingr by various
parEies
Any suggest.ions for whaE I should tell him?
Clark McKinleY
Information Officer
CaIPERS Office of Public Affairs
916 /195-4t96; fax: 9L6/795-35O'7
rii Clark,
Sue Kane has yet to confirm forwarding my email (sent Eo Sue earlier chis week per your
instructions) to the CaIPERS board. can you follow up on Lhis for me?
Thanks,
lhris
PM-1238
)
Page I of5
..!
Langhi, Taryn
From: Elíopoulos,Theodore
Sent: Sunday, September 20,2OOg 2:53 PM
To: Potlle, Randy
Cc: Weir, Laurie
Subject: Fw: Page Mill
Hi Ted,
You seemed very concemed about why the Page Mill properties were included to be appraised on the
6/30 update scheduie, so I wanted to follow up with you to let you know I was not info¡med to omit
them. Quite honcstly, I worked closeJy with Eric on the assignment and kept Laurie, and legal apprised
. as the appraisals went final.
I am attaching a chain of correspondence for your review. Rest assurred they will not be appraised this
coming cycle.
Let ¡¡e knorv if you have any questions and I rvill be happy to respond.
Thanks,
Dan
6Dt2n1n
PM-1239
Page 2 of5
Nadine Gallegos, Accounting manager with Page Mill properties would like to receive the lìnel Page Mill appraisal
so she can input the values into REPIMS. The Reconcilíation team would like to have those values entered into
the system to meet theír fìnancial reporting requirement. Although Page Mill may be filing bankruptcy, the values
may serve beneficial in the long run.
I will let the recon team know what you and legal decide. I am Ímpartial to the outcome and I will send you a
separate spreadsheel with all the Urban values as of 6-30 as soon as possible.
Dan,
That is good news. Hold off for now on forwarding a copy to them I'm not sure they want one. I'll ask our counsel
for their input. Thank you very much.
Eric
Hi Eric,
The Page Míll fìnal appraisals will be ín this week. Do we need to send a copy lo Page Mill?
Thanks,
Dan
Dan,
Do you know when we will have the "fìnal" appraisal? See guestion below from our outside counsel. Thanks.
Eric
É,n rrrl.t ñ
PM-1240
Page 3 of5
RHffi&ffiTE.ffi
Regards,
Elizabeth Ceballos
Page l\fill Properties, LLC
+80 Couper Si. zn¿ iÌoor
Paìo Alto, Ca9430l
650-833-3857 Direct
650-833-3957 Fax
eccba llos@pagemil l.conr
Ã,1111n1n
PM-1241
Page 4 of5
Dan,
with the.managlfi.gtifv.lng-i1?T.3^f the appraisal
our attorney on Page Mill ll is looking for any conespondence senr rhem notifying rhem of such? I don't see
Drocess. Do you t or óuri,mãñ right nave
"u" "nv*inõih;i-ñ foider under Page Mill ll. rhanks.
äîffiî ¡íir,ä"rîäidJ ãi¡í"ãpîr"ir"i
"orr""ponãànce
Eric
ffiËHþ&ffirKffi
lauríe,
Pl{t-1242
Page 5 of5
Attached is the Page Mill Properties II, L.P. (the "Fund) pclf.
l'4tc)¡elpl"lateo
CaIPERS Investments
Global Real Estate
4O0 QStreet, Suite E4800
Sacramento, CÀ 95814
Michele-Mateo@calpers.ca. gov
Tel:916.795.9428
Fax:976.795.3965
Ñb"
CâIPERS
* Intemal Revenue Service regulations generally provide that, for the purpose of avoiding federal tax
penalties, a taxpayer may rely only on formal written advice meeting specific requirements. Any tax
advice in this message does not meet those requirements. Accordingly, ffiy such tax advice was not
intended or wrjtten to be used, and it cannot be used, for the purpose of avoiding federal tax penalties
that may be imposed on you or for the purpose of promoting, marketing or reconunending to another
parry any tax-related matters.
: ========--==================================================
PM-1243
Page I of5
Langhi, Taryn
T, got it. R
Randy M- Pottle
SPM - REAI ESTAIC - CAIPERS
LPE, 400 Q Str, #E4800
Sacramento, GA 95814
P: 916 795-2941, M: 916 769-9715
E: randyjottle@ca lpers.ca.gov
Hi Ted,
You sesmed very concerned about why the Page Mill properties were included to be appraised on the
6/30 update schedule, so I wanted to follow up wìth you to let you know I was not informed to omit
them. Quite honestly,I worked closely with Eric on the assignment and kept Laurie, and legal apprised
as thc appraisals went final.
I aln attaching a chain of correspondence for your review. Rest assurred they will not be appraised this
coming cycle. ¡
Let me know if you have any questions and I will be happy to respond.
Thanks,
Dan
Ptvt-1244
Page2 of 5
Nadine Gallegos, Accounling manager with Page Mill properties would like to receive the fìnal Page Milt appraisal
so she can ¡nput the values into REPIMS. The Reconcillation team would like to have those values enlered lnto
the system to meet their linancial reporting requirement. Although Page Mill may be filing bankruptcy, the values
may serve beneficial in the long run.
I will let the recon team know what you and legal decide. I am impartial to the outcome and I will send you a
separate spreadsheet with all the Urban values as of 6-30 as soon as possible.
Dan,
That is good news. Hold oft for now on forwarding a copy to them l'm not sure they want one. I'll ask our counsel
for their input. Thank you very much.
Eric
Plvl-1245
Page 3 of5
HiEric,
The Page Mill fìnal appraisals will be ín this week. Do we need lo send a copy to page Mill?
Thanks,
'
Dan
Dan,
Do you know when we will have the'final" appraisal? See question below from our outsfde counsel. Thanks.
Eric
RHffi&&rË[3
PM-1246
Page 4 of5
Regards,
Elizabeth Ceballos
Page Mill Properties, LLC
480 Cowpcr St. Znd Floor
PaIo Alto, Ca9430l
650-833-3857 Direct
650-833-3957 Fax
eceballos@pa gemill.com
Dan,
. Our attorney on Page Mill ll is looking for any correspondence with the manager notifying them of the appraisal
process. Do you have anything that you or Cushman might have sent theri notifying them of such? I don't see
anything in the shared drive appraisal correspondence folder under Page Mill ll. Thanks.
Eric
PM-1247
Page 5 of5
Email : dulcie.brand@pillsburylaw.com
From : Weir, Lau rie fma ilto: Lau rie-Weir@Ca lPERS.ca' gov]
ænt: Friday, MaY 08, 2009 3:02 PM
To: Warren Otto; Brand, Dulcie D.; Schlenker, Eric
Cc: Allan Emkin; Eliopoulos, Theoãore; Pottlg, Randy; Macht, Pat; Plasencia, Javier
SubJect: FW: Page MlllPDF
Forgive me if I already forwarded this one to you' They come in via email, overnight, fax' etc' L
lltutie,
Attached is the Page tuIill Properties II, L.P- (the "Fund) pdf'
ì4írlwl.etl4øtea
CaIPERS fnvestments
Global Real Estate
400 QStreet, Suite E4800
Sacramento, CÀ 95814
Michele-Mateo@calpers.ca.gov
Tel:916.795,9428
Fax: 916.795.3965
Ãþ"
C¿IPF.RS
* Intemal Revenue Service regulations generally provide that, for the purpose of avoiding federal tax
penalties, a taxpayer may rely only on formal written advice meeting specific requirements. Any tax
ädui"" in this meisage dôes not meet those requirements. AccordinglY, anY such tax advice was not
intended or written tó be used, and it cannot be used, for the purpose of avoiding federal tax penalties
that may be imposed on you or for the purpose of promoting, marketing or recornmending to another
p^rly any tax-related matteß'
=========================================
Ptvt-1248
Page I of2
Langhi, Taryn
Clark McKinley
Information Officer
CaIPERS Oflicc of Public Affairs
91 6t 7 9 5- 419 6; Iax: 9 I 617 9 5-3507
Hi Brad,
I'm doinga post on the dispute between East Palo Alto and Page Mill Properties and would like to
check some things.
Page Mill:
--The tenant activists say Page Mill has only received S70 million from CaIPERS. They are calling on
CaIPERS to withhold the rest of the $100 million originally planned. Are they correct that $30
million has not yet been delivered to Page IVIill?
--When Mayor Abrica and the EPA delegation spoke to the CaIPERS board last month, Ted Eliopoulos
said a consultant has been hircd to evaluate the situation. Has the consultant issued a report?
--The board members said CaIPERS has limited options because of contractual obligations. IIas
CaIPERS taken any action in response to the complaints and the EPA cify council's request that
CaIPERS withdraw the $100 million from Page Mill?
The Towers
-ln addition, ryhat's the status of The Towers project in Sacramento tl¡at CaIPERS purchased
from Saca? A news release in June 2007 said CIM would focus on developing a new plan for the site
over the next l8 months.
Ed Mendel
927-85s9
6t112010
Pf\A-1267
Page2 ofZ
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PM-1268
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Prú-1277
Page I ofl
Langhi, Taryn
Hello all-
ljust received a phone call from Pele Hartnetl in lra Ruskin's oflice regarding the current situation at the East
Palo Alto PageMill property. According to Peter the tenants have informed him that the rental offìce has closed
and there is no management or security on the property. The tenants don't know what to do if there is a
maintenance issue or an emergency. They are complelely in the dark as to who owns the property. There is an
assumption that Wells Fargo has foreclosed on lhe property and PageMill just walked away without any type of
transition plan in place. Pete also has a phone call into the Wells Fargo lobbyist.
I told Pete that lwould lry to get tn"t"rs for him bul coutdn't make any promises.
"otu
I'm not sure what our current role is in this properÇ, but is there any information that we can share with Pete as to
the,status of the property? Who is responsible for the day-to-day management of the property? ls there
someone that Pete can contaci to try and get this situation resolved-
Thanks, Danny
Ê ta la^1
^
PM-1280
.
"1 La{¡g,hi, Tpryn , -
From: Kane, Sue
Sent: Wednesday, May 21,2008 ',l0:05 AM
To: Weir, Lauríe
Subject: RE: Response Needed
Hi Laurie -- can a generaL & neutrâl response -- nothing t,oo deÈai1ed -- be taking from
what you have aLready done? Thank you.
-----OriginaI Message-----
From: hleir, Laurie
SenL: Tuesday, May 20, 2008 4:50 PM
To: Kane, Sue
SubjecÈ: RE: Response Needed
ImporÈance: High
Hi Sue,
recenEly received a cotßnent and reguest for response on our talk Back websiE.e from
f/ve
ovíer Mariscal. r don't know who he ís, buE I have crafted a respbnse t.o ¿he request, and
forwarded to Ted and Javier for Eheir approval before iE goes out- lE. tvould be helpful to
know if thís, rnuch longer çfilery is comíng from the same source.
lrle hawe received several medÍa requests Eo which we have responded wiÈh assistance from
PaE. MachÈ and her staff.
Hi -- r do noE know as Rob. chose not c.o share thaÈ information but if you give me a reason
that iE matters relaLive to response (r can see how that might, happen) , r will go back jto
Rob and ask on Ehat basis.
-----Original Message-- - --
From; lteir, Laurie
SenE: Tuesðayi May 20, 2008 4:27 PM
To: Ka¡e, Sue
Subject: .RE: Response Needed
ImporE.ance: High
Hí Sue,
PM-1285
lan you telL me who drafced che issues ouElined beLow? Is iL Ovier Mariscal, or other?
Thanks.
-----Original Message--- --
From: SEausboll, Ànne
Sent,: Tuesday, MaY 20, 2OOB 11:42 All
To:9üeir, Laurie
cc: Kane, Sue; Eliopoulos, Theodore
Subject: Fw: ResPonse Needed
V,IiIl you s prepare some bulleÈ (Ealking) points for Sue and cc me. Thanks. Ànne
page Mill properties is a private equity investment fund, and Calpers appears Eo be
one of ics biggest investors. Until very recently, Eheir websiÈe described Page Mil]
properties as specializíng in co¡nrnercial real estate. So it was with great misgiving Ehae
p"opl" in EasE pato Alto hratched them, starting abouE LB months ago, stârt buying up large
ãr.lhe" of rental housing in East Palo Àlto. From the very beginníng, observers were
suspicious thaE PMP \ras intent. on some other goal chan providing renEal manage¡nent
services for the workíngr pèople living in tshese unies.
The area in which PMP is acquiring land is Ehe "vtesE side' -- Ehe narrow strip of E.
palo Àlto Ehat extends wésL of }lighway 101. This is the area E.hat used to be known for
"whiskey gulch, " a¡rd which now features the 4 Seasons Hocel and a big law complex. The
resE of Ehe "wesE side' remains modesE: Ít houses a very large nr.uriber of apartment
complexes along with some single family uniÈs- A fairly large portion of the affordable
renEal housing in the greacer Palo AIEo area is to be found in this narrow space.
. pMp's acquisitions started around Ehe Four Seasons complex and spread from trhere. At
present, they have purchased over 1500 units in EasE Palo Ãlto, \,thich makes chem by far
th. 1.tg"=t landlord in t.he city. They have sunk almost half a billion dollars of inwestor
money ineo their purchases, and che prices trhey have paid to acguire Ehese properties
greaily oucscrip E.he kinds of rencal incomes they can earn from them- On the face of it,
thir quite strange, because Ehe ciuy has a fairly scrongf RenL Scabilization
"ã"*"
Ordinance--passed by the voLers, irrevocabte by Ehe citsy counciÌ, Ehat stands in the way
of <lrastic rent increases or redevelopment. of propertíes for purposes other than rentaL
housing -
' IniÈially, pMp sEated EhaE. Lhey would be a law abiding ciÈizen inEenE on improving
the housing stock in the neighborhood. This has curned ouE Eo be quiEe unErue. Last
December they began to show everyone Eheir actual moEives, issuing renL. increases Eo some
1300 units, in open defiance of Uhe city's Rent Stabilizac.ion Ordinance. The increases
ranged from 93 tro 43t , and repTesent a serious hardship for many of Che people facing
them--noE Eo say an eviccion by other means. Many people are on fixed income and quite
vulnerable, but Page ¡¡i]l has evicted them anyuray, while cynically preE.ending E.hat Ehe law
2
PM.1286
doesn'E appLy Èo chem. This is clearly contrary Eo the LocaL ordinance.
The affair wit.h the renE íncreases has followed a complicaÈed and unfortunaE.e
course. It is Èoo complicated t.o expì.ain at lengeh here, buE effect,ively PMP made use of a
situation of demoraLizauion and understaffing in the renE office E,o seize upon a set of
outdat.ed and inapplicabLe "certificates of maximum lega1 rent.' in order Eo make a series
oE contradictory and bizarre claims about the nature of the certificaÈ.es. IE, has
exacerbated t.his by coordinatinq ics increases E.o occur al1 at once, which has had the
effect of overwhelming Ehe CiEy's resources and of Íntimídating cenants wich a sense of
inevit.abiliey. ltany people have just moved away in the face of pay-now-or-be-evicted
threats from t.heir landlord
The cicy has responded poorly to t.his chalì.enge. The cicy council and Ehe renL board
are uniEed in opposition Eo the rent increases, but E.he citsy atEorney quic in NoveTnber,
and they have lacked the organizaÈion, the courage, and (most importantly) t.he legal
counsel t.o respond effectiveLy. Unable to free themselwes of this 1aw, Page Mi1l has
decided Eo seart a Lhousand fires againsÈ iE, daring the city t.o bankrupE itself on legal
defense of a law protectring Ícs poor people. On Page Mill's side: a fancy pubLic relaLions
firm, and a team of lawyers headed up by a specialisE. in overturning municipal ordinances
and busting unions -- On East. Palo ÀlEo's side: a few part-time volrrnteers straggling in
from SEanford 1aw, a¡¡d some corununity acEivists-
The sEoties told by the many peopLe facing rent increases are heartbreaking, and we
are very concerned by clear paEterns of tenar¡t harassment--ranging from false notices of
.eviction for unpaid rent, Èo illegal unit searches- (In our comple>< alone, four ouE of E,he
eighc units have received false noEices of ewicr,ion in Èhe lasL few months- I hardly need
to add that it is a teriifying ching for most. E.enants to receive such a notice.)
Buc oulí concerr¡ is not simpJ.y with the plight of individual t.enants. we are
convinced that PMP does noc wanÈ E,o be a landlord at all, buE is trying to circumvenL or
overEurn the renE scabilizãEion ordinance in order to kick peoþle ouE of their homes and
redevelop È.he .1and for co¡runercial purposes. D¡oÈ.hing less Ehan a vast. redevelopment projecc
would justify t.he scale of PMP's investment. Moreover, becãuse of PMP's highly ì-everaged
and financially vulnerable position, we believe ÈhaE tshey wili acc quickly and ruthlessly
in the next months to overturn Èhe ordinance and remake the l-andscape of Èhe cicy
according Lo their plans. Some of this Ehey could do 1egally if they followed che sç.aridard
prôcedure for redevelopment, which involves buying ouL the tenants,- buE page Mill prefers
Eo intimidace people or force Ehem out by oLher means--it is cheaper.
Our personal experience with Page Mill has given us a úindow inco how uhey plan to
do Lhis. Last summer we discovered t,hat our landlord (which was noE page Mill at the E,ime)
was evadi-ng Ehe Renc StabilÍzation Ordinance, and we enibarked on a campaign Lo compel
registracion of his units. Because of the disorganizaEion and demoralization in the Rent
Board Office, Ehis v¡as noL an easy thing E.o do. EvenLually, we caught him, however--
ironically, E.he facÈ that he was crying to sell the unit.s to Page Míll allowed us Eo
corner him. hjich che help of ¿he Rent Board, the CiEy Council, the City Attorney, and a
pro-bono voLunteer from SE.anford law. we forced him E.o register in order to compleE.e his
sale. He paid 5100,000 in fees and penalties to c.he ciEy, rolled back our iJ-IegaI renE
increases, and signed a lega1 agreemenL wirh us Ehae he woul.d regisE.er the unics. (This
was a slap on E.he rvrist., compared wich whac he should have paid for over ttrenty years of
willful evasion of Ehe law and handsome profics from doing so. )
Curiously, while our ol.d landlord paid up to t.he city, he did nor regist.er rhe
unics. fnsÈead, he delayed signing che agreement with us unLil after the sa1e. Thereafter,
Page Mill has refused to regiscer Èhe uniL.s. They separately incorporated each unit as an
3
Plvt-1287
.LLC (in DeLaware!) and are claiming a "srnalL owner' exempEion from Lhe RenÈ SLabiLizaEibn
Ordinance- They've creaÈed a large number of these ''mom and pop' LLCs.
I¡,le now beLieve EhaÈ Page MiIl's sE,rategy is Eo use Ehe separaEe incorporaE.ions Eo
circumvents che Ordina¡ce by selling Che separate uniÈs to E,hemselves for condo-izaEion.
Once condo-ízed,, Ehe 'separaÈe ohrners" will get E.ogeEher and voEe for demolition- This is
obviously an inappropriaEe business practsice: moreover, is aLmost certainly illegal.
CorporaE.ion sÈructures may legitimaEely be used to avoid some taxes, but Lhey may not be
useã Eo evâde civic dueies. üre are looking inEo ì.egal resources for conEestíng E,he LLCs in
courE.
lrle befieve Lhat CalPers should invesÈigate Page MilI's pracEices very seriously, for
both huma¡riÈarian and financial reasons:
'invesEment
FinanciaL: obviously, any highly leveraged real estaÈe company is a risþr
in rhe currenu market. !ùe believe that PMP might be an especially poor invesEmeng. PMP...
. represents itself as a large comparty, buE when you look at Ehem closely, you realize Ehat
'thãy are nothing buL a couple of fraÈ boys sieeing on a vast pile of debt, just Erying to
see whaE they can gec away with. Page rvfiÌÌ has waged a huge bets that the city is too
disorganized a¡¡d incompeEenc to protect itself and iLs citizens. But if we are righc and
Ehe cigy can prevail against these ilLegal tactics, Page I4ill will be sEuck wich a stock
of modesEly performing rental- properties they bouqh! at a premium based on Ehe idea that
Chey could-or-rt*-n.rr'rr"r th" }aw. Holding investrnents in Page Mill woul-d lrot, under this
scáario, be a good thing for invesEors such as Cal-Pers
trte woufd be happy Eo wríte a longer account of this situation, or to ta.Ik to anyone
aE Calpers who has further guesfions. The situaf.ion is developing week by week, so we will
probably hawe more news soon.
As we wrap up Chis email, we should warn you about one E.hing: because PMP has a
public relagions firm working aÈ high heat, mosL of the media coverage has been heavily
corg¡ed Eoward their perspective (they like to insinuaLe thaL eweryone else is
incompeEenE)- Most media accounts are simply verbat.im reprintings of PMP's press reÌeases.
So cake what you find on google r,vith a grain of sdlt!
wondering whaE's for Dinner TonighL? Gec new tu/ists on farnily favoriEes at ÀOL Food
<hutp://food.aol com/ d inner- ton igh L ?NC ID=aol f od0 0 0 3 0 00 0 0 0 0 0 0 1>
PM-1288
. Message Page l,of2'
Langhi, Taryn
lmportance: l,l1Sh
with page Mill ouu and.Peters Gociper.Vilìage out, wgutd it be a fair staternent to say we do nto have'anv,;o-[:tlæt:
in,oür porlofl io loday?tricìa,K.Meeh!
Dîrector of Ertëinal Àffíii¡,s .
p a't'' m a ç L!@ c .-.'.'---....
aliLe rs. c iW
.
---'Original Message---:-
From: Mêcke, Quintin
Sent: Wednesday, February 24,2AI0 9:574M
To: Mecke, Quintin
Subiect: PRESS RELEASE: Ammiano Introduces Socially Responsible Investment Act
Importance: High
PreBs
T#nT Am:ffitüirr,Ít
FOR IMMEDIATE RELEASE: February 24,2O10
Contact: Quintin Mecke
Office: 41 5-557 -3O1 3; Cell: 4'l 5.505.2417
PM.1350
Message Page? ofZ
Socially Responsible lnvestment Act, AB 2337, to prohibit the use of public pension funds in
predatory investment schemes. The legislation would require CaIPERS and CaISTRS to
disclose and d¡vest from any investments in companies engaged in predatory business
practices that rely, or result in, the displacement of residents in affordable housing in order to
generate profits for investors.
"lt is unconscionable that hundreds of millions of dollars in public funds have been used in
efforts to evict tenants from New York to Californía," said Ammiano. "Actions speak louder
than words and CaIPERS needs to make its claim of socially responsible investing a reality."
Tenants Together, California's statewide organization for renters' rights, has been urging
CaIPERS for over a year to voluntaríly adopt "predator free" investment criteria, pointing to the
large scale displacement of tenants in East Palo Alto and New York City fueled by CaIPERS
money. To date, the pension fund board has not taken action to screen out real estate
investments that are premised on evicting tenants.
"The retirement funds of working people should not be used to evict working people. We
applaud Assemblymember Ammiano for introducing this important bill that will ensure that
public employee pension funds are not invested in predatory schemes that displace renters,"
said Dean Preston, Executive Director of Tenants Together.
Fublic pension funds have been a primary source of equíty for what affordable housing
advocates have termed ''predatory equity", a form of real estate speculation predicated on the
displacement of low and middle-income renters from affordable housing. ln recent months,
"predatory equity" investments have come under greater gcrutiny in both California and New
York as a result of tenant harassment and foreclosures.
"At its heart, this bill introduces greater transparency and accountability into California's
pension fund investment decisions, something that will benefit communities across the
country," added Christopher Lund, Communications Director of the Easl Palo Alto Fair Rent
Coalition.
###
Quintin Mecke
Communications Director
Office of Assemblymember Tom Ammiano
455 Golden Gate Avenue, #14300
San Francisco, CA 941O2
Email : qujnti n. m ecke @asm..ç-a-ggv
Phone: 415-557.3013
Fax: 415.557.3015
Website:h.t!BJ'lcl-erne-cl-a!s-ass-enblv.ca.gplrlç-nnþ-çfs]al.=31
PM-1351
Page I of I
Langhi, Taryn
wewelcomeyourcontinuedinputonfhesel?tt:rsandhopelhatyo.uwillkeepusinformedofeventsrelatingto
lhe new year'
page Milt in the East palt-o-Ãio'"àl^rurity. wshing you allfhe besf in
Laurie
Hi Laurie,
HappyNewYears!Ihopeyo,,"ry9y^"qtheholidays.Iwsryedto'99*ifyouhavereadthetenantbook
we sent. we would like to know if calp"o rrur
*i"t with Page Mill to discuss the rent increases' Please
keep us uPdated about this iszue'
PM-1354