Four more rent-controlled San Francisco apartments might be culled from the city’s cutthroat housing market — this time, by a landlord who admits to participation in a conspiracy to purchase San Francisco properties for far less than fair market value.
Real estate investor Craig Lipton and his associates Keith Goodman and Craig Mallery recently purchased a four unit residential apartment building at 2405 Anza St. They have, Lipton admits, made it clear to the current tenants that if they cannot flip the property for at least $1,599,000 million, they plan to evict the current tenants and convert the building into a tenancy-in-common.
Current residents at the 90-year-old building — it was built in 1923 — include a single parent and two seniors, who have been living at the location for 36 years. According to Paragon Real Estate Group, residents of the one bedroom, one bath units (two of which include parking spaces) pay between $716 and $1,478 a month in rent. Buyers can expect as much as $2,900 in rent for each unit, Paragon suggests.
Much like the well publicized Ellis act eviction of Lee family — an elderly family who resided in a rent controlled apartment in Chinatown for decades — displacement would leave the Anza tenants unable to relocate amidst a hostile rental market that shows few signs of abatement, according to a tenant who spoke on the condition of anonymity due to an ongoing legal battle.
The tenant said that Lipton and his associates have been pressuring tenants to leave from the moment the property changed hands in September. Eviction notices have yet to be served, but negotiations between the landlord and tenants over a move-out payout — required in the event of an Ellis eviction — have broken down.
Lipton said he has offered tenants “double” what is required by the Ellis Act to relocate. “In some cases over $30,000,” Lipton wrote during an email conversation with the Appeal.
The tenant, speaking anonymously, confirmed that Lipton’s offer was above what was required, but not by enough to make a departure economically feasible. The tenant was unable to confirm that anyone in the building was offered “over $30,000.”
On October 15 of this year, the current tenants unanimously rejected Lipton’s offer as “substantially inadequate.” But, should the tenants choose to engage in a legal battle, their options are limited.
“There’s really no defense for this type of eviction,” Omar Calibas, an attorney with the Asian Law Caucus told the San Francisco Examiner last month.
Although Lipton insists that he is proceeding with the matter legally, he admits that he has not always been above-board in his real estate dealings. In 2011, Lipton pled guilty to participating in a “conspiracy to rig bids” to obtain real estate at public real estate foreclosure auctions in San Francisco, according to federal court documents. The purpose of the conspiracy was to “suppress and restrain competition to obtain title” of real estate within the city — essentially buying properties for less than their fair market value.
The charges included violating the Sherman Antitrust Act and Mail Fraud, carrying maximum sentences of 10 and 30 years respectively, as well as fines. Since Lipton made a plea agreement with the federal prosecutor, he will likely serve little, if any, time in prison. He was fined $13,416.50 in restitution, according to the plea agreement, a fine Lipton says he intends to pay.
“I have accepted responsibility for my involvement in the illegal activities at the steps [where foreclosure auctions are done in the city],” Lipton told the Appeal.
He went on to note that he has been a real estate professional in San Francisco for decades, and that “my name has been tarnished over a few thousand dollars.” Lipton said his investors are aware, and have chosen to continue to do business with him.
Bill Bryan, one of Lipton’s investors in the MF Fund II, LP — the limited partnership under which such real estate purchases are made — confirmed that he knew about Lipton’s felony charges, but said that he has confidence in Lipton’s current investment activity.
A spokesman for the Department of Justice declined to comment in detail about the case because the investigation into the conspiracy is ongoing.
Lipton has been involved in several other eviction-related legal battles, one of which was recently dismissed due to lack of merit, according to federal court documents. Such fights are common when investors purchase foreclosed properties, according to Lipton. Though Lipton says that he evicted some squatters from a commercial lot in SOMA in the mid 1990s, this would be his first Ellis Act eviction.
Ellis evictions have long been a controversial topic in the city. Many believe doing so damages the fabric of neighborhoods because they tend to target long-term tenants protected by rent control laws — and as a result the properties tend to be relatively inexpensive. Critics also say that Ellis evictions rise sharply during times of economic growth, and that it is unjust to allow market speculation to have such a great impact on the city.
116 Ellis act notices were served in fiscal year 2012/2013, a figure that has more than doubled since 2010/2011, according to Rent Board Documents. Thus far in calendar year 2013 there have been 147 Ellis notices served, suggesting that fiscal year 2013/2014 will be a banner year for such evictions.
The Inner Richmond neighborhood, where 2405 Anza is located, has one of the highest rate of no fault evictions in the city — including Ellis withdrawals — said district one supervisor Eric Mar in a written statement. Mar called Ellis evictions “devastating” because they empty entire buildings at a time.
Supervisors are currently drafting legislation, and searching for other ways to bolster tenant protections, Mar said, including efforts to amend or eliminate the Ellis Act.
“Personally,” Mar said, “I believe that housing is a human right and that keeping long-term residents housed and communities intact is the best way to keep San Francisco vibrant and diverse.”
Mar’s not the only city official who has expressed concern over the current wave of Ellis act evictions. As you might recall, San Francisco Mayor Ed Lee intervened to help the Lees locate new housing. However, the Mayor’s office did not return phone calls requesting comment for this report.
Lipton defended his Ellis activity, saying that the evictions will actually be an employment boon for some.
“… one of the driving forces in my life today is to generate work for my maintenance company, so my crews can remain fully employed,” he told the Appeal.
“This is the basic bargain I have [with] my guys. Work hard for me and I will always provide you with work. This property [2405 Anza St.] represents a fair amount of work.”
The building was also being pursued by “several” tenancy-in-common developers, according to Lipton. He says that if he had not made the purchase, others would have “executed from the same playbook.” A TIC conversion was the only way to turn a profit from the property at that asking price, he said.
Louis Neff, the real estate agent who made the original sale to Lipton and his associates said there was only one formal offer — from Lipton, who made it before a listing was published. He acknowledged that the property, given the economics, is unlikely to be profitable unless it became a TIC conversion.
Meanwhile, the tenants of 2405 Anza St. have put signs in the windows of the building — warning neighbors of the possible eviction, as well as Lipton’s past.
“BLDG OWNED BY CONVICTED REAL ESTATE FELON THREATENING ELLIS ACT EVICTION OF TENANTS” reads one of the signs.
Lipton asserts. however, that since the Ellis Act is state law, he’s only acting within his rights as a property owner.
“When the sellers made the decision to sell this property,” Lipton said, “that was the day the tenants’ rent control apartments were at risk.”