The First Amendment Coalition has sued CalPERS to obtain records on why the pension fund invested $100 million in Page Mill Properties, the biggest residential landlord in East Palo Alto -SMD
By Bonnie Eslinger
July 20, 2010
A nonprofit public interest organization has sued CalPERS to obtain records that may shed light on why the pension fund would invest $100 million in Page Mill Properties, which until recently was the biggest residential landlord in East Palo Alto and came under fire for substantially raising rents.
“CalPERS’ investment of $100 million in a project that has yielded nothing raises significant questions,” states the lawsuit filed Friday by the First Amendment Coalition.
The suit focuses on CalPERS’ investment in Page Mill Properties II, a real estate investment fund connected to the controversial company’s real estate holdings in East Palo Alto. Last year, after Page Mill defaulted on a $50 million balloon payment, all 101 of its rental properties in East Palo Alto were assigned to a court-appointed receiver and reverted to Wells Fargo Bank. CalPERS wrote off the investment.
Critics had attacked Page Mill Properties for taking advantage of East Palo Alto’s flawed rent stabilization ordinance by raising rents by more than one-third in some cases and forcing out tenants who couldn’t pay the hefty increases.
The suit notes that CalPERS’ records show a $900 million loss on a real estate investment in the San Joaquin Valley as well as investment losses in Manhattan properties that, like Page Mill, have been accused of abusive management practices that pushed out low-rent tenants.
Peter Scheer, executive director of the First Amendment Coalition, said the records request is an effort to gain insight into what influenced CalPERS’ financial decisions regarding its Page Mill investment. It specifically seeks the offering memorandum and partnership agreement for the deal, as well as related internal e-mails and other communications.
The First Amendment Coalition’s legal complaint also notes that Attorney General Jerry Brown sued two former CalPERS officials in May for fraud, alleging that tens of thousands of dollars were spent on key senior executives with the pension fund in an effort to influence investment choices.
“This petition should be granted so that the public can see how CalPERS manages the staggering $210 billion in assets with which it has been entrusted by government retirees, their dependents, California taxpayers and the public generally,” the suit states.
The First Amendment Coalition also sued CalPERS in 2004 to get information on the management fees it pays to individual venture capitalists, hedge fund managers and others handling the private equity funds in which the pension fund invests.
E-mail Bonnie Eslinger at beslinger@dailynewsgroup.com.