A judge has ordered a Southern California-based company to take over operations at about 1,800 rental units in East Palo Alto until Wells Fargo Bank and the city's biggest landlord resolve a financial dispute.
Page Mill Properties and its subsidiaries failed to make a $50 million balloon payment to Wells Fargo in early August because of economy-induced financial difficulties, a Page Mill spokesman told The Daily News last month. Wells Fargo and Page Mill are still in negotiations, and it remains unclear whether the Palo Alto-based company's properties are headed for foreclosure and bank ownership.
Wells Fargo announced Wednesday that it planned to go to court to request a receiver, which is an uninvolved person or company that carries out court orders.
San Mateo County Superior Court Judge John Grandsaert granted the request that same day, his clerk confirmed.
A woman who answered the phone at Pacific Palisades-based Wald Realty Advisors Inc. said her company would likely take over running the buildings early next week per the judge's order.
She described a court-appointed receiver's role as "like an acting owner, but they don't hold the title," noting that it was at that company's discretion to select a property manager.
The woman declined to give her name and said she was too busy to refer a reporter to another employee who was authorized to speak on the record.
Page Mill subsidiary Woodland Park Management has been managing the properties this week again after it pulled workers and furniture from an on-site office several days ago. However, the receiver will likely select a different property manager in the coming weeks, according to a person familiar with the situation who spoke on condition of anonymity.
In documents filed Tuesday in San Mateo County Superior Court, attorneys for Wachovia Bank — now part of Wells Fargo — allege Page Mill "improperly diverted" rents instead of using that money to make loan payments.
The complaint requests an injunction preventing Page Mill from continuing to pocket the rent money.
"Plaintiff will suffer irreparable harm unless such preliminary and permanent injunctions are issued because defendants are diverting the rents and not applying the rents to the payment of their obligations under the loan documents," the complaint states.
A 2008 deed of trust attached to the court filing spells out the bank's remedies if Page Mill defaults on the loan, which include collecting all rents, foreclosure or selling the properties.
Page Mill spokesman Adam Alberti said Wald Realty's appointment as receiver is "consistent with the interim agreement that had been reached late last week."
"At this time, there is no change," Alberti said. "Page Mill will continue to manage the property until otherwise determined."
E-mail Jessica Bernstein-Wax at jbernstein@dailynewsgroup.com.
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