EAST PALO ALTO, Calif. -- A wave of robberies and burglaries is hitting East Palo Alto, threatening to reverse the city's recent period of stabilization. One reason behind the crime surge is the financial troubles of real-estate firm Page Mill, say locals, law enforcement and other officials of the town.
Page Mill Properties LLC, which began snapping up local apartments in 2006, became the city's biggest rental-unit landlord and attempted to transform the town by redeveloping properties into higher-end condominiums.
But in September, Page Mill defaulted on a $240 million loan from Wells Fargo & Co.'s Wachovia Bank and closed its East Palo Alto offices, leaving its properties there largely untended. Since then, some residents say they have seen more vandalism and loitering around their buildings.
"There has definitely been an alarming number of robberies and burglaries over the last few months," says Ronald Davis, East Palo Alto's police chief. "Some of the responsibility has to go to Page Mill," he says, citing an environment where crime and blight could fester created by Page Mill's abandoning its properties.
On a recent day, the consequences of Page Mill's departure were evident at some of its properties. At apartments on Woodlawn Avenue and Cooley Avenue, broken fences and uncut grass abounded. Discarded leaflets, broken bottles and loose paper littered the parking lot of 5 Newell Court.
Money manager David Taran, who runs Page Mill, declined to comment. Sam Singer, a Page Mill spokesman, says the company was stymied by the downturn, which devalued its properties so the firm couldn't easily renegotiate its loan with Wells Fargo. He says no one wants to see East Palo Alto's neighborhoods revert to their troubled past.
Page Mill owned 1,800 rental units in the city of 32,000 people, or about half the rental stock, according to city officials. Now a county court has placed Page Mill's apartments in receivership and appointed a third-party firm to oversee them, though city officials say many of the units are less supervised than in the past.
David Wald, who operates a realty-advisory firm in Pacific Palisades that is now temporarily overseeing Page Mill's East Palo Alto properties, declined to comment on Page Mill's actions before his appointment as receiver. Mr. Wald says he is working closely with the East Palo Alto Police Department to coordinate security at the properties.
"Private security at the properties has been increased, and overall I believe that security at the properties has improved," says Mr. Wald.
The repercussions from Page Mill's loan default on East Palo Alto highlight the unexpected impacts rippling out from the recession and the credit crunch. In the aftermath, East Palo Alto -- a blue-collar town that had the nation's highest murder rate per capita in 1992, according to the Federal Bureau of Investigation -- appears headed toward another violent chapter after a period of stabilization in the past few years.
Not all of East Palo Alto's recent difficulties can be traced to Page Mill. With the city's unemployment rate at 20.7% in September compared with 17% in Oakland and 9.7% in San Francisco, East Palo Alto is clearly hurting from the downturn.
Overall, robberies in East Palo Alto soared 140% in September from a year ago, according to police records. That increase continued in October, when robberies jumped 44% and burglaries swelled 73% from a year ago. The rise came even as East Palo Alto's total crime rate fell 7% in September and 2% in October.
In contrast, robberies and burglaries have declined in other Bay Area towns. In Oakland, burglaries decreased 36% in September and fell 20% in October compared with a year earlier, while robberies rose 6% in September but dropped 10% in October from a year ago, according to city records.
Chris Lund, a local housing advocate, says one Page Mill-owned 60-unit apartment complex on Manhattan Avenue has a 30% vacancy rate. Page Mill's Mr. Singer acknowledged that the vacancy rate in the complex had risen since the company pulled out of East Palo Alto, but says he doesn't have exact figures. He added that vacancy rates across Page Mill's properties in the city are now around 20%, down from 30% before Page Mill bought the apartments.
Virginia Savalli, who lives in a four-unit apartment building that Page Mill acquired last year, says the changes in the neighborhood are striking. A nine-year resident of East Palo Alto, she says she had noticed less blight around the city in the past few years. After Page Mill shut its East Palo Alto management offices and fired its maintenance workers, however, blight around the properties began to creep back.
In July, Page Mill's management became less responsive to maintenance requests, says Ms. Savalli, who is unemployed. A month later, she says she complained about rat droppings in the garage -- with no response. In October, someone broke into one of her neighboring unoccupied units. Mr. Singer says Page Mill responded to maintenance requests.
The situation is a turnabout from Page Mill's move into the city in 2006. At the time, the company, flush with a $100 million investment from the California Public Employees' Retirement System and a $240 million loan from Wachovia, began buying up East Palo Alto real estate.
Page Mill put up security cameras and removed bushes and shrubs that hid drug dealing and other illegal activity. In 2007, East Palo Alto's robberies fell 45% and burglaries plunged 23% from a year earlier, according to the FBI.
Still, some residents complained about the company's steep rent increases, says the Stanford Community Law Clinic, a legal aid clinic that sued Page Mill on behalf of tenants.
As a result, city legislators in December 2007 placed a six-month moratorium on rent increases of more than 3%. After Page Mill challenged the moratorium in court and won, the city attempted to permanently stop the increases by drafting a ballot measure. Page Mill sued again and stopped the city from putting the measure before voters.
East Palo Alto Mayor Ruben Abrica said: "Page Mill tried to wear us down. They filed so many lawsuits and took a completely adversarial stance." Mr. Wald, the receiver, is negotiating with lawyers from the city and Page Mill to try to settle the claims.
Write to Bobby White at bobby.white@wsj.com
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