Wells
Fargo Bank confirmed Thursday that it has filed notices of default on
all of Page Mill Properties' East Palo Alto holdings, potentially
putting about 1,800 rental units on the road to foreclosure.
The
bank submitted the documents to the San Mateo County Assessor's Office
on Sept. 25, Wells Fargo spokeswoman Elise Wilkinson said. Page Mill
has 120 days from that date to resolve the situation.
After that
period, "unless the obligation being foreclosed upon or a separate
written agreement between you and your creditor permits a longer
period, you have only the legal right to stop the sale of property by
paying the entire amount demanded by your creditor," the notice states.
Wilkinson declined to comment further because negotiations between the two parties are ongoing.
In
August, Page Mill missed a $50 million balloon payment on a
quarter-billion-dollar loan from Wachovia Bank, which is now part of
Wells Fargo. A San Mateo County Superior Court judge appointed Pacific
Palisades-based receiver David Wald to oversee the apartment complexes
last month after Page Mill's property management arm, Woodland Park
Management, vacated an off-site office and pulled staff from the
buildings.
Tenants have become increasingly concerned about the
fate of the properties, although many expressed relief when Wald hired
Investors' Property Services to take over their management. Both
tenants groups and the city have had a strained relationship with Page Mill mostly because of disputes over large rent increases at the properties.
There are about 10 active lawsuits between Page Mill and the rent-controlled city of 32,000 over rent hikes and other issues.
While
a notice of default is the first step toward foreclosure, a number of
alternative outcomes remain possible in cases like this, analysts and
Realtors say.
The bank could agree to lower interest rates,
extend the loan's term or make a short-sale of the property, among
other options, said Daren Blomquist, the marketing communications
manager for Irvine-based RealtyTrac Inc., which tracks foreclosures
online.
In the second quarter of 2009, between 35 and 50 percent
of defaults on single-family homes went into foreclosure, Blomquist
said. However, given the large amount of Page Mill's loan, foreclosure
could be more likely than that for its properties now that things have
gotten to the default stage, he speculated.
"That's going to
really hurt the lender to have to absorb that property on their books,
so I think they would be more motivated to work something out,"
Blomquist said. "The lender would typically try to rectify the
situation before they would file the notice of default."
That
Wells Fargo filed the notice, "to me is an indication that maybe
they're less hopeful that there's a chance to save this property from
foreclosure," he added.
Jennifer Flores Tasto, president-elect of
the San Mateo County Association of REALTORS, or SAMCAR, expressed
surprise that such a large landlord hadn't resolved the situation yet,
given that so many tenants are still paying rent.
"We might be
running into stuff like this more," Flores Tasto said. "I think that's
our next crisis: the commercial lending market."
She added that foreclosure of an apartment complex can be a chaotic experience for renters.
"Banks
are so slow in taking over," she said. "It's very disruptive to
people's lives in terms of the residents, the tenants. It really causes
a lot of chaos in people's lives."
Two Page Mill spokesmen did not respond to a phone message and e-mails requesting comment.
E-mail Jessica Bernstein-Wax at jbernstein@dailynewsgroup.com.
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