CitiApartments is one of the largest real estate companies in San Francisco, California, which ultimately owns and manages over 300 buildings directly and through affiliates. In recent years companies have suffered financial downturns, and have been the subject of harsh criticism and litigation over alleged illegal business practices as residential landlords.
Video CitiApartments
Company Structure and Ownership
CitiApartments, Inc. is a subsidiary of Skyline Realty, Inc., and also operates buildings owned by limited companies, all of which are owned by founder Frank Lembi and various members of his family. Among the most prominent are Trophy Properties and Ritz Apartments.
In 2006 and 2007 CitiApartments and its affiliates owned 307 apartment buildings with a total of more than 6,500 apartment units accommodating more than 7,000 residents, making it the second largest residential property rental property in San Francisco at the time.
It also has five boutique hotels, two office buildings, real estate brokers, mortgage brokers, and property management companies.
Maps CitiApartments
History
Origins
Frank Lembi, originally a pharmacist, became a real estate broker after returning from military service in 1946. Shortly after, he formed Skyline Realty as a broker. He bought the business immediately after the death of his business partner in 1968. The current kingdom includes: FirstApartments (created to replace CitiApartments): http://www.firstapts.com/Personality Hotels: http://www.personalityhotels.com/CitiSuites: http://www.citisuites.com/Hotel Diva: http://www.hoteldiva.com/
Recent Business Development
Beginning in the early 1990s, Skyline Realty shifted its focus from hacking real estate into buying and managing apartments. CitiApartments has taken a buy and hold approach to investing, making massive purchases of old buildings in almost every San Francisco neighborhood, but mostly in Tenderloin and Nob Hill. Since most of the urban housing stock consists of smaller buildings, with only a few large complexes, the company achieves a dominant position in its market.
Due to San Francisco's strict rental lease control laws, which prohibit all rent hikes that are very simple and prevent landowners from terminating unreasonable employment, CitiApartments can not directly benefit from building improvements. Instead, it takes a long-term approach with:
- Offer purchases and incentives for tenants to move
- Wait until the lessee leaves before renovating their unit
- Reseading an upgraded unit at a much higher market price, or as a suite of high-end companies or hotel rooms
- Cut out building management costs
Family business
The son of Founder Frank Lembi, Walter Lembi, was an important owner until his death in 2010. Grandpa Taylor Lembi also has two apartment buildings and is part of the business. David Raynal, COO, is Frank Lembi's nephew. In various combinations and through affiliated companies they have a building managed by CitiApartments.
Controversy
In April, 2006, 23 tenants filed a personal suit against the company. Among these claims are bullying intimidation by armed guards, harassment and threats, forced interrogation sessions to pressure tenants in signing agreements, illegal construction intended to harass tenants, and locking tenants, all intended to force tenants to rent under a controlled market to leave so that the Company can renovate and rent back at a higher level.
In addition there are many lawsuits against companies on behalf of individual plaintiffs. One of them is handled by a San Francisco landlord/tenant lawyer Drexel Bradshaw from Bradshaw & amp; Associates, P.C., who sued CitiApartments under the RICO law of 1970. The use of US phone and mail fraud was the cause of RICO's prosecution.
In July, 2009 several additional lawsuits were filed against CitiApartments Inc. and at least 56 related entities, including one class action suit, by a former tenant stating the existence of a deliberate pattern to withhold and delay the return of the rental deposit illegally. CitiApartments are sanctioned in excess of $ 30,000 in one instance, and $ 50,000 in another, for what the judge described as "deliberate" failure to comply with a document discovery request.
Eliminates competition
CitiApartments often pay as much as 50% more for buildings than their value to other markets, and as a result may have raised the overall market price by 5-10%. This encourages competition from property investors who are weaker and more sensitive to cash. Beginning in late 2006, he bought almost all of the multi-unit apartments sold in town when they became available. Critics claim that the only reason CitiApartments can afford to pay premiums is because it generates more money for a building than a company operating within the bounds of the law, or that it makes an optimistic and realistic promise to its lender about its ability to force tenants who controlled the rent out of their apartments.
Wobbly Finance
CitiApartments and its twin companies buy buildings with credit from outside investors, with down payments as low as 5% of the total purchase price (compared to 30-40%, which is more common for the purchase of comparable commercial real estate). Because of the high price paid for buildings, and high financed amounts, the buildings have negative cash flow and can not support their mortgages. The company lender usually provides a higher-than-usual loan reserve that will give CitiApartments enough money to make interest payments while also paying off or displacing existing tenants, based on a financial model that will replace at least 75% of tenants within two years.
The old critics complain that in the event of a market decline or other unforeseen event, CitiApartments is in danger of defaulting on the mortgage and must sell it at a depressed price or in foreclosure, which will have a ripple effect suppressing commercial real estate throughout San Francisco. The prediction occurred in January 2009, when the parent company had to assign 51 of its 307 properties (to) one lender, UBS AG, in exchange for foreclosure, as they collectively had negative cash flows of about $ 3 million per month.
In 2009, the Lembi Group experienced financial difficulties due to a combination of lease softening due to the late 2000s recession (which disrupted the effectiveness of replacing existing lease-control tenants with friction and expulsion), inability to renew or refinance existing loans the financial crisis of 2007-2010, and the decline in the value and sale of commercial property resulting in the impossibility to resell buildings to avoid foreclosures. Given the high financial level and the group initially paid the price above the market, much of their loans were under water. At that time the company sought to renegotiate about $ 1 billion in loans, and the possibility of default on another $ 164 million loan. In the summer of 2009 the company has transferred 51 properties to one lender in lieu of foreclosure, and in the process of foreclosures in over 60 others.
On October 29, 2009, the San Francisco Chronicle published a story stating that Clark County County, Nev., Has a "warrant for Walter Lembi, the managing director of the Lembi Group that is financially troubled, for allegedly spending $ 298,500 worth of bad checks earlier this year at Caesar's Palace in Las Vegas. "
Past Controversy
Frank Lembi is the CEO of Continental Savings of America, a savings and loan organization that was taken over by the Office of Savings Supervision to prevent bankruptcy due to poor high-risk real estate loans in the savings and loan crisis of the 1980s. He and his son Walter are mentioned in various lawsuits related to the company.
CitiApartments Responses
To promote its position as an older housing resident in San Francisco, CitiApartments has hosted numerous charities and causes associated with housing and low income, and provides a nearly free studio apartment for a needy family. He disseminated many press releases about the issue since the commencement of lawsuits and adopted the slogan "Restoring the San Francisco Environment."
CitiApartments through interviews and press releases strongly denied all claims, and rejected all criticism made against it in connection with infringing the right of the tenant. It describes itself as an honest property manager, and claims that disputes with tenants are unfounded, small, or normal and incidental to a landlord of his size.
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References
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External links
- press kit - contains a San Francisco complaint text
- Citistop Tenants' Union - informational website for tenants opposing CitiApartments
- The Scumlords: the evil squad of Skyline Realty - the 1/3 of the SF Bay Guardian series
- The Scumlords: Ignore and corrupt - part 2/3 of Bay Guardian series
- The Scumlords: Family business - 3/3 part of the SF Bay Guardian series
- Bradshaw & amp; Associates, P.C - San Francisco Lawyers
- Avicolli-Mecca, Tommi (May 14, 2008). "There is No Scarcity of Tenant Ghosts". Beyond Chron: The Voice of the Rest.
Source of the article : Wikipedia
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