Tenants Together

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995 Market Street, Suite 1202

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San Francisco, CA 94103

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415.495.8100www.tenantstogether.org

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FOR IMMEDIATE RELEASE CONTACT: Andy BlueOctober 15, 2009 415.533.4694

CALPERS LOSES $600 MILLION IN PREDATORY EQUITY SCHEMES THATRELIED ON MASS DISPLACEMENT OF TENANTS TO TURN PROFITS:

CALIFORNIA TENANTS DEMAND REFORM

CalPERS will lose hundreds of millions of dollars in predatory real estate investment schemes according torecent reports in the

New York Times

, the

Wall Street Journal

, the

San Jose Mercury News

, and otherpublications. What has not been adequately reported is that these schemes are classic examples of what

housing advocates call “predatory equity,” over leveraged investments that rely on the displacement of

tenants from rent-regulated housing in order to turn profits.CalPERS has effectively invested (and lost) the retirement funds of

working people

in projects that weredesigned to displace

working people

from their homes.

Tenants Together, California’s statewide organization for renters’ rights, is calling on CalPERS to adopt

predator-free real estate investment policies that will prevent it from ever again committing funds to thesetypes of schemes that have displaced tenants and have proven to be such financial disasters. TenantsTogether is also demanding a full investigation into the circumstances of CalPERS investments in predatoryequity schemes to determine what CalPERS knew about these investments at the outset.

“CalPERS must never again make investments into schemes that are so devastating to local communitiesand to the retirement accounts of working people,” said Dean Preston, Executive Di

rector of Tenants

Together. “We need to know exactly how this happened so we make sure it never happens again.”

CalPERS, the nation’s largest pension fund, will lose $600 million

in two separate real estate investmentdeals: one in New York City with partners Tishman Speyer Properties and BlackRock Realty and another inEast Palo Alto, CA with partner Page Mill Properties. Both investments have been the subject ofconsiderable controversy as they have involved the mass displacement of low and moderate income tenantsfrom their homes. They have also spawned multiple lawsuits and raised the ire of tenants, communityorganizations, public officials, and labor groups.

For more than a year, Tenants Together has been working with tenants, advocates, labor unions, and city

officials in East Palo Alto, where CalPERS’ investment partner, Page Mill Properties, has been engaged in

open conflict with the city and its residents. In 2006 Page Mill Properties began buying up some 1800 unitsof rent-controlled housing on the west side of East Palo Alto bordering an affluent neighborhood of PaloAlto. After acquiring the properties, Page Mill began implementing drastic rent increases (many far inexcess of the

annual increase permitted under the city’s ren

t stabilization ordinance) and forcing manytenants to leave their homes through unaffordable rents, harassment, and eviction lawsuits.After learning that CalPERS was a principal investor in the project, Tenants Together, along with advocatesand tenants from East Palo Alto met with CalPERS staff and testified before the CalPERS Board ofAdministration bringing the crisis to their attention and calling on them to intervene with their partner PageMill to move it to rescind the rent increases and cease the unjust eviction of its tenants. Tenants Togetheralso warned that predatory equity investments were extremely risky financially and reputationally forCalPERS.Yet for months after, the situation continued to deteriorate in East Palo Alto as evictions and litigationcontinued. Finally, last month, Wells Fargo Bank reported that Page Mill was in danger of losing itsproperties after missing a $50 million mortgage payment. Soon after, its properties were put intoreceivership as an initial step towards foreclosure. If the foreclosure proceeds, as appears to be likely,CalPERS will lose all of its $100 investment.