“Invasion of the Gentrification Mob” -- Skyline’s Rampage on the City’s Affordable Housing

by Paul Hogarth, 2006-12-18

Rent control is the single most effective program in San Francisco to prevent mass displacement and runaway gentrification. But because rents get set at market-rate whenever there is a vacancy, property owners have always salivated at the prospect of removing long-term tenants. Many have attempted to skirt around the city’s tenant protections – but few are as aggressive as Skyline Realty, who through a web of subsidiaries own over 5,200 apartment units in San Francisco. On December 15th, reporter J.K. Dineen of the S.F. Business Times revealed that Skyline purchased ten multi-unit buildings in November – adding 200 more apartments to their massive empire. Skyline’s method of purchasing properties (by out-bidding all other buyers by paying above market rate) has put their coercive practice of forcing out tenants into their business model. Beyond the individual lives destroyed, what it also does is unfairly skew the housing market for everyone – landlords and tenants alike.

Tenant counselors, lawyers and organizers have long been familiar with Skyline’s strong-arm practice of buying up buildings, and how it affects the tenants who live there. A casual walk through the City will reveal the extent of their holdings – as the recognizable “Citi-Apartments” marquee outside their buildings appear to be everywhere. Upon purchasing a building, Skyline employs a highly aggressive campaign of intimidation to force out long-term tenants – including unannounced visits by armed paramilitary-like agents, unauthorized entry into rental units, and retaliating against tenants who refuse to accept offered buy-outs. On August 16th, City Attorney Dennis Herrera filed a lawsuit in Superior Court against Skyline for these and other unlawful practices.

Skyline has openly admitted in the past that it is their routine practice to offer tenants money to move out once they purchase a building. The reasons are obvious – if they can make a tenant move out voluntarily, they stand to gain a large profit in higher rents from the next tenant. The nominal price that a tenant receives to move out (a few thousand dollars) is minimal compared with the tenant’s loss of a rent-controlled apartment, and chump change compared with what Skyline stands to gain from the vacancy.

“When Skyline bought my building,” said Alysabeth Alexander, who works at the Tenderloin Housing Clinic as a tenant organizer, “they targeted everyone who had been there for 5 years. They would call them, offer them money – and ask if there was anything wrong with the apartment. They would always ask them – are you interested in moving? They would call them on the phone, and try to meet them in person. Sometimes they would spontaneously show up to the building in person.”

If they can’t buy out a tenant, Skyline tries to see if there’s a pretext to evict a tenant. Suddenly, lease provisions that were never enforced under an old landlord become an excuse for Skyline to force out a long-term tenant. “They tried to evict a 12-year tenant in my building,” said tenant Lana Beckett, “because his name was not on the lease. His ex-girlfriend -- who had moved out years ago -- was still on the lease. But that had never been an issue for two prior landlords.”

Beckett estimates that her building on Pine Street has lost nearly 40% of its tenants in the past year since Skyline bought the building. Even if they can’t evict a tenant under a minor lease violation or convince a tenant to take a buy-out, Skyline can create such a climate of fear that many tenants decide to eventually move out on their own. “They would come into our building at odd times in the evening,” said Beckett. “There would be two guys who looked like they came out of central casting for ‘Tough Guys.’”

How Skyline approaches the tenants after they buy the building also suggests an effort to rig the market against competing landlords. “On the first day,” said Alexander, “they had big men in suits knocking on our doors at 7:00 a.m. They slid new rental agreements under our doors, new house rules and regulations and information about the building, requests to see our leases, and requests for our contact information, and how much we paid in rent.” Under the city’s rent control law, it is illegal for a new landlord to impose new house rule for long-term tenants, but it is legal if the tenants agree to them.

But getting information such as how much a tenant pays in rent is usually something that a landlord would want to know before – not after – they buy a building. When a building is being sold, it is common practice for real estate brokers to ask the tenants to fill out estoppel certificates. These are basic disclosure forms that put the building’s prospective buyer on notice (such as what rights the tenant has in their lease or how much the tenant pays in rent) that ostensibly factors into how much the buyer is willing to pay for the building. For example, if a building has many rent-controlled tenants, the buyer may decide that it's not worth paying what the seller is asking for.

But Skyline doesn’t seem to care about this information before they buy a building – because they figure that they can get rid of most of the rent-controlled tenants later. In other words, they factor in their strong-arm bully-tactics in their business model as they acquire property throughout San Francisco.

According to J.K. Dineen’s article, Skyline will often pay 16-18 times the building’s gross rent – whereas most investors refuse to pay more than 13 times the gross rent. Whereas other landlords would hesitate to pay above-market for a building of rent-controlled tenants, Skyline assumes that they can just send their thugs in later to make the purchase profitable. By employing this strategy, it becomes virtually impossible for competing landlords to buy up property because Skyline can always outbid them.

Not only is this unfair for honest property owners who try to play by the rules – it also hurts more tenants whose lives are affected by a Skyline take-over. As more and more multi-unit properties in San Francisco get gobbled up by Skyline, an ever-increasing number of tenants will fall prey to its gentrification mob. And this affects the City’s overall affordable housing stock.

EDITOR’S NOTE: Tenants who are affected by a Skyline Realty take-over, or who want to get involved in the campaign should check out the Citi-Stop website at http://www.citistop.org -- Send feedback to paul@thclinic.org