This is one of our editors' picks from our ongoing roundup of Investigations Elsewhere.
San Francisco Magazine chronicles the business dealings of the Lembi family in San Francisco, for a short time the largest private landlords in the city, who went on a "five-year apartment-buying binge" at the height of the housing market. But their name has become notorious in the city, according to the magazine, because they reportedly strong-armed longtime tenants out of their apartments and raised rents across the city.
Their business offers a version of the housing boom and bust in miniature. They took advantage of cheap financing and collateralized debt obligations to carry out their plan. According to the magazine, that plan was to "exploit the difference between artificially low, rent-controlled rents and the sky’s-the-limit, market-rate rents they could charge when the old tenants were out and new ones took their place."
According to a confidential document prepared by Credit Suisse in 2008, the Lembis planned to replace 85 percent of tenants and raise rents by an average of 59 percent. Tenants of those buildings now swap stories of bully tactics aimed, they say, at getting them out. A local politician got this e-mail from a constituent:
CitiApartments (a Lembi company) has had the elevators shut down for three days and will have the water off tomorrow. I’m fearful many senior and disabled renters will die without food, medication, and water. Many tenants are afraid to complain for fear of reprisals.
Other tenants were offered increasingly large sums of money to move. The city attorney has accused several Lembi companies of unfair business practices, including intimidation and harassment. But the Lembis were hobbled by the credit crisis, not the law: Early this year, they were forced to hand over 51 buildings to UBS, and other buildings moved toward foreclosure.
The Lembis did not respond to requests for comment. Adding to a whiff of partiality in the article, the reporter admits: "I’m a fourth-generation San Franciscan who spends perhaps a bit too much time despairing that the city is changing, and that greed is at the root of what I don’t like about what I see."
The magazine has a follow-up about a local bank that made $41 million worth of loans to the Lembis – most of which have defaulted.
