Must Reads: A ‘unique’ opportunity for investors spells mass eviction for tenants

Life at The Driftwood apartments was far from perfect. Tenants said the plumbing was prone to leaks and once in a while a cockroach might scamper through the kitchen.

But rent, at $800 or less a month, was doable. And the cream-colored building on Pacific Avenue in Long Beach held special memories.

For Jonaya Chadwick, 19, it was where she hoisted friends to grab avocados from a tree and wrote fantasy stories that helped her escape problems at school and home.

When her mother, Theresa Harvey, fought cancer in a nearby hospital, Chadwick even stayed with the complex’s live-in owners.

But in January 2017 the last of those owners passed away and soon after a commercial brokerage posted an online advertisement: “CBRE is pleased to present The Driftwood Apartments, a 13-unit building located in non-rent control Long Beach.”

The ad noted it was a “unique” investment opportunity with rents about 30% below market — the clear implication there was plenty of room to hike.

Orange County investors purchased the property in May 2017, and in January, a firm they hired, Beach Front Property Management, told residents they had 60 days to leave.

A week later, Beach Front followed with the same notices at another property just two blocks away, and the clock started ticking on what advocates say is an increasingly common crisis for California renters: a mass eviction.

Driven by a white-hot real estate market, investors are snatching up older apartment buildings and clearing out tenants to renovate units and remarket them at sometimes double the rent. Other times, buildings are leveled to build pricier apartments or condos.

Displaced residents must find more expensive lodgings — if they can.

For the dozens of people living at The Driftwood and the unnamed 26-unit complex on Cedar Avenue, the drama played out over the next six months in scenes of quiet desperation and public pleas.

Emotions of the residents — who include seniors on Social Security, blue-collar workers and college students — could swing from helplessness to anger in the course of a day.

I’Esha Caldwell, 35, who works as an account manager and hair extension specialist, said her blood pressure skyrocketed when she discovered the eviction notice on her door.

Neighbor Victor Chacon, 81, and his wife Marlene, 69, who live on fixed incomes, say they can’t sleep and Victor’s heart problems have worsened.

For Harvey and her daughter, the notice tipped a precarious existence into acute crisis. The 58-year-old cancer survivor struggles with the effects of a stroke, lung disease, diabetes and chronic back pain. Unable to work, she sometimes uses a walker and relies on disability payments of about $911 a month. That makes it a constant challenge to pay the monthly $750 for a one-bedroom with worn brown carpet that smells of their two dogs.

Chadwick has tried to help. But the recent high school graduate said applications for retail jobs turned into dead ends.

Finding another home after their 19 years at The Driftwood looked impossible: In early June, Zillow advertised only three nonsubsidized rentals in all of L.A. County for under $800 — all studios or single rooms.

“We are going to be homeless,” Harvey said, tearing up as she sat on the stairs leading to her apartment.

A frenzy of buying

Owners can evict tenants this way because they only need to give 30 or 60 days notice to terminate a month-to-month lease, unless municipalities have “just cause” protections, which accompany rent-control laws in about a dozen California cities.

The notices aren’t public records, so it’s impossible to know how many mass evictions take place. An eviction like those at The Driftwood only becomes public if the tenant doesn’t leave and the landlord files a lawsuit, which usually happens when someone doesn’t pay rent.

The number of those suits declined in California in recent years. But the drop-off could reflect an improving economy.

Other signs point to increased displacement from redevelopment.

In rent-control cities, landlords generally can’t tell rule-following tenants to leave unless they pay a relocation fee and convert the units to condos or demolish the building. In Los Angeles last year, owners filed to remove 1,802 rent-controlled units from the market — a 31% increase from 2016.

The push to evict tenants often follows a building purchase. In 2017, investors bought 1,686 so-called Class C properties — usually older, more rundown apartment buildings — in L.A. County, according to real estate company Transwestern, which looked at properties that sold for $1 million or more. That was a rise of nearly 70% from 1,005 properties in 2012, when the housing market started to take off.

Those older buildings are more likely to have mom-and-pop owners less interested in regularly raising rents. By buying and renovating the units investors can easily lift rents — and keep doing so.

“There is not nearly enough housing being developed,” said Greg Harris, an executive with brokerage firm Marcus & Millichap. “Investors see our market as an opportunity where there is tremendous long-term upside potential and not a lot of downside.”

The two ZIP Codes with the most sales in recent years are in Long Beach, including where The Driftwood and Cedar apartments are located.

The money often comes from investment firms that pool the contributions of wealthy individuals. The Driftwood’s new owner is a limited liability company managed by another firm run by executives of Orange County companies the Waterford Group and Stillwater Investment Group.

Apparently it’s a good investment: Limited liability companies run by those executives, Sean Rawson of Waterford and John Drachman of Stillwater, have purchased 15 buildings in Long Beach since 2015, Rawson said. Public records show they sold two of them, each for about $1.5 million more than what was originally paid.

In addition to The Driftwood, one of the complexes Rawson and Drachman’s companies still own is the complex on Cedar.

‘Did you get the paper?’

In February, after nearly 21 years in her upstairs apartment at the two-story Cedar complex, Cristina Moran’s world began to tilt when Beach Front taped eviction notices to the doors of the downstairs units.

By evening the concrete courtyard was filled with frantic conversations. “Did you get the paper? Did you get the paper?” A month later, upstairs tenants were hit too.

Moran, 39, shares the $780-a-month, one-bedroom apartment with her husband, Alex, a refinery worker, and their two daughters. Next door is her mother-in-law; across the courtyard are her brother-in-law and his wife.

It didn’t take much investigation to realize her next place would be more expensive, pushing her to look for a second job. The Salvadoran immigrant already leaves home at 3:30 a.m. for a shift at a Seal Beach Target. But she wants to minimize the impact on Jaylin, who at 5 will soon start kindergarten, and Kimberly, who at 20 is studying to become a physical therapist and has seen her grades slip from the stress.

As much as possible, Moran wants their world to return to one of school and Sundays spent watching their father play in local soccer matches.

“As a parent,” Moran said, “I need to put all the pressure on me.”

In 2015, sociologists Matthew Desmond and Rachel Kimbro published a study of nearly 200 people who were evicted. They found evicted mothers are more likely to experience depression and report their children’s health as poor. Studies by Spanish and Swedish researchers show people who were evicted are more likely to experience symptoms of PTSD and to die of any cause.

“There is something so fundamental about having a home and if that home is forcibly taken away from you that just destabilizes every aspect of your life,” said Kimbro, a sociology professor at Rice University.

Construction zone

For tenants at The Driftwood and Cedar, the stress was magnified by the disruption of remodeling.

As families left, workers swooped in to tear up counter tops and strip carpet, plopping neighbors into a construction zone. Tenant advocates say it’s a common tactic to make people move sooner.

Cockroaches and rodents sprang from cupboards as they fled renovations in nearby apartments, residents said. Liz Velez, the pregnant wife of Moran’s brother-in-law, said the dust and paint fumes left her with headaches.

On a recent morning, Moran sat in her mother-in law’s apartment, having pupusas and chatting with her two daughters, her mother-in-law and Velez. Moran burned a precious vacation day to be on hand as new windows were installed in their units.

The buzz of power tools was constant. Loud bangs floated up from the alley, where a worker broke up a toilet. Another worker yelled through the screen door that water would be shut off the following day.

Around 11 a.m., Velez realized their time might be wasted when she received a text message from Beach Front informing her it might only complete one unit a day. “Then why send the same notice to every unit with the same date and same time?” she texted back in anger. Just after 1 p.m., they learned the vendor wouldn’t be coming at all.

Beach Front Chief Executive Kyle Kazan said he was sorry no one showed, but vendors sometimes have conflicts. He said his company’s construction activity wasn’t aimed at pushing people out sooner and noted it was legal and conducted during daytime hours.

Too few homes

It’s no secret why California landlords can command higher rents: Too many people are chasing too little housing.

Neighborhood opposition to development blocks new construction. After the recession the number of renters skyrocketed as mortgage lending tightened and the large millennial generation moved out on its own.

To stem the resulting rent escalation and evictions, tenant advocates want rent control. In November, California voters will decide whether to let cities limit rents on buildings built after 1995 — something state law has banned for over two decades.

Advocates in Long Beach couldn’t get enough signatures to put controls on the ballot for older buildings, but they promised to keep fighting for protections similar to Los Angeles. There, owners of buildings built before October 1978 generally need a “just cause” — such as a tenant not paying rent — if they want to evict tenants. When a unit becomes vacant, landlords can charge whatever rent they want, but the law caps annual increases for tenants at 3% to 8%, depending on inflation.

Many economists argue rent control restricts supply further by pushing landlords to convert units to condos and incentivizing tenants, who otherwise would move, to stay in their units.

Dan Blackwell, a broker with CBRE, said the prospect of rent control is giving some Long Beach landlords further reason to raise rents now. Or sell.

Rawson of Waterford said his company is making needed improvements in rundown buildings. At The Driftwood and Cedar, where tenants said they’ve long dealt with pest problems, Rawson said they’ve invested $30,000 in each unit to make them spic and span. Like the apartment industry as a whole, he doesn’t consider 60-day notices to be evictions, arguing landlords are simply ending a tenancy the same way a resident can with proper notice.

“We bought the buildings to say we are going to reinvest and bring these blighted buildings to the point where they are an asset to the community,” Rawson said.

Beach Front’s Kazan said his company rarely gives 60-day notices and, when it does, most people can find a new place nearby and get on with their lives.

Given the market, though, those new units are likely more expensive and some people simply can’t pay.

Pressure for a deal

Desperate, Harvey reached out to Housing Long Beach, a tenant group pushing for rent control.

The group called a press conference with Driftwood and Cedar tenants in early March to pressure the owners into a deal with residents. Two weeks later, tenants appeared at a City Council meeting to ask for help.

In tears, Velez spoke of her pregnancy and how she feared moving far from her doctor’s office.

Anayensy De La Cruz told the council she hadn’t seen her father in weeks because he had taken a second job to afford a pricier home.

The last to speak was Victor Chacon. He called it an injustice to be treated like this after 30 years at The Driftwood. When he ran past his allotted three minutes, his mic was cut. Chacon kept speaking, his fist raised in the air.

A week and a half later, just before the last Driftwood households — Chacon, Harvey and Caldwell — had to leave, their councilwoman, Lena Gonzalez, announced a deal with the owners: Tenants would get 30 more days and an undisclosed amount of relocation money. Her chief of staff told a local news website the office would work on a similar deal for Cedar.

But weeks later, Driftwood tenants said they learned more details and felt let down. They wouldn’t get the money — $2,000, plus their full security deposit — until after they left, making it difficult to find a place. And the money wouldn’t go far after paying first month’s rent, a security deposit and moving costs.

They decided to hold out for more and stayed past their allotted time.

At Cedar no deal emerged and some residents stopped paying rent even before they had to leave. They wanted to save money but also protest that they were living in a construction zone. When their 60 days ended, they also refused to leave.

Moran said she knew the position wasn’t sustainable, but wanted to show the owners — and others like them — it wasn’t easy to buy a building and kick everyone out.

The first eviction lawsuits — for Harvey, Chacon and Caldwell — arrived in mid-May.

It wasn’t like they hadn’t tried to find new homes. Chacon, who paid $625 a month at the Driftwood, said it would take years to work his way up the wait list for the subsidized senior housing he found. He couldn’t find a market-rate unit in his budget.

Caldwell said she found a one-bedroom a few days earlier for “more than double” the $800 she was paying. (Her eviction lawsuit was later dismissed.)

Given her mother’s health, Chadwick took on the work of finding a new place, but struck out.

As the prospect of living on the streets grew, mother and daughter fought more. For release, Chadwick used a gifted season pass to escape to Knott’s Berry Farm where she and friends role-played as residents of a 19th century boomtown.

Final offers

Eventually, Caldwell accepted about $2,500 to turn in her keys and the owners withdrew their lawsuit. Resolution wasn’t so easy in other cases.

Kazan said Beach Front and the owners were willing to help those who couldn’t afford to move, but that tenants didn’t return the company’s calls. Tenants denied that and said Beach Front was the one that was unresponsive.

An attempt to find Chacon and his wife Marlene a below-market studio for seniors fell apart amid confusion and distrust. Chacon settled his lawsuit for $1,667 after attorney fees. He has until early August to leave.

In late June, Cedar’s owners sued Moran and other families. They are waiting to go to court and looking for a new place.

And on a Monday morning, Harvey and her daughter met in a courthouse conference room to discuss their new offer: $833 in seven business days, and the rest of the $1,667 after they turned in the keys.

Their attorney, Juan Morales, doubted they could get more. He noted if they lost at trial, they would leave with nothing.

Even if they took the money, many landlords require income at least double the rent.

“What are we going to do?” Harvey asked.

“I don’t get why you are asking me,” Chadwick responded. “I can’t do all of this on my own.”

Harvey ultimately signed and in tears hugged her daughter.

“It’ll work,” she promised.

Packing up

The metamorphoses of The Driftwood and Cedar complexes, meanwhile, had been proceeding apace.

The name was removed from the Pacific Avenue building. New wooden gates were installed at both complexes, as were barbecues in the courtyards.

Online ads show one-bedrooms units with black counter tops, wood floors and sparkling white bathrooms. Rents are now $1,395 at Cedar and $1,495 a month at Pacific.

A day before Harvey and Chadwick had to leave, they still hadn’t found a permanent place to live.

Harvey spent the day carrying boxes of clothes, DVDs and other belongings down the steps and into a friend’s beat-up truck so they could be moved into storage. Much of it would be left behind.

Chadwick said if either of them had a driver’s license, maybe they’d save up and purchase a car to sleep in. Or maybe she’d stay with a friend and her mother could rent a room in a house.

For the time being, home would have to be the Colonial Pool & Spa Motel, a gold motel with arches whose grounds are dotted with palm trees. At a cost of more than $550 a week, or over $2,000 a month, it was still the cheapest place they found that accepted their dogs.

The room at least was clean, and Harvey was briefly at peace.

“Sweetheart, it’s a home,” she said, “and I don’t have to worry about anything else for another week.”

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