Meet The Wealthy Investors Buying Cheap Portland Apartment Buildings

Landlords packed Portland City Hall last week to testify against a new city policy requiring property owners to pay relocation costs when they raise rents by more than 10 percent in a year or evict people without cause.

One by one, the landlords described themselves as caring local business owners with small scale investments in a duplex or a few one-bedroom apartments.

"I don't have a rent over $650," said Kelly Gossin, a man with a ponytail and a hat reminiscent of Indiana Jones. "I haven't raised the rent since 1996 but one time, for $50."

"My average client is a retiree, a senior citizen," said real-estate attorney Charles Kovas. "Let's not sit here and assume that landlords are full of a pot of gold."

Notably absent from the hearing were a different class of landlords: the professional and institutional investors who have flocked to the Portland market in recent years. They're taking advantage of low vacancy rates and strong population growth to make money – and, in the process, driving up rents.

Dozens of publications from the real estate industry proclaim Portland an investment opportunity, thanks to rents that historically remained low but are now the fastest growing in the nation.

"Portland Multifamily Commands Top Dollar," read the headline of a 2016 forecast from Colliers International, which buys and sells real estate in 66 countries. "The Golden Age of Apartments," declared a publication from HFO, a Portland-based real estate investment firm.

Two Portland properties that sold at the end of last year, the Titan Manor and the Normandy Apartments, provide interesting case studies into who these investors are.

For activists and politicians pushing for rent control, these two apartment buildings have become shorthand for the thousands of poor Portland families displaced by rent increases and mass no-fault evictions.

Like many investors, the men who own the Normandy and the Titan Manor have stayed out of the spotlight. They used shell companies to buy the properties and limit their legal liability. Then they hired property management firms to handle day-to-day interactions with residents.

These are all perfectly legal, industry standard ways to do business. But the relative anonymity of property owners can leave tenants feeling powerless to challenge their evictions and may make it difficult for them to collect the relocation assistance payments the Portland City Council now requires. Tenants are supposed to request the aid payments themselves, and if their landlords refuse, their only recourse is to take them to small claims court.

'It’s A Mess'

The Titan Manor, a 72-unit apartment complex on Fessenden Street in Portland's St. Johns neighborhood, sold for $8.3 million last October. It's a series of long, two-story buildings with a fresh-looking coat of yellow and brown paint a few blocks from Roosevelt High School.

But in the months leading up to the sale, the previous owner had let the 1972 property fall into disrepair. Debris, trash and algae cloud the green water that fills a small swimming pool in the building's interior courtyard.

Coya Crespin, a single mother with a 5-month-old and a daughter in elementary school, works in the restaurant industry and has rented an apartment at the Titan for 5 years.

Curtains printed with dinosaurs hang in the kids' bedroom, and Crespin has written out words and syllables on an easel in the living room to help her daughter practice reading.

At first, Crespin was hopeful that the new owners might spruce things up.

“It’s a mess,” she says. “Two out of the five washing machines in our laundry room don’t work. It’s just run down.”

Crespin says that after the building changed hands, she received a letter from Avenue 5, a property management company, promising exciting new changes for residents. She called immediately to request repairs in her unit.

Instead of repairs, Crespin says she and the other residents at the Titan all received no-fault evictions over a period of two months. Willamette Week

first reported

on the evictions. Avenue 5 did not respond to a request for comment.

Some of her neighbors have moved out already, Crespin says, but about 50 units remain occupied, mostly by families with children. Some parents don’t want to pull their children out of the neighborhood school in the middle of the academic year.

It bothers Crespin that she doesn’t know who bought her building and who is responsible for her eviction.

“It feels very unstable,” she says. “I want to have a working relationship with my landlord. I feel like we’re in business together.”

Paper records from the sale of Titan Manor are on file at the Multnomah County tax assessor’s office, including a title transfer document and mortgage documents for a $4.2 million loan the buyers took out from the Washington Trust Bank. In January, they refinanced that loan for $6.6 million.

Documents show that four different limited liability companies own the Titan Manor. Three listed their address as 10 Clay Street, suite 200, in Oakland, California, and the deed notes that tax statements should be sent to that address.

That's also the address of the Rogers Family Office and Rogers Family Foundation. The office and foundation manage the wealth of T. Gary Rogers, the former CEO of Dreyer's Grand Ice Cream, former chairman of Levi Strauss and Co. and former chairman of the San Francisco Federal Reserve Bank.

Rogers acquired Dreyer's in 1977 for $1 million. Nestle bought the ice cream maker in 2006 in a deal worth $3.2 billion, according to an interview Rogers gave the San Francisco Business Times in 2011.

The Rogers family used some of their payout from the Nestle deal to endow a private family foundation, which also operates out of the Oakland office. It has assets of about $100 million, per an account the family gave to the University of California at Berkeley Library. The foundation gives money to support charter schools and early literacy initiatives in Oakland.

At one point, Rogers' properties included a Napa Valley vineyard listed for sale for $20 million.

And though no one with the family will confirm it, documents suggest Rogers' real-estate holdings – or perhaps those of his philanthropy — also include this rundown Portland apartment building. For example, the Rogers family's in-house financial advisor, Matthew Semansky, signed mortgage documents for the Titan and is listed on the articles of incorporation for the three LLCs.

Semansky did not respond to multiple phone calls. Another employee at the Rogers Family Office hung up when asked about the Titan Manor evictions.

A second investor or group of investors, based in Oregon, owns a 14.3 percent stake in Titan Manor, through a company named STK Brugger LLC.

Developer Sean T. Keys is listed as the company's manager in its articles of incorporation. Keys also signed the mortgage loan and refinancing documents for the Titan. Keys is a partner at the Metropolitan Land Group, a Beaverton-based investment firm that owns more than 1,200 rental units in Oregon and Southwest Washington, according to its website. He's also a fourth-generation homebuilder, according to a short profile that ran in a brochure for First Republic Bank.

"An energetic and dynamic personality, Sean's interests range from real estate to polo to philanthropy," it stated.  

Keys and his wife, Gretchen, serve as chairs for the American Cancer Society's Hope Ball and Polo Classic fundraiser, an event they host at the Hidden Creek Polo Club, one of Keys' many properties in Oregon.

Public records show that just a month before he purchased the Titan, the IRS filed a lien on his business for $337,240 he owes in federal taxes. He's also facing a $14,553 lien for taxes he owes the state of Oregon.

The Oregonian has reported on Keys' debts and his connections to a local retirement fund manager who was permanently barred from the business after he misspent his clients' money.

Keys did not respond to multiple messages left at his office with the Metropolitan Land Group.

Asked what she would say to her building's owners, Crespin fought back tears.

"There's no words to say how invisible they made us feel. How insignificant they thought we were," she said. "It's heartbreaking."

Crespin was particularly upset that the new majority owners of her building appear to be associated with philanthropy focused on children's literacy.

"What I would do is get all the children in the building, and put them in the courtyard, take a picture of them, blow it up, and stand outside his house."

'A Rent Increase Has Become Necessary'

At the Normandy apartments on Portland's Northeast Killingsworth Street, residents recently received notices that their rent will more than double on April 1.

"Sorry to inform you, but the rental market has created enough of a disparity to your present rent that an increase has become necessary," reads one of the notices, published in The Oregonian. The announcement goes on to cite rising costs and "the steady increase of market rents for similar units in the Portland area," as the reason one tenant's rent is increasing from $600 to $1,250 a month.

Built in 1971, the Normandy is three separate buildings. The yellow siding is coming loose in several places. A disintegrating RV is parked in the yard.

Twenty-six children live in the building's 18 units, and they account for more than 5 percent of the student body at nearby Rigler Elementary school, according to Willamette Week, which first reported on the Normandy rent increases.

“Across the county, we’re seeing families in this crisis as they pack up and move from school to school, district to district, chasing that elusive affordable apartment,” says Multnomah County Chair Deborah Kafoury. She supported Portland’s plan to make landlords pay moving costs for evicted tenants because of situations like the one at the Normandy apartments.

City Commissioner Dan Saltzman, himself a real-estate investor who earns some of his income from rent, invoked the Normandy while casting his vote in favor of relocation aid. Landlords are now

challenging

the repayment policy in court.

As with the Titan, figuring out precisely who owns the Normandy requires a bit of digging. Tenants received their rent increase notices from a property management company.

But the property deed and other sale documents show that Ira Virden and Charles Halliday purchased the property in December, using the companies CPE Killingsworth LLC and Starr Pacific LLC. Tax documents for the property are being sent to Virden’s home address.

Virden is the Portland office manager for

HFF

, a multinational real-estate brokerage with offices in 24 U.S. cities. Halliday is co-head of the firm’s San Francisco office. Neither Halliday nor Virden returned repeated phone calls asking about the Normandy.

But

a 2015 report published by his firm

, alongside a photo of Virden, offers some insight into his thinking. The report notes that luxury apartments in downtown Portland are fetching record rents, and driving up prices across the city.

“The market-wide rent growth is stemming from rents set by new construction” the report reads. “The downtown ‘Class-A’ apartment deliveries have begun to force middle-income earners to seek housing in close-in suburban areas, where Portland’s Urban Growth Boundary continues to constrain supply.”

The report suggests that Portland’s rents will continue to rise until they catch up with those in San Francisco and Seattle.

Tom Minnaert owns First Class Property Management, the company hired to manage the Normandy.

Minnaert says many of the units are in “atrocious” condition due to years of neglect. He says the new owners bought the property intending to fix it up and expecting to raise the rents.

“I totally understand. A lot of people look at it, ‘Wow, those landlords are just being greedy and doubling people’s rents,’” he said. “We weren’t doing it just to double the rents, we were doing it to provide better housing and make the property a better property.”

But it's a stretch to call the $1,250 for units at the Normandy "market rate."  The average rent in Portland's Cully-Roseway neighborhood last year ranged from $847 for a one-bedroom unit to $1,175 for three bedrooms, according to the Portland Housing Bureau's 2016 data.

Minnaert says he sympathizes with his tenants. He's watched as low-rent properties became scarce in the Portland market.

"It's very hard to find anything, even under $1,000, for a two-bedroom apartment," he says.

Minnaert says he's hoping to meet with the Normandy's residents one-on-one early next week to discuss the 100 percent rent increase. He says he might be able to negotiate a smaller increase for tenants who want fewer repairs made to their units – if he can get the apartment building's owners on board.

"If he says, 'No this is what I want to do,' ultimately I'm going to have to abide by what he wants to do," Minnaert said.

But the owners may not have much incentive to negotiate.

The vacancy rate in the Portland metro area was just 3.1 percent at the close of 2016, among the lowest in the nation. That makes it easy for landlords to find new tenants.

Furthermore, to avoid having students at Rigler Elementary pulled out of school mid-year, Multnomah County

has offered

$48,000 to help families temporarily cover the cost of their rent increases at the Normandy. The money will be given out through the nonprofit Latino Network.

“It’s just for a brief time to help those kids complete the year,” Kafoury says.

She says the rapid rise of rents across the Portland metro area has placed enormous strain on Multnomah County’s short-term rental assistance program, which in the past was used primarily to help renters with short-term financial difficulties or transitioning out of homelessness.

“When we have to spend $10,000 on a family, as opposed to $6,000 on a family, it means fewer families can be served,” Kafoury says. “That means that taxpayers are effectively subsidizing these rent increases that are going to landlords, more frequently than ever, that are out-of-state corporations or investment holdings.”

Last fall, Multnomah County voters

approved

a housing bond measure to help fill the gap in affordable units. Kafoury says taxpayers are doing their part to address the city’s housing crisis.

“We need landlords to step up as well,” she says.

Coya Crespin, the mother of two at the Titan Manor, also hopes her landlord steps up. With the help of local organizers with the Community Alliance of Tenants, Crespin has written a letter asking her building’s owners to reconsider the no-fault evictions. She’s asking her neighbors to sign it too.

She plans to send it to every address associated with the four LLCs that bought the Titan Manor.

She’s hoping they write back.