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L.A. Renters Get New Landlord: A San Francisco Investment Giant

Has a Montgomery Street company arrived in Southern California to flip rent-controlled apartments into market rate units?




A Veritas-owned property at 300 San Juan Avenue, Venice.

Nicolas Mermet and Andrea Eitsert are in the middle of a nine-month marital disagreement.

Mermet thinks Veritas Investments, which purchased the couple’s Los Angeles building last July, is guilty only of mismanagement and poor planning. “I’m the more optimistic type of person,” he says.

But Eitsert is convinced something more sinister is behind the deafening construction they’ve endured eight hours a day, five or six days a week, since November, when crews first arrived at 3240 Fay Avenue to perform an earthquake retrofit. Veritas wants them to leave their rent-controlled apartment, she says, and the construction is “definitely” on purpose. Mermet isn’t buying it.


Over 18 months Veritas has quietly built a Los Angeles portfolio, using shell companies to acquire at least 12 rent-controlled buildings on the city’s Westside.


The couple agrees on one point, however. Day by day, they are going insane.

“They’re going for the torture, for the sadism,” says Eitsert, breaking into a hysterical laugh.

“A campaign of terror”

Roughly a year before construction would begin at Fay Avenue, 69 tenants sued Veritas Investments and CEO Yat-Pang Au in San Francisco, where the company owns over 250 apartment buildings. By February 2019, the lawsuit expanded to include 106 tenants in 39 different buildings. Negotiations between Veritas and the plaintiffs are ongoing. (Veritas also received a Paycheck Protection Program loan this spring, which, under pressure from Nancy Pelosi, they say they will repay.)

Defendants “target long-term rent controlled tenants in a disguised effort to harass and intimidate them with the goal of forcing tenants to move out so Defendants can raise rent to market rate,” the plaintiffs alleged in the 2018 lawsuit. “Harassment” tactics cited by the tenants included, but were not limited to, construction “calculated to cause disruption of the tenants’ quiet use and enjoyment of their premises,” “frequent and prolonged water shut-offs without proper notice,” “severe leaks” and the “proliferation of construction dust and debris” in apartments and common areas. In the last 18 months Veritas has also quietly built a Los Angeles portfolio, using shell companies to acquire at least 12 rent-controlled buildings on the city’s Westside, Au’s first expansion outside of the Bay Area.

Veritas’ Los Angeles complex at 3240 Fay Ave.

Residents at 3240 Fay Avenue are already voicing complaints like those made by tenants in the San Francisco lawsuit. When asked if he and his neighbors will sue, Fay Avenue resident Will Ogilvie says they are considering all their options. Residents at another Veritas property, 300 San Juan Avenue, approached the Los Angeles Tenants Union for advice this spring, but declined to participate in this story.

When informed of tenants’ concerns that Veritas is forcing them out of their apartments, a spokesperson questioned if they had evidence to support the claim. “The company does not do that,” the spokesperson wrote in an email shared with Capital & Main.


Veritas is known for passing on renovation costs in rent increases.


Los Angeles announced this June that its homeless population had grown to more than 66,000, roughly double the population of Beverly Hills. Activists and politicians attribute the scale of the homelessness crisis in large part to a dearth of affordable housing in the city. And though median rents dropped during the pandemic to $2,150 for a one-bedroom apartment, anxiety is increasing over an imminent “eviction tsunami“ when the city’s COVID-19 eviction protections expire.

According to Brad Hirn of San Francisco’s Housing Rights Committee, Veritas’ ability to flip rent-controlled apartments into market rate apartments could further “hemorrhage” the city’s affordable housing stock. One Bay Area tenant said the company is trying to “undo” rent control in San Francisco.

Veritas is known for making renters pay for construction in what are called “pass-throughs,” when landlords charge tenants for renovation costs through rent increases, a legal way to inflate rents even in rent-controlled apartments. Because of the pandemic, pass-throughs are currently frozen in Los Angeles until the governor’s state of emergency ends on September 30.


One tenant says her building is ‘absolutely not’ in better condition than before renovations. Crews seem to disperse throughout the complex to work as slowly and as loudly as possible.


But 60 days after protections expire, Veritas can file for a Primary Renovation pass-through at Fay Avenue, allowing the company to charge a 10 percent rent increase over two years — on top of annual three to five percent increases — to cover plumbing repair, structural repair and retrofits. Veritas can also apply for a Capital Improvement Project pass-through to cover other renovations, charging Mermet, Eitsert and their neighbors up to 50 percent of regular construction costs in maximum $55 monthly increases. Veritas cannot charge tenants with both pass-throughs at the same time, says Elena Popp of Los Angeles’ Eviction Defense Network.

L.A.’s first eviction tsunami was supposed to arrive in April, May and June, but it never came. Up to 600,000 Angelenos were expected to lose their homes — but because of protections, eviction numbers plummeted in L.A. County, says Popp. What she calls “tsunami two” would follow the reinstatement of pass-throughs, 91 days after the cessation of the governor’s state of emergency, unless it is also thwarted.

Current protections are suspending L.A.’s housing stock by “fish wire,” says Popp. “It could hold, but someone could come and cut it at any minute.”

At first, Mermet was relieved his complex’s long-standing issues were being addressed. “I’m pretty sure when Veritas got the building, they got a little bit more than they bargained for,” he says. “The bones of the building were in a dire state of disrepair.”


‘The previous owner was a bully and a jackass,’ says a tenant, ‘but if something went wrong in the building, he took care of it right away.’


But according to his wife, the complex is in even worse shape than when renovations began. “There has been no improvement,” says Eitsert. Tenant Megan McMullen says the building is “absolutely not” in better condition than before renovations. Crews seem to disperse throughout the complex to work as slowly and as loudly as possible. “We’ve been joking that they’ve redone the drywall in the apartment below us five or six times,” says Eitsert. “I don’t know what they’ve been doing besides making us miserable.”

“All these people are working, making noise all day long,” says McMullen. “And then you look at some of the units and you’re like, ‘What are you guys doing?’”

The Fay Avenue property needed “urgent repair” when the company acquired the building, according to the company’s spokesperson. “We are addressing key life safety issues including its lack of emergency gas shutoff valves, neglected soft-story earthquake retrofitting, foundation repair as well as plumbing, dry rot and termite damage,” they said.

Ogilvie, whose job in sound design has been disrupted by the construction, says he is enduring “a campaign of terror.” Veritas, via managers Moss & Company, informed the tenants there would be a retrofit in the fall, but never said anything about additional remodeling, according to Ogilvie, let alone provided the necessary paperwork.

Areas of expertise

Veritas Investments only purchases relatively small, rent-controlled buildings. As a real estate investment trust, or REIT, an unknown number of anonymous investors back the company financially. Private equity firms like Carlyle Group and Ivanhoé Cambridge are their most prominent, and public, financiers; the Baupost Group, a hedge fund from Harvard University where Yat-Pang Au obtained his MBA, has been another close collaborator.

Such groups are often reluctant to invest in dilapidated, rent-controlled properties, Sylvain Fortier of Ivanhoé Cambridge explained to the San Francisco Business Times, but Veritas offers the “expertise” necessary for equity firms to navigate the messy world of affordable housing.


Another renter says workers have entered her apartment without notice — including one morning while she was asleep.


“We have a very long-term investment horizon,” Yat-Pang Au said in the article. “We tend to look for buildings that have a more transient tenant profile, but transience can mean 10 years or two years, you never know. We honor and respect the stability that rent control provides for our residents, and we just wait.”

Critics argue that with Au, whose favorite book is the play Cyrano de Bergerac, nothing is as it seems. In a complaint filed on January 31, the Evander plaintiffs allege that “pursuant to Defendant Yat-Pang Au’s business plan,” they were “suddenly subject to a new antagonistic and intentional juxtaposition of nuisance construction and a decrease in housing services” when Veritas acquired their buildings. Au has publicly said that “young techies” moving to San Francisco are the company’s target demographic, a group the plaintiffs say they do not belong to as long-term tenants. They describe Au’s “business plan of acquiring rent-controlled buildings, driving out long-term tenants and then immediately selling the buildings once long-term tenants have vacated and rents have been raised to market rate.”

According to Brad Hirn, who says he spent the last three years researching Veritas for the Housing Rights Committee, the “expertise” Veritas can offer investors is a knowledge of local housing law and its loopholes.

“I think that’s what the investors are speaking to,” says Hirn. “They know Veritas has done their homework on how to maximize profit from these buildings while seemingly doing it legally, and without formal evictions.”

The 300 San Juan Avenue property in Venice Beach is also beset with problems. Tenants have made at least 18 service complaints and requests to the city on MyLA311 since last summer, including one complaint of flooding, five of illegal construction, two of illegal excavation and three of obstruction. On December 4, 2019, at 10:16 p.m., a fire erupted in the building, attributed by the L.A. Fire Department to faulty wiring in a penthouse apartment.

Built in the 1920s, 300 San Juan was also in poor condition when Veritas acquired the building, their spokesperson explained. “As with the Fay building, we have received great feedback from San Juan Ave. residents who appreciate the improvements, and we will continue working with all our residents to minimize disruption,” they wrote.


Open wires protrude from a gash in the wall where the apartment buzzer used to be, random nails jut down from a ceiling, hammered in mysteriously from the apartment above.


Tenants at 10 other Veritas properties in Los Angeles say the company has performed construction on their rent-controlled buildings, but report nothing unusual. San Fernando Valley–based Moss & Company manages the properties, unlike in the Bay Area, where Au created an in-house team, GreenTree Property Management, to oversee the buildings.

“We understand and empathize with all complaints during a renovation,” Moss & Company director of operations Maria Bonacci wrote in an email. “The company is not aware of any current or past lawsuits. There has been no illegal activity at the properties we operate in LA.”

A bicycle theft and water shutoffs

Fay Avenue tenants say workers often fail to clean up, leaving mud, dirt and debris in the complex. They also claim workers don’t clean up in the apartments themselves, leaving sawdust and other wreckage behind, and empty cans and cigarettes in the parking lot.

Getting Veritas or Moss & Company to address disrepair complaints takes unreasonable effort and persistence, according to tenants. “My property manager is just absentee,” says Ogilvie. “The previous owner was a bully and a jackass, but if something went wrong in the building, he took care of it right away,” says Eitsert. Construction crews broke both Fay Avenue gates in April, for example, and despite tenant complaints, Veritas only fixed the gates this week after they were reached for comment on this article. Tenants were also supplied with electronic clickers. Last month, Ogilvie’s bike was stolen from the back garage because of the broken gates, he says; Veritas has agreed to compensate him.

Open wires protrude from a gash in the wall where the apartment buzzer used to be, ripped out in July 2019 when Veritas purchased the building, and never replaced. Random nails jut down out of Ogilvie’s ceiling, hammered in mysteriously from the apartment above. The laundry room was an early drama: Workers frequently tripped circuit breakers in the fall, according to Eitsert, rendering the machines useless. Once the machines were fixed, clogged pipes disrupted their water supply. When tenant Megan McMullen’s stove broke, she says the replacement Moss & Company gave her was filthy and leaked gas.

“It was like they said, ‘No, she can’t have a new stove,’” says McMullen. “‘Give her the shittiest, dirtiest thing you can find, and if she doesn’t complain, great.’”

Gas and water shutoffs, another feature of the Bay Area lawsuits, also plague tenants, who say they need water to wash their hands during the COVID-19 pandemic. “They’ll give us notice that they’re going to shut off the water, and the water doesn’t shut off, and then a few days later they’ll shut off the water without warning,” says McMullen.

Eitsert says workers entered her apartment without notice on two different occasions, once in the morning while she was asleep. McMullen says she filmed workers entering her apartment with a security camera while she was at work.

“As with any projects such as these, there are sometimes inconveniences, however we do the best to provide accommodations to our residents either in the form of rent credits or alternative arrangements,” the Veritas spokesperson wrote. On July 14, manager Lenae Price offered tenants an additional $150 rent credit for the months of July and August. Ogilvie calls the concession “insultingly low.””

Sincerely, the Veritas Tenants Association

Last month, Ogilvie organized his neighbors, people he says he never really knew before the construction began. Now they correspond with building management as a group, signing their emails as “The Veritas Tenants Association of Fay Ave, LA, CA.” Keeping meticulous logs of their complaints, the association is bracing itself for the months ahead.

Some members may still be unsure what is afoot in their sun-drenched building, but McMullen no longer has any doubts she is being targeted by a company based 380 miles to the north, no matter how surreal that first sounded.

“We definitely all are,” she says. “They’re trying to drive us out.”

Photos via Google Maps

Copyright 2020 Capital & Main

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