'Debilitated' Former Sanford Capital Property Sells At Auction As Tenants Protest Conditions
A group of Southeast D.C. tenants traveled to the far corner of Northwest Washington on a rainy Wednesday morning to protest the foreclosure auction where their community was to be sold. But by the time they arrived, the property had already found a new owner.
The property being sold at the auction, held outside the office of Alex Cooper Auctioneers at 4910 Massachusetts Ave. NW, was the Oak Hill Apartments, a nine-building community sitting 12 miles and a river away on Wheeler Street SE in Congress Heights.
The 108-unit property was previously owned by Sanford Capital, the notorious landlord that agreed to exit the District's housing market after D.C.'s attorney general sued it for the poor conditions of its apartments. The Oak Hill Apartments were one of the few remaining Sanford properties that hadn't yet sold, as it had been in court-appointed receivership since 2017.
The auction was initiated by the holder of Sanford's loan, Chak Investments LLC, which alleged the landlord hadn't paid its debt. Berkadia's Cameron Webb, Bobby Meehling and Louis Jacobe represented the debt holder in marketing the property to attract interested buyers.
More than 20 people, representing 11 separate investor groups, arrived Wednesday morning to bid at the auction, held outside the entrance of an office building. A few held umbrellas, but most stood out in the light rain. The auctioneer began addressing the crowd at the scheduled time of 11:30 a.m., reading out property information and legal language for several minutes before starting the auction. The bidding opened at $8M.
Twenty-one separate bids were placed, most at increments $100K higher than the previous offer, before the auction was won by a private local investor, represented by Long & Foster Real Estate's Andreas Pericli, who bid $11.3M.
After the auction ended, Pericli, the auctioneer and the debt owner went to a private room in the building to sign paperwork, and most of the losing bidders left the scene.
About 10 minutes later, a group of seven individuals entered the building's lobby holding signs that read "Justice for Oak Hill." The group's members identified themselves as the Oak Hill Tenants Association, and they included some tenants and some organizers who don't live at the property.
Doretha Harris, a member of the group who said she has lived at the Oak Hill Apartments for 13 years, told Bisnow the group was looking to meet with the buyer of their homes to discuss his agenda for the property.
"We'd like to know what's going to happen to us on the property," Harris said. "We'd like to know what they're going to do with the property. It needs a lot of work."
The buyer and his agent, who had entered a room in one of the building's hallways prior to the group's arrival, didn't return through the lobby. After the group had waited for several minutes, Webb entered the lobby and informed them that the buyer had left out of a separate exit and he would work to schedule a meeting between the parties at a later date.
"This is crazy," Harris told Webb in the lobby. "That's how you know they're going to be sneaky with us on the property."
Webb, a broker who was marketing the property for sale, told the group that he is a neutral party who wants everyone to be satisfied, including the tenants. And he told the group that tenants have rights under D.C. law, currently including a moratorium on evictions.
"They have to play by the rules," Webb told the group.
Speaking to Bisnow after the group left, Webb said the group's arrival showed him that the new owner has work to do to regain the tenants' trust.
"The fact the tenant association showed up today means there's a relationship to be restored at the property," Webb said. "The tenants want to be heard and included."
Pericli, the buyer's agent, spoke to Bisnow on the phone about three hours after the auction ended. He said he and the buyer didn't intentionally avoid the group, adding that they had parked in a garage that was accessed through an elevator, not the lobby exit.
He declined to name the buyer, who he said would be acquiring the property through an LLC and wanted to remain confidential. He said he plans to meet with the tenants in the next week or two to hear their requests.
"This property has been debilitated, it's in very bad shape," Pericli said. "We'll work with the community as much as possible and improve those conditions. From what I've seen of the conditions, it is not acceptable."
The tenants said the problems include physical conditions such as mold and rodent infestations, and issues of safety with violent crime and broken locks on building entrances. The group detailed their concerns in a letter they had printed and planned to deliver to the buyer.
"We have been living in slum conditions for too long," the letter read. "We are expected to pay thousands of dollars in rent for unlocked buildings, leaky plumbing and roach-filled apartments. It's unsafe for us to use our balconies or spend time outside because of shootings."
Harris said that the problems began with Sanford Capital, but they continued after the property went into receivership and the court-appointed receiver retained UIP Property Management to manage the property in late 2017. She said UIP brought tenants to court over unpaid rent before the District enacted an eviction moratorium, but it hasn't addressed many of their maintenance issues.
UIP principal Peter Bonnell, speaking to Bisnow Wednesday afternoon, acknowledged that they sued tenants who hadn't paid rent, adding that it is a common practice for property managers. He said because UIP manages but doesn't own the property, it hasn't been able to invest the necessary capital to fix the maintenance issues. And he said he had expected the property to come under new ownership much sooner.
"We took over as manager in 2017, and I expected a 12-month assignment, we would get the property under control and stabilized, and then it would be sold," Bonnell said. "For reasons I'm not privy to, it was kept until now, and we've done the best we could with the limited resources that were available to us. It's a tough situation. It's a huge investment, and I'm glad it's been sold to somebody who's hopefully going to make that investment."
He said UIP replaced the building doors twice because of broken locks, but it kept running into issues of people propping the door open or jamming the locking mechanism to keep it unlocked. He added that D.C.'s eviction moratorium prevented UIP from removing tenants who had put others in danger before the D.C. Council passed a measure to allow that exception last week.
"There was literally nothing we could do," Bonnell said. "Someone could commit a crime, we could know it was them, and we were barred by Covid rules for bringing them to court. The law-abiding, rent-paying folks in this property were put in danger because there was such a strong ban on evictions. Thank God someone wasn't killed."
Pericli said the new owner intends to make the property safer and improve its maintenance. He noted that its interests are aligned with the tenants because a cleaner, safer property is more valuable for the investor.
"You saw the auction price, it went to the moon, you're talking about a significant investment, so we cannot leave things like they are," Pericli said. "We have to act."
He said the buyer had initially planned to stop bidding if the price surpassed $10M but then decided to continue bidding as the strong demand pushed the price higher.
"It's a crazy market these days," Pericli said. "He had the funds, so he decided to go higher. He lowered his yields, in essence, to do that."
Webb said the winning bid was on par with his expectations going into the auction. He said he thought the demand was high in part because of the property's location within a half-mile of the St Elizabeths East campus, where a host of new development is moving forward, including a planned 136-bed hospital, the Entertainment and Sports Arena, several multifamily projects and a planned office building anchored by a D.C. agency.
He also said the investor has the ability to add value by improving the conditions and leasing it up, as the apartments are currently 60% occupied.
"By investing in the property and renovating the units, I think you can really change the environment and feel of the property," Webb said. "You can take a negative and turn it into a positive."