Unrest over new leases at mobile home park
When the Plaza del Rey Mobile Home Park Residents Association was created, it was intended to be a bridge between the Sunnyvale park’s residents and new ownership.
But, last month, the association witnessed the wrath of its residents. The association saw residents shouting at each other, booing, jeering and some bursting into tears and running out of the room. Sharp words were leveled at the association itself.
Roughly 100 residents packed the park’s clubhouse to get an update from the association on new lease terms offered in March. Residents, unhappy with the new terms, are hoping the association can bring the park’s new owners — the Carlyle Group — back to the table to renegotiate the leases.
“You are playing into the hands of Carlyle. They are thrilled we are in disarray,” board member Lois Shouse shouted back at residents. “They do terrible things, and here we are fighting among ourselves instead of fighting them.”
Residents have said told city leaders and this newspaper over the past few months there’s been an anxious vibe at their park ever since the Carlyle Group, a Washington, D.C.-based private equity firm, purchased the property in 2015.
When the firm raised monthly rents by 7.5 percent in May last year, a jump residents were unaccustomed to, some residents say they became even more anxious. The increase was nearly double the typical annual increase under the prior ownership of roughly 3-4 percent.
Under previous ownership, all space rent agreements were month-tomonth with no long-term leases. The association began working with the Carlyle Group earlier this year to create lease agreements that would help assuage residents’ worries about more spikes in rent.
The new leases are for five years and lock in 4 percent annual rent increases as well as a $1,022 initial monthly rent.
According to a representative from the Carlyle Group, approximately 70 percent of Plaza del Rey residents had signed the new leases through May. Residents who do not sign the lease will continue with the previous month-to-month agreement, but without knowing what future rent increases might be.
Park resident Terry Miller, echoed a sentiment of many fellow tenants; that they aren’t happy with some things in the lease but signed to have the security of a steady 4 percent annual increase while they could.
“I signed the lease because I thought it was the best of the crappy options,” Miller said.
However, in order to sign the lease residents must also sign a “right of first offer” agreement, which requires residents to notify the Carlyle Group when they intend to sell their homes. The firm can then make an offer, which the resident can reject, but if the resident decides to sell the home at a price equal to or lower than that initial offer, the firm can make another bid.
“I might live to regret that I didn’t sign the lease, but it was a principle thing,” a resident named Bonnie said to this newspaper. “I wasn’t about to give up my rights about who I sell my property to, to them.”
The lease also states that a new buyer can request a negotiated starting rent of $1,250 for most spaces and $1,350 for four of the larger spaces or inherit the current owner’s rent. The new buyer will then be offered a five-year lease at an annual rent increase of 7.5 percent if the transaction closes before Dec. 31 of this year. Past this year, Carlyle can set the rents for new owners to “market rate” at $1,600.
“People really wanted the good things, the rent reduction, the guarantee of 4 percent rent increase, that they felt that they had to sign the lease even with the poor parts,” Shouse said to this newspaper. “It was like they gave us three roses in a bed of thorns.”
Residents are also upset about the lease’s statement has residents not only chipping in for the cost of capital improvement projects, but an additional 7 percent toward project costs.
According to the Carlyle Group, money generated from last year’s first rent increases went toward capital improvements throughout the park such as upgrading the community clubhouse, remodeling the community pools and adding other new features such as decorative fountains.
“We have made significant capital investments to materially improve the property for residents. We have worked closely with the residents to keep rent affordable, including leases that limit rent increases and a program to help tenants who have limited financial means,” said Dave Kingery, managing director of the Carlyle Group.
That program, he said, provides a safety net for residents experiencing financial hardship. Residents earning less than $50,000 a year and below a certain amount in assets could qualify for an exemption from rent increases for two years.
But the tone in the park has changed, residents say.
“Since the increase, the whole park has been on stress alert,” Sandy Skolnick said.
Last summer she, along with park resident Judy Pavlick and others, formed the Sunnyvale Mobile Home Alliance to keep abreast of changes at Plaza del Rey and other mobile home parks across the city. The group is worried about rising rents and on guard after two mobile home parks — Blue Bonnet and Nick’s Trailer Court — were recently closed and residents were given assistance to relocate elsewhere.
Carlyle Group representatives said they are not interested in owning any of the mobile homes; rather, older homes would be replaced and resold if there is a temporary acquisition.
“When we are talking about buying these things, we’re only interested in (mobile) homes built in the 1980s or before. We’d buy the home, tear it out, put a new one in and then sell it,” said Kingery.
The firm also says it does not intend to get the park’s zoning changed and has no plans to develop the park into anything else. Existing Sunnyvale policy mandates at least 400 acres be zoned across the city for mobile home parks.
Kingery says the company was “excited” to purchase a 90-acre property in the Bay Area because of the profitable nature of its real estate. The group would not comment on the park’s purchase price.
“We like the Silicon Valley in general and this is a manufactured housing property, which Carlyle Group is focusing on right now. It gave us the opportunity to purchase in California,” he said. “We’re buying this because we’re getting the manufactured housing and we think it’s good money right now.”
Residents and the association, however, want to renegotiate those new lease terms with Carlyle. Association president Mike McCarthy explained that the terms of the current board members were extended so they could continue working with the Carlyle Group. The association also added two board members on June 15.
Residents created the association two years ago when there were rumors of a sale to new ownership. To head the group, the residents elected five board members, according to Shouse.
Residents, however, allege Carlyle Group failed to negotiate property and the association failed to bring the company back to the negotiating table to rectify the reviled portions of new leases. Some residents at the June meeting even asked the current association step down and be replaced with new members.
On April 25 several association board members spoke to the city council hoping to compel the Carlyle Group to renegotiate. Earlier this year, the city helped arrange for the Carlyle Group to negotiate leases with residents through Project Sentinel, a nonprofit housing counseling agency.
Residents are also considering ways to get mobile home rent control adopted in the city. Short of a rent control measure from the city, members of the Sunnyvale Mobile Home Alliance have mulled a costly ballot initiative.
To the dismay of some Plaza del Rey residents, the council decided in February not to study rent control this year, but will be doing a full review of city housing policies instead.
Many of the mobile park’s residents pay a rent for one of the roughly 800 spaces in the park, in addition to the mortgage paid on homes. According to McCarthy, roughly 50 percent of the park’s residents are on a fixed income, and many are retired.