Developer sued by DTLA artist collective over rent-restricted building

Fifteen Group bought the building, whose residents are part of Santa Fe Art Colony, then switched it to market-rate and jacked up rents

Dec.December 06, 2019 03:49 PM
(Credit: Courtesy Santa Fe Art Colony Tenants Association and iStock)
The building at 2345 South Sante Fe Avenue. (Credit: Courtesy Santa Fe Art Colony Tenants Association via Los Angeles Magazine and iStock)

An artist collective is suing Fifteen Group, a month after the real estate investment firm jacked up prices on their rent-restricted Boyle Heights apartment building.

The Santa Fe Art Colony Tenants Association filed the suit Monday, claiming Fifteen Group illegally refused its effort to buy the property outright after switching the building to market-rate and dramatically raising rents.

The tenants association is part of the Santa Fe Art Colony, which was established in 1986 with city funding. It calls itself L.A.’s only rent-restricted artist-in-residence complex.

Miami-based Fifteen Group purchased the building at 2345 South Santa Fe Avenue last year. The resulting rent hikes took effect Nov. 1, and in some units went as high as three times their previous amount. For example, one unit went from $,1,400 per month to $4,500.

The lawsuit escalates a public battle pitting developer against artists. The Santa Fe Art Colony wants to preserve a piece of a neighborhood that has served as a hub of art studios. The lawsuit also makes use of an arguably obscure part of the state housing code.

According to the lawsuit, Fifteen Group, led by brothers Mark and Ian Sanders, purchased the property for $15 million in June 2018 from the city’s Community Development Agency. It had a 30-year agreement with tenants that expired in 2016, which had set rent restrictions on 85 percent of the units.

After Fifteen Group purchased the property, tenants made an offer to acquire it themselves for $16.8 million.

The tenants association alleges that Fifteen Group demanded $22 million, then did not negotiate in good faith with tenants over finding an agreeable purchase price.

By not negotiating, Fifteen Group allegedly violated state housing law saying that for rent-restricted properties, landlords must negotiate in good faith with “certain entities” who are interested in buying the property and retaining rent controls.

The tenants association is represented by Sheppard, Mullin Richter & Hampton. The white shoe firm usually represents developers and investors in real estate disputes.

Messages left Friday with Fifteen Group, which has a satellite office in Downtown L.A., were not returned.

The real estate investment firm has grabbed headlines for its Miami deals, including making a $20 million profit in 2014 from flipping a FedEx building.

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