Rent strike looms ahead of potential Veritas buyback of $1B debt

Tenants of Veritas plan a rent strike, hoping to sway the outcome of the landlord’s expected bid on $1 billion of its own debt tied to 95 apartment properties in San Francisco.  

A tenants group has organized the strike ahead of the San Francisco-based company’s plans to submit bids on its debt to Eastdil Secured before June 6, the San Francisco Business Times reported.  

The Real Deal reported this week that Veritas plans to bid on its own debt, most likely with a new financial partner, and not the Baupost Group, which was the major sponsor of the defaulting loans. The Business Times said the bid could include Baupost Group, citing an unidentified source. 

The striking tenants hope to leverage the sale to a different landlord.

“This is an effort to say, ‘Look, we’re not just going to sit idly by as you decide the fate of our homes that you’ve been mismanaging,'” Brad Hirn, a lead organizer with the San Francisco Housing Rights Committee, told the Business Times.

“The tenants want to assert that they want a different landlord,” he said. “They want the ability to negotiate how this goes.”

Eastdil Secured, a brokerage hired by the lenders and special servicers behind the delinquent loans, is taking final offers on the debt June 6. 

The buyer of the loans, secured by 95 buildings containing 2,452 units, would likely buy the loans at a discount and foreclose on the Veritas affiliates, taking over the properties.

The 2,452 units in two portfolios — one with 75 buildings and $800 million debt and the other with 20 buildings and nearly $140 million debt — represents a third of Veritas’ apartments in the city. 

The landlord and multifamily investment firm has been a major player in the city since 2011, when it bought a 2,000-unit portfolio for $500 million from CitiApartments as the Lembi family faced its own defaults in the aftermath of the 2007 banking crisis.

Hirn said tenants in two buildings containing 49 units are withholding rent to maintain leverage.  He said tenants in other buildings may later join the strike.

A spokesperson for Veritas told the Business Times the firm had “not been notified of any residents withholding rent in any of the buildings we manage.” 

The rent strike and attempts to influence the sale are the latest dispute by Veritas tenants, who accuse the company of poor conditions and displacement. Veritas says it runs its buildings according to city and state regulations. 

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Veritas has faced numerous lawsuits over its business model, which critics say consists of buying rent-controlled buildings and renovating them, while passing bundled costs for repairs and debt service to tenants. 

Veritas, founded by CEO Yat-Pang Au in 2011, and its affiliates owned 6,500 units in the city last year, making it the largest landlord in San Francisco. A San Francisco Chronicle investigation identified more than 293 buildings owned by companies tied to the firm. 

— Dana Bartholomew