The President’s Report
by David Wasserman
As SFAA’s 90th birthday approaches, we need to reflect upon long-range planning and strategy for overcoming the immense hurdles facing the housing industry. In every issue of this magazine, we talk about new laws, emerging problems at the San Francisco Board of Supervisors, proposed state and local litigation, and other nightmares looming on the horizon. This month, I want to talk about one formula that has worked: entrepreneurs and the entrepreneurial spirit.
Two names immediately come to mind: Angelo Sangiacomo of Trinity Properties and Frank Lembi of Skyline and Citi Apartments. These men stand alone as true icons. I do not know either of them personally. I have never worked for any of their companies, and I never intend to work for them.
What I do know is that a simple Google search produces a plethora of articles and commentaries about each of them. The themes are essentially the same. Sangiacomo is pegged as the “father of rent control”; his late-1970s rent increases, in the wake of unprecedented inflation, supposedly forced a reluctant Board of Supervisors and a hesitant mayor to sign rent control into law. He has been recently vilified for his efforts aimed at rebuilding Trinity Plaza and rejuvenating the mid-Market Street area. Likewise, Lembi is portrayed as a thug who allegedly employs henchmen to drive out rent-controlled tenants in droves. Both men, indisputably, maintain the largest stock of residential housing in the city. According to many, even in our own industry, they are also the ones to blame for our current woes.
Hogwash! These individuals are heroes in every sense of the word. Their drive, vision and work ethic should be studied and emulated by all. For many reasons, we, as an industry, should salute them as we move ever closer to the century mark.
First and foremost, these men successfully do business in a climate where most run for the door. Indeed, Exxon, Bank of America and Transamerica can’t get out of this town fast enough. Politics that border on the ridiculous and heavy taxation compels most responsible business leaders to relocate elsewhere. In their wake, the city loses vital tax dollars, essential to maintain the overbloated expanse of social services. Sangiacomo and Lembi, on the other hand, have been here since World War II and show no sign of exiting. Their presence and their purchases contribute vast amounts of tax dollars to the government’s general fund, which enables these out-of-control politicians to spend more money than most states in the union.
Second, these leaders construct, buy and improve vast amounts of real estate. The net effect is that all of our property values increase. Rather than slumping under the weight of excessive governmental controls or widespread abandonment, property values in this area appreciate like nowhere else in the nation. This trend is fueled in large part by the economic machinery oiled by the Lembis and Sangiacomos; without their presence, the local market would be far less competitive.
People love to hate our real-estate titans for different reasons. Some are jealous. Quite simply, many investors seem awed by the fact that both men built their empires from virtually nothing. Yet this fact epitomizes what makes America great. Instead of playing it safe, both bet the farm on everything and continue to this day to multiply their fortunes by taking chances. Instead of resting, they are investing. Their constant optimism serves as a motivator when, by most accounts, running apartments in San Francisco is a fool’s errand.
There are countless articles opining about the recklessness of the Lembi buying spree or Trinity’s self-inflicted torture of tackling a mid-Market Street revival, but who among us has this entrepreneurial courage? Bill Gates did when he dropped out of Harvard to invent a new way of computing. Charles Schwab also bucked a trend when he started his own version of investment banking. So did Henry Ford, when he began mass production of the automobile. Sometimes you fail, as Lembi did in the 1980s when his savings and loan business came apart, but a true entrepreneur never gives up and throws in the towel. Such is the case with Lembi and Sangiacomo, and one wonders why, decade after decade, they continue to provide quality housing to the city’s masses.
Some blame these two for the political firestorm that has engulfed our industry for the better part of the last twenty years. Yet can anyone really argue that these laws would not exist but for Sangiacomo’s actions to combat inflation in the late 70s? Does anyone really believe that this jurisdiction would not have pushed through rent control at some point after Berkeley, Santa Monica and Los Angeles declared war on the landlord community? San Francisco has demonized practically every business, most recently enacting a sick-leave policy so outrageous it cannot command serious debate, so why would anyone suggest that the rent laws, amended (strengthened) about 60 times since 1980, would be absent from the landscape but for Angelo Sangiacomo? The obvious truth is that even without the rent escalations in the late 70s, our politicians would have eventually found a way to follow the statewide trend of severely regulating residential housing.
Recently, the Lembis have been featured in the media for their role as defendants in various wrongful eviction and fair housing lawsuits. What the press doesn’t cover are the Herculean efforts of Skyline to resolve these complaints without antagonistic and protracted litigation. Indeed, most of the cases were quickly settled, and the Skyline directors have been working with tenant groups and city officials to address concerns raised by tenants in recently acquired properties.
Even more commendable was Trinity’s patience and perseverance with the Trinity Plaza redevelopment. In the end, Trinity essentially acquiesced to the demands of government and the interest groups, ceding far more newly constructed units to rent control regulations than previously agreed upon. As a result, this development, which promises a significant aesthetic and tax boost for the city, will be, at least for the near future, a money loser for Sangiacomo.
So to suggest that these entrepreneurs are greedy barons is a misguided interpretation. These men not only work their hearts out at 80-plus years old to ultimately make a profit, they are also contributors to their communities. Just look at the charity lists—you can’t miss their names. Look at the buildings they have restored and preserved, and ponder what they have built in this city. If they were truly villains, then what they are leaving behind would resemble something far different that what we see today.
Finally, many people enjoy top quality housing because of these men and their families, who continue to run Trinity and Skyline. The Trinity and Skyline tenants work in our biotech and financial industries, which in turn supports our tax base, allowing the government to fund all of the services that those who decry these men cherish. With every purchase, rehabilitation and construction, millions of untold dollars go into the public coffers, further funding our unique way of life in the city. Thus, the biggest paradox of our time sits in front of us everyday: the most substantial givers to our economy have become the most hated. As SFAA turns 90, what I am asking is that we consider and commend this immense contribution for what it is—a true example of American ingenuity and a positive mark on our landscape for both owners and tenants.
In sum, everyone agrees that housing is one of our most important resources. Sangiacomo and Lembi, while inviting controversy over the years, have an unimpeachable record of providing quality housing to the city’s residents. Both men have used their own ingenuity to create world-class apartment structures and management systems. In turn, the community has benefited through escalated property taxes and, more importantly, vast facilities to house its workforce. So rather than chastising these efforts and successes, let’s start giving them the praise, respect and thanks that they deserve. Hopefully, more of us will catch this entrepreneurial spirit and ideally our civic leaders will ultimately appreciate the sources of the revenue that they so freely spend.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the SF Apartment Magazine. David Wasserman is the president of SFAA. He can be reached at Wasserman-Stern Law Offices, 415-567-9600. Copyright © 2007 by SF Apartment Magazine. All rights reserved.