From: Zhang, Yangkun (Yangkun.Zhang@FMR.COM)
Date: Fri Oct 20 2000 - 10:11:02 PDT
I must be masochistic to be still posting on this list. But hey, I've got my
asbestos suit on, so--flame away. The following story was on the page one of
the Wall Street Journal today, and it seems to be very relevant considering
the discussions we're having re: PRC--People's Republic of Cambridge, that
A quick summary, Mr. Mulugeta, an Ethiopian emigrant who saved and invested
wisely, thus becoming a landlord. He bought a dilapidated housing unit
(whose rents were even collected by the previous owner), started renovating
the place, and evicting the previous residents--as in Palo Alto, rent
controls laws implies that he could not raise rent (I assume to cover the
renovation costs and the inevitable rise of property tax due to property
appreciation) without evicting the tenant first.
Junior Leaguers Join Nuns in Effort
To Thwart Silicon Valley Landlord
By JONATHAN KAUFMAN
Staff Reporter of THE WALL STREET JOURNAL
EAST PALO ALTO, Calif. -- When Sister Trinitas Hernandez was looking for a
place to serve the poor in Silicon Valley, she settled on this two-story
dirty yellow apartment building wrapped around a barren courtyard. Grandly
named "Carriage Manor," it's home to 48 Latino families working in the
low-wage eddies of the high-tech economy: fast food, gardening, day-labor
construction and housecleaning. Many of the families live five or six people
to a room. Stray dogs roam the street outside.
Within a few months of her arrival in January 1997, Sister Trinitas started
three on-site English classes. She brought in volunteers from the Junior
League of Palo Alto, the tony town next door, to staff a play group.
But where Sister Trinitas and the Junior Leaguers see a chance to help the
poor, Benyam Mulugeta sees a financial windfall. A real-estate investor
betting on East Palo Alto's gentrification, he bought Carriage Manor this
spring for $2.1 million, sent eviction notices to a quarter of the tenants
and doubled some of the rents. An immigrant himself who is married to a
Hispanic woman, he came to this country from Ethiopia virtually penniless in
1972. Today he owns millions of dollars in property.
'Survival of the Fittest'
"I was in their shoes once," the landlord says of his remaining tenants.
"But sometimes you have to push people to find their inner strengths. It's
survival of the fittest." Mr. Mulugeta has little patience for the
self-appointed defenders of Carriage Manor.
At a recent meeting over the fate of the building, Carrie DuBois, a Junior
League official, accused Mr. Mulugeta of "endangering children" and then
described a garden tour she took of posh Silicon Valley homes. "Many of the
people who tend these gardens live in Carriage Manor," she said. "We need
these people. We need these gardeners."
If the Junior Leaguers "care so much about the gardeners," Mr. Mulugeta said
later, "why don't they pay them $25 an hour rather than $7, so they can live
The confrontation -- which has prompted an unlikely buyout bid orchestrated
by the Junior League -- is unfolding at the epicenter of the explosion of
new wealth transforming neighborhoods across America. Silicon Valley has
long turned its back on East Palo Alto, a beaten-down city of 2? square
miles. Overwhelmingly black and Hispanic, it has some of California's worst
schools and still bears the scars of a violent crime wave in the 1990s. Many
streets lack sidewalks and street lights.
Suddenly, though, East Palo Alto is hot, as mid-level technology workers,
priced out of the rest of Silicon Valley, move in. Three-bedroom houses in a
new development are selling for $600,000 apiece. The median housing price
has jumped more than $100,000 in the past year, to $325,000. And rents have
doubled, sweeping out residents of places like Carriage Manor.
In their effort to protect these tenants, the Junior Leaguers have tried to
exploit their connections to Silicon Valley wealth. But technology companies
and foundations shy away from giving money to alleviate the housing crisis,
preferring instead to fund programs that bridge the "digital divide," such
as supporting education and providing computers in the classroom.
'All the Money in the World'
Housing for the poor in East Palo Alto "is one of those issues that could
use up all the money in the world, plus a dollar," William Somerville, a
local foundation official, says. At the Junior League's behest, he tried but
failed to raise money to aid Carriage Manor's residents. "It's a hard place
to figure out how you can have an impact," he says.
Sister Trinitas Hernandez and one of her young charges at the building.
Now the clock is ticking on Carriage Manor, where the altruism of the nuns
and the good intentions of the Junior League are colliding with the
free-market dreams of Mr. Mulugeta.
On a sunny day, Sister Trinitas, 62 years old, wearing a light-blue habit
and short-sleeve white blouse, stands before a group of Carriage Manor
women, teasingly threatening to throw an eraser at them if they don't speak
English. They giggle and begin reading from their notebooks: "Yesterday, I
went shopping at Kmart. On Sunday, we went to church and then had breakfast
The women, none of whom is on welfare, have all been up since at least 5:30
a.m., making breakfast for their husbands and then sending children off to
school. Several of the women leave for jobs themselves once their husbands
come home in the afternoon. More than 30 people a day attend lessons in a
first-floor apartment Sister Trinitas has turned into a makeshift classroom.
Before she moved to the area four years ago, Sister Trinitas had worked with
migrant workers in southern California. She lives only three blocks away
from Carriage Manor, in a modest three-bedroom house she shares with two
Soon after beginning work at Carriage Manor, Sister Trinitas received a call
from Ms. DuBois, 42, a vice president of the Palo Alto chapter of the Junior
League, the social and good-works organization.
A real-estate broker who earns about $100,000 a year, Ms. DuBois is married
with two small children. Her husband, a computer-magazine writer, brings in
an additional $70,000, making them comfortable but not rich by Silicon
Ms. DuBois likes the elegant teas and black-tie charity dinners that are a
Junior League signature. But she has also worked as a volunteer with
children from abusive and alcoholic homes. Although Ms. DuBois was raised in
an upper-middle-class family in Sacramento, her mother had a nervous
breakdown and left home when Ms. DuBois was eight. "It shattered my world,"
she says. "I can't save the world, but we need to be sensitive to children's
Ms. DuBois had lived in Silicon Valley for a dozen years, but she had never
visited East Palo Alto. Indeed, she says, "I had never known a poor family."
A mutual acquaintance suggested she contact Sister Trinitas. The nun and the
Junior Leaguer first met at a trendy health-food restaurant in affluent
Menlo Park. Ms. DuBois talked about how she donated her old, worn-out
clothes to Goodwill.
"You should only give something that you would wear yourself, or something
you would put on your child," Sister Trinitas chided her.
Ms. DuBois's first visit to Carriage Manor shocked her. The courtyard was
ankle-deep in water after a rainstorm. Sister Trinitas showed her the studio
apartment of Hilda Marquez and her family -- two parents and four children
living in one crowded room.
"It didn't look like America to me," Ms. DuBois recalls. She brought over
other Junior Leaguers. Upon seeing the Marquez apartment, one member, Cathy
Carlson, exclaimed: "Oh, my God! We'll adopt them. We'll move them
somewhere, and we'll pay the rent for the rest of the year."
"What happens next year?" Sister Trinitas objected. Paying a year's rent
wouldn't change long-term circumstances. The Junior Leaguers "are good women
with good hearts," the nun says. But what is needed isn't "constantly giving
to the poor, but working with them so they want to improve themselves."
Ms. DuBois was converted, but some in the Junior League balked. They worried
about safety. During one early visit, several Junior Leaguers declined to
get out of the rented bus they had taken to the building. (In fact, the
volunteers haven't been the victims of any crimes.)
Ms. DuBois told her fellow Junior Leaguers that if the group didn't support
Carriage Manor's residents, she would work there on her own. In the spring
of 1997, the organization gave $7,500 to support Sister Trinitas's
activities, an annual donation that was increased in subsequent years to
$20,000. Junior Leaguers agreed to staff a play group with volunteers to
watch residents' children while the adults take English lessons. Ms. DuBois
signed up for a two-hour stint every Thursday.
A Playroom for Danny
Shortly before noon on a recent weekday, Ms. DuBois, still dressed in her
stylish black business suit, pulls up in front of Carriage Manor in her
Mercedes sedan. She deliberately leaves the car unlocked -- a silent rebuke
to more tremulous Junior Leaguers. This morning, she has visited two new
Silicon Valley listings: a four-bedroom house on a busy street that will
probably sell for $799,000 and a five-bedroom "fixer-upper" that needs
landscaping, new bathrooms and a new kitchen, advertised for $899,000.
Ms. DuBois walks across the courtyard to a one-bedroom apartment that Junior
League volunteers have turned into two gaily decorated playrooms, with
animals stenciled on the walls and toys piled along the floor. She crouches
down as the Marquez family's youngest son, Daniel, six, rushes over to show
her a picture he has drawn.
When Ms. DuBois first began working at Carriage Manor more than two years
ago, Danny refused to touch her. He frequently spat at and hit other
"I thought, 'Is he going to go to prison?' " Ms. DuBois recalls.
Now, Sister Trinitas and her fellow nuns have obtained more than $5,000 in
annual scholarships for Danny and two of his siblings to attend St.
Elizabeth Seton, a parochial school in Palo Alto, where almost all of the
students graduate from high school and two-thirds go on to college. Danny,
says Ms. DuBois, "has got such potential."
Unbeknownst to the Junior League and Sister Trinitas, Mr. Mulugeta also had
his eye on Carriage Manor.
The oldest of 15 children of an Ethiopian government clerk, Mr. Mulugeta
didn't wear shoes until he was 14. In 1972, when he was 19, a Peace Corps
teacher from California put him in touch with a black family in East Palo
Alto who invited him to come to the U.S. for the first time. He stayed on
with the family in exchange for doing household chores.
Benyam Mulugeta bought the complex this spring, intending to renovate and
raise the rents Mr. Mulugeta enrolled in a local college and earned a
bachelor's and two master's degrees -- in economics and international
relations. He helped pay his tuition by cleaning out laboratory monkey cages
at SRI International, a Silicon Valley research-and-consulting firm. After
getting a green card, he moved up to work as a financial analyst for SRI. He
rented a $275-a-month apartment and married a woman who had immigrated from
Peru. He began bringing family members over from Ethiopia.
In 1981, with his sister, mother, wife and baby son sharing his two-bedroom
apartment, Mr. Mulugeta was evicted for overcrowding. "It was the greatest
thing in my life," he says, because the ouster spurred him to get into real
He bought a bank-foreclosed house on a poor, crime-ridden street in East
Menlo Park, next door to East Palo Alto. He paid $60,000, borrowing money
from his brother and from credit cards to raise the 10% down payment. Within
a year, he had fixed up and refinanced the house, raising more than $30,000
that he used to buy another house. He repeated this maneuver in poor
neighborhoods throughout the Bay area, selling off some of his renovated
properties and keeping others. Five years ago, he bought a comfortable Palo
Alto home for his family for $750,000. Today it is worth about $2.5 million.
"Only in America, I'm telling you," says Mr. Mulugeta with a smile. He says
he has sponsored two dozen relatives who have moved to the United States
Mr. Mulugeta, now 48, bought Carriage Manor from an owner who had let the
place sag and hadn't even collected rent some months. The $2.1 million price
was a bargain, he says, because he and his wife can spruce up the building
themselves and squeeze large rents out of it. Initially, Mr. Mulugeta
thought of Carriage Manor as a source of income for his four children, ages
12 to 18. "I don't want them to start with nothing the way I did," he says.
Renovate and Evict
Under East Palo Alto's rent-control law, a landlord may raise rents
substantially only when apartments become vacant. So, a month after taking
ownership, Mr. Mulugeta started evicting a dozen families he considers "bad
apples." Municipal law allows a landlord to kick out tenants who overcrowd
their apartments or cause serious damage, among other reasons.
Ms. Marquez, with six people in her one-room studio apartment, discovered an
eviction notice taped to her door one midnight in April, when she arrived
home after finishing the $8-an-hour night shift at Wendy's. In a panic, she
called her husband in Mexico, where he was visiting his ill mother. "I don't
want to leave," she told him. Their children were thriving on
parochial-school scholarships. "I don't want to put them in a new school,"
During the next few days, Ms. Marquez searched for another place to live.
She and her husband were paying $479 a month at Carriage Manor. Even a
cramped one-bedroom in another East Palo Alto building can cost $1,200 a
month. Ms. Marquez felt desperate.
Carrie DuBois, a real-estate broker and Junior League member, is trying to
prevent the eviction of poor tenants at the Carriage Manor apartment
building in East Palo Alto, Calif.
Mr. Mulugeta next evicted Martha Perez and her husband, Robert, and fired
Robert from his job as building superintendent. Upon learning of the Perez
eviction, Andi Mallinckrodt, a Junior Leaguer who had become close to Ms.
Perez, talked to her husband, George. He's the West Coast sales manager at
Fisher Scientific International Inc., a laboratory-products distributor. Mr.
Mallinckrodt arranged a new job for Mr. Perez as a $12.50-an-hour materials
handler at his firm. With the new job, the Perezes managed to find another
apartment in a building near Carriage Manor.
As fear about the evictions spread through the building, Ms. DuBois decided
in May to try to persuade Mr. Mulugeta to sell the building to a nonprofit
group that would protect the tenants. She called Mr. Mulugeta and told him,
"I want to buy your building."
"It's not for sale," he responded. "It's for my family's future."
"I hung up and felt sick," Ms. DuBois recalls.
But the next day, Mr. Mulugeta called back. He would sell for $4.5 million,
more than twice what he paid two months earlier.
Given the madness of the Silicon Valley real-estate market -- Ms. DuBois
regularly auctions her listings for amounts way above the asking price --
she considered the $4.5 million price reasonable.
She contacted Mr. Somerville, the head of the Philanthropic Ventures
Foundation, who is active in East Palo Alto. Mr. Somerville contacted four
wealthy high-tech donors, but they all turned him down. Some didn't want to
give Mr. Mulugeta a quick windfall, says Mr. Somerville, who declines to
identify any of the benefactors. Others prefer giving money to programs
focused on technology and education or to local food and drug-treatment
"Some things have the cachet that big funders want to get involved in," Mr.
Somerville says. "Housing for poor people doesn't have that cachet."
Melanie Yunk, a Junior Leaguer who runs her own consulting firm, called a
client, Sherif Danish, founder of Saqqara Systems Inc., a San Jose software
company, and asked if his company would contribute to save Carriage Manor.
Mr. Danish declined.
Saqqara isn't yet profitable, he explains later. "I think that the local
government should intervene to solve the housing problem overall in the
valley," he says. "Housing in Silicon Valley, including rentals, is out of
reach for a large majority of the residents, not only poor people. It took
my daughter, who graduated a year ago, 10 months to find a rental she could
afford with her salary."
Ms. Yunk also came up empty-handed at Agilent Technologies Inc., a high-tech
company based in Palo Alto. Agilent focuses its giving on science education
and health care, said Terry Lincoln, the company's Silicon Valley
community-relations manager. Agilent recently gave $250,000 to Plugged-In, a
nonprofit technology-education group in East Palo Alto.
"Every phone call I get is a good cause," says Ms. Lincoln. "We're one
company. We can't go out and try to fight the housing issue alone."
The drumbeat of rejections angered Ms. DuBois. "The wealthier this community
becomes, the more it becomes detached from reality," she says. "People are
losing their homes. It's right in our backyard, and everyone is turning
Ms. DuBois spoke with several local newspapers and television stations about
Carriage Manor, hoping that publicity would stop the evictions or force Mr.
Mulugeta to sell to someone sympathetic to the tenants. At their home in San
Carlos, her husband, Grant, told her to face the "harsh reality" that the
Carriage Manor residents would have to move.
But Ms. DuBois refused to give up. She asked Sister Trinitas whether her
order of nuns, the Daughters of Charity, could buy the building. The order
has substantial resources from donations, and it runs hospitals and other
large nonprofit institutions. The nuns readily agreed to buy the building,
fix it up and lower rents. The Daughters of Charity decided to offer Mr.
Mulugeta $2.6 million for Carriage Manor -- a quick $500,000 profit.
Ms. DuBois learned the amount of the nuns' offer on the May morning that she
and Sister Trinitas went to Palo Alto to meet Mr. Mulugeta. She told Sister
Trinitas the offer wasn't enough.
"It's in God's hands," Sister Trinitas said.
"Can't someone else be in charge as well?" Ms. DuBois asked.
The meeting, held in the elegant office of the real-estate firm where Mr.
Mulugeta does brokerage work, quickly turned hostile. Sitting in a
conference room with a marble table and tapestries hanging from the wall,
Mr. Mulugeta felt deceived. He expected to be offered close to his $4.5
million asking price. Privately, he blamed Ms. DuBois for media portrayals
that make him "look like a bad man, a slumlord." On a recent visit to the
Home Depot in East Palo Alto, a Hispanic girl shouted, "That's the
landlord!" and began cursing at him.
'Don't Teach Me About Poverty'
And Mr. Mulugeta resented Ms. DuBois for lecturing him on his obligations to
the poor. "They don't have to teach me about poverty," he says later. "I had
so many things against me. I'm black, I came from a Third World country, I
didn't know anyone here. If I made it, anyone can make it." Ms. DuBois, he
says, "wants her gardener to live [at Carriage Manor], and I will be paying
for it. They want this to be a charity at my expense."
For Ms. DuBois, wages aren't the issue; housing is. "You can't pay people
behind the McDonald's counter $20," she says. "A hamburger will cost $15.
You need to have housing for all income levels."
As spring turned to summer, Sister Trinitas dug in to fight the evictions at
Carriage Manor. At her urging, Ms. Marquez appealed directly to Mr.
Mulugeta's wife, Paula, who is from Peru and speaks Spanish.
Initially Ms. Mulugeta, an accountant, supported her husband's plan to evict
tenants and raise rents. During the course of the summer, the eviction
notices helped clear out several apartments, which had new tenants paying
much higher rents.
But Ms. Mulugeta had spent evenings and weekends at Carriage Manor, painting
vacant apartments -- and speaking Spanish to the tenants. When her husband
threatened to evict one tenant who criticized him during a television news
interview, Ms. Mulugeta intervened, pointing out the tenant is disabled and
has three children.
"Now that I've met all the people, I like them," Ms. Mulugeta says, sitting
next to her husband in the plush living room of their Palo Alto home. "The
women who live there and I -- we talk like sisters. If we sell [Carriage
Manor], I'd like to put some clause in there that these people can all
"She's becoming like those nuns," Mr. Mulugeta scoffs.
Still, under pressure from his wife, Mr. Mulugeta agreed during the summer
to allow the Marquez family to move into a one-bedroom apartment in the
building -- although their rent rose to $750, from the $479 they had been
paying for their studio. The increase, Ms. Marquez says, means she can no
longer save to pay for an immigration lawyer to help her and her husband
"They're poor people, but good people," says Mr. Mulugeta of the Marquez
family. Like Ms. DuBois, he has become smitten with young Danny, who often
hangs around while Mr. Mulugeta does repair work. "He's a real go-getter,"
the landlord says. "He reminds me of when I was a kid."
The media reports about the evictions also had the unintended consequence of
drawing inquiries from other investors interested in buying the property and
upgrading it for high-priced rentals or condominiums. Mr. Mulugeta won't
identify the potential buyers but says the offers are in the neighborhood of
$4 million. The idea of selling at that price appeals to him. He could use
the nearly 100% profit to diversify by buying a fast-food or motel
franchise. Then, he says, he would like to hire some of the current Carriage
Manor residents as burger-flippers or motel maids for $10 or $11 an hour.
As for where these potential future employees might live if their building
is converted to expensive rentals or condos, he says: "The majority of the
people in Carriage Manor, even if they have to move, they will do better.
They will find within them the means to succeed. My conscience is clear."
As summer waned, the persistent Junior Leaguers drew up names of wealthy
contacts who might come up with contributions to rescue the building. "We
are a group of determined women who know we can get what we want," says Lisa
Tayeri, a Carriage Manor volunteer.
Sister Trinitas also vowed to continue the fight. "I'll stay to the bitter
end," she says, "until I'm removed bodily."
One Thursday afternoon, when Ms. DuBois arrives at Carriage Manor for
volunteer duty, she runs into Mr. Mulugeta. She walks over and politely
shakes his hand, saying she still hopes to find a way the nuns or some other
nonprofit can buy the building.
Mr. Mulugeta tells her he signed an agreement the week before to sell the
building to a family-owned real-estate company that invests in shopping
malls and other properties. The price: almost $5 million. If the deal goes
through, he says, the new owner probably will evict everyone and turn the
building into condominiums.
Today, the Daughters of Charity and the Junior League are still talking
about raising money to make a bid for Carriage Manor. But Mr. Mulugeta says
that by the end of next month, he expects to complete his $5 million deal
with the Silicon Valley real-estate firm.
"After that," he adds, "I don't care what they do."
Write to Johnathan Kaufman at firstname.lastname@example.org
Needless to say, you know where I stand. Being an immigrant who first lived
in a basement without a kitchen (but I still thought it paradise compared to
where I came from), I sympathize far more with Mr. Mulugeta, the immigrant
who worked his way up in society. From a purely emotional vantage point, I
feel that those [white] upper-middle class women (albeit well-meaning ones)
are trying to make a charity case at his expense. I also feel (again, no
proof, just an emotion) that the left in this country tends be a mostly
white lot who 1) pits minority groups against minority groups--i.e., Jews
against blacks, Asian shop owners against blacks, and in this case, black
immigrant against South American immigrants, and 2) uses the cloak of
"compassion" to beat down those minority immigrants who DOES, through work
and perseverance, make it to the middle-class and god forbid, owns property
or a business, thus becoming the stereotypical "shift-less shop owner" or
GG claims that I need a lesson in Fascism. Okay, do let me know what you
think it is. In my opinion, fascism is a system of government marked by
centralization of authority, stringent socioeconomic controls, and oft
marked by suppression of the opposition through terror and censorship.
Let's see, many in this country wants centralization of authority--e.g.,
EPA, IRS, federal control of the school system, rampant abuse of imminent
domain laws, the FCC (who has the nerve to over-ride bankruptancy laws w/r/t
spectrum licenses), etc.
Many in this country wants stringent socioeconomic controls. Note the
progressively confiscatory tax system, with income taxed at 39.6%, with your
employer paying about another 7% (which you never see on your gross pay, so
you don't miss it), with a 55% rate on someone dying, and with income
derived from Chapter C corporation being taxed TWICE. Of course, a targeted
tax cut is given, if the person who died left the business to "qualified
heir" and if the business is a "qualified family business" and if the person
who died contributed "materially" to the business 5 out of the 8 years
before his or her death. A targeted tax cut is also given, if you meet any
of million criterias given--some groups who can garner enough sympathy, but
more often than not large corporations who can give enough money to convince
a politicians that they're "deserving", hence R&D tax breaks.
As for terror and censorship--what do you call the treatment of the Branch
Davidians? Yes, they're a bunch of wackos, but they weren't bothering me or
anyone else that I know of. What justified the government trying to arrest
them? If eccentricism justifies arrest, everyone from Donald Trump, Howard
Hugh, J. Paul Getty, and Armand Hammer should have been thrown in prison.
And why was that Cuban kid sent back? His mother died bringing him here for
crying out loud, is there no sympathy here? Maybe it's because I'm an
immigrant myself, and so tend to be bleeding heart when it comes to such
things, but America as a nation could have surely have found it in its heart
to let ONE CHILD stay in this country. As for censorship, need I even
mention the government trying to mark encryption as "munitions"?
Most of these started as well meaning social programs, after all, socialism
does have many appeals, as socialism is a system upon which distribution of
goods and services is determined by society at large, and thus (at least
theoretically) guarantees a good mixture of individual initiative and reward
within a larger context of community welfare. Capitalism, being based a word
"capital" which itself is derived from "head" (just as the "cap" is
something that sits on your head, and "cappo" marks a maffia head) is
fundamentally based on individuals [and their heads], and is to many
contradictory to "socialism". (Note that I disagree, there is fundamentally
nothing wrong with socialism or income redistribution SO LONG AS one
remembers that there must be income before income redistribution.) But
people do forget that income must come before redistribution, and also seem
to easily forget that supply must come before demand (hence supply-side as
opposed to demand-side economics)--if for no other reason that without
production, no money in the world can give you consumption. People also
forget that when you put "community welfare" above that of the individual,
you are necessarily giving up individual liberties to a politicized decision
making body--typically, the government. So while socialism is not
necessarily the Road to Serfdom (or fascism), it can easily be the case
should advocates of socialism ask for more and more centralized control for
the sake of community welfare.
Okay, I'm off my soap-box and will shut-up for a while now.
P.S. If someone wants to start a thread on reproductive rights and the
separation of church and state, I'll be happy to start bashing Republicans.
It's just that given that I have a pet interest in economics, it is far
easier to bash Democrats [on their moronic economic policies].
P.P.S. Does anyone remember when Central Square was an absolute dump? Rent
control at work!
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