Lembi’s legacy

Pub date September 21, 2010


Two of the most outrageous and intransigent political narratives in progressive San Francisco converge at the Hotel Frank near Union Square.

The first involves the relatively new namesake of a boutique hotel formerly known as the Maxwell Hotel San Francisco, Frank Lembi, the nonagenarian who was once one of the city’s largest and most notorious landlords, running CitiApartments, Skyline Realty, Lembi Group, and other related corporations with his recently deceased son, Walter, and others.

Since the Guardian first reported on allegations of illegal and unethical tactics intended to force protected renters from their homes in an award-winning three-part series (“The Scumlords,” March 2006), Lembi’s empire was sued by the City Attorney’s Office and its former tenants (“SF vs. Frank Lembi,” 10/6/09), followed by a financial crash that involved banks foreclosing on dozens of the group’s properties (“Triumph of tenacity,” 6/1/10).

That downfall has now dovetailed into a second prominent San Francisco story: the ongoing contractual impasse and labor unrest between the city’s corporate-owned hotels and workers represented by Unite-Here Local 2, whose list of boycotted local hotels grew to 10 with the addition of the Hotel Frank earlier this month.

After the Hotel Frank and Hotel Metropolis were foreclosed on by Wells Fargo Bank earlier this year, longtime union workers at the two hotels say their rights have been violated, their benefits slashed, and their workloads increased unilaterally by the bank’s management company, Provenance Hotels, whose representatives refused to comment for this story.

“These are troubling signs of the kind of relations they want to have with Local 2,” Anand Singh, a lead organizer with the union, told the Guardian.

Together, the stories that converge at the Hotel Frank are about the plight of renters and workers in San Francisco, and whether they can maintain their economic standing against attacks from powerful corporate interests.

Corporations run by members of the Lembi family once controlled more apartments in San Francisco than any other landlord, growing rapidly in the 1990s and early 2000s using highly leveraged real estate purchases and renting units under CitiApartments and other names.

Tenants in rent-controlled apartments are protected under various San Francisco laws, but as the Guardian has reported and the city’s ongoing lawsuit against the Lembi empire alleges, the group’s business model was based on trying to force, intimidate, and cajole tenants into vacating those units in order to increase rents. Those complaints were also the subject of well-attended City Hall hearings in 2006 and a campaign called CitiStop organized by the San Francisco Tenants Union.

A separate class action lawsuit by former Lembi tenants brought by the San Francisco law firm Seegar Salvas LLP in 2009 alleges that the Lembi corporations also routinely refused to return the security deposits of former tenants. Both lawsuits are ongoing, with plaintiffs’ attorneys noting that the courts have fined the Lembi corporations for not cooperating with the discovery process.

Yet while the name Frank Lembi had been tarnished in progressive political circles, it was until only recently celebrated in the business press and by downtown organizations such as the San Francisco Apartment Association, which lauded Lembi as a tough-minded visionary. And it was a name that Frank Lembi’s daughter sought to memorialize in 2007 when the company she ran, Personality Hotels, added the York and Maxwell hotels to its string of four boutique hotels near Union Square.

Yvonne Lembi-Detert changed the name of the Maxwell to the Frank Hotel and rechristened the York as Hotel Vertigo after the Alfred Hitchcock movie set in San Francisco. Those familiar with the deal say she paid top dollar for the hotels — $35 million for the Maxwell, which had sold a few years earlier for $18 million. She then borrowed another $10 million to renovate the hotel she had renamed for her father, putting up the Hotel Metropolis in the Tenderloin as collateral.

“This was a vanity project, nothing more and nothing less, Yvonne’s legacy to father Frank,” one worker at the hotels told the Guardian.

Officials at Personality said Lembi-Detert was on vacation and unavailable for comment, but Director of Operations David Chin told us, “The purchase price was what the market bore at the time” and that the renovations were prudent. “The factor that drove the hotel to foreclosure was really the economy.”

Although the loans for the hotels came from a Japanese-based corporation called Nomura, they were packaged along with other troubled loans into collateralized debt obligations (CDOs) — those toxic financial instruments that played such a key role in the crash of the banking system in 2008 — eventually coming to be controlled by Well Fargo.

As the Hotel Frank was put through extensive and expensive renovations that were never completed, the economy turned sour and the Lembis fell far behind in their loan payments. Wells Fargo finally took ownership of both the Frank and the Metropolis in May, contracting the management out to Provenance, which moved quickly to try to turn the financially troubled hotels around.

Workers at the two hotels, most of whom had been there for decades, say the new management team took an aggressive posture from day one, announcing increased workloads, longer work days, suspended vacation pay, and new medical plans with steeply higher costs to workers.

But they arrived in a town with a hotel union energized by clashes with management at hotels all over the city, so the workers at the hotels resisted the changes and their Local 2 colleagues have rallied to their defense. When thousands of workers and their progressive supporters marched through the streets of San Francisco to the Grand Hyatt in July, they stopped at the Hotel Frank along the way and unfurled a banner that read “Frank and Metropolis Hotel Workers United to Fight Provenance and Wells Fargo.” And on Sept. 8, both hotels were added to Local 2’s boycott list.

Singh said Provenance is unfairly trying to hold workers at the hotel responsible for the bad financial decisions that the Lembis made, and he called on Wells Fargo to absorb those financial losses without having its agents attack the union.

“It was not based on anything the workers have done,” Singh said of the financial situation at the hotels. “This huge bank is asking the workers to bear the brunt of this financial strategy even after being bailed out by taxpayers.”