- In Alexandria, Virginia, $31 billion landlord CIM Group bought a massive apartment complex in 2020.
- Tenants, fed up with eviction threats and neglect, pressured the company through its investors.
- CIM is meeting demands of tenant leaders after a long, drawn out battle.
Sami Bourma was girding for the battle of his lifetime.
It was a July evening in 2021, and three to four dozen of Bourma’s neighbors had assembled in a courtyard of their home at Southern Towers, a 60-year-old complex of five apartment buildings in Northern Virginia on the outskirts of Washington, DC. The group was organizing against CIM Group, the landlord they said had upended their lives.
“This is our time to fight back,” Bourma, a Saudi-born immigrant whose parents were from Sudan, told the crowd. “Corporations don’t come here to help us. They come here to take an opportunity to invest their money, make a couple of dollars out of hardworking people, and then leave.”
CIM, a $31.3 billion Los Angeles-based real-estate owner-operator run by a pair of former Israeli paratroopers and Richard Ressler, a veteran of the junk-bond pioneer Drexel Burnham Lambert, bought Southern Towers in August 2020. It was one of the largest apartment deals of the year, and in keeping with one of the hottest trends in real estate: big investors buying multifamily properties for their rent potential at a time of faster inflation.
CIM had a vision to meet the needs of the greater Washington community with the Towers joining a range of office, hotel, and apartment assets owned by the firm in the area, a representative said.
But instead of improvements and upgrades, tenants received eviction notices during a nationwide ban on evictions — and mold, pest, and other maintenance issues went unresolved. The tenants, many of them African immigrants who have grown to love the community, were worried by their new landlord’s agenda. They wondered whether CIM wanted them gone, in favor of the 25,000 Amazon employees who would soon work at the company’s planned second headquarters just 5 miles away.
“They want us to get tired so we quit and move, but we love this area,” Bourma told Insider in December.
So Bourma and his neighbors forged alliances they hoped could prevent their landlords from brushing them aside. First, they made political appeals, joining Virginia Democrat Terry McAuliffe’s failed 2021 gubernatorial campaign, and engaged in public protests in front of the Towers, to little effect.
Then they saw a fresh strategy: Follow the money.
African Communities Together, an immigrant advocacy group working with the tenants, began sending letters to pension funds that have billions of dollars tied up in CIM projects. At pension board meetings, Bourma spread the word about landlord neglect and tenant hardships.
“Public pensions are a critical funding source for private institutional investors,” and hold tremendous influence over the money managers, said David Webber, a Boston University law professor who focuses on shareholder activism.
The tactic has started to pay dividends. In July, residents of Southern Towers had their first private meeting with CIM and an observer from the Pennsylvania Public School Employees’ Retirement System pension fund, which had invested with CIM and — according to a PSERS representative — is responsive to “citizens’ concerns.”
Two more meetings led to some concessions from CIM, including a temporary rent cap and a timeline for repairs to broken elevators and playground equipment. Tenants say these are half measures, but also signs of progress.
Insider spoke with 10 Southern Towers tenants. Some are identified in full, while others asked that their last names be withheld for fear of professional consequences. Insider also spoke with two former CIM property managers and two witnesses to discussions between CIM and investors at a professional conference, with each asking for anonymity to avoid the possibility of retribution. Their identities are known to Insider.
The tenants have a long road ahead of them, with many of their demands outstanding. But capturing the attention of the company has been a major feat in a state with relatively weak rent laws. Landlords have no obligation to bargain with tenant associations anywhere in the country except for San Francisco.
“For a landlord with billions of dollars, making them come to the table is a win,” Bourma said in December. “To have them sit with us to hear our complaints, that’s a win.”
Tenants across the US are feeling increasing pressure, as rents hit all-time highs just as inflation added to the cost of everyday items.
Meanwhile, multifamily investment hit a record high of $335 billion invested in 2021, according to CBRE. Big-money investors are pumping billions into the sector, leaving many renters to find that their new landlord is a Wall Street giant practiced in extracting as much income as possible from its investments.
That has put tenants and landlords on a collision course. The battle between the Southern Towers tenants and CIM could presage what’s to come across America.
Hidden gems in Alexandria’s gold rush
Southern Towers’ five 16-story buildings in Alexandria, Virginia, about 10 miles from the US Capitol, are a haven for the working class. They comprise their own census tract, and as of 2020, three-quarters of tenants were people of color. More than 60% are immigrants, most from Africa.
CIM — a major player in the Northern Virginia area with 5,500 apartment units — wants to keep Southern Towers as “quality workforce housing” in an area saturated with luxury housing, according to the company representative. It’s part of CIM’s strategy of enhancing communities with properties from affordable housing to data centers, the person added.
Southern Towers was already in a bad way. Tenants had been demanding a rent freeze from their previous landlord Bell Partners. When CIM snapped up the properties, it did so at a discount because of unpaid rent. The investor planned to make a “significant investment” into the “deteriorated” properties when it struck the deal, according to the representative.
The deal was financed with the help of a 10-year, $346 million loan with a 2.2% interest rate from Freddie Mac. The Korean Teachers’ Credit Union, which also participated in the deal, put the total size of the deal at $700 million: $506 million to acquire the Towers, with almost $200 million earmarked to redevelop the property.
The terms of the deal were favorable, with borrowing costs near record lows. The same couldn’t be said for the condition of the property.
“They bought a lemon,” a former property manager said of the situation faced by CIM at Southern Towers. “They didn’t realize it wasn’t just a lemon. It was a rotten lemon.”
The former manager used to visit a family member in the Towers during the 1990s. Little had improved, and most things seemed worse, with leaks, moldy rooms, and “infestations” of roaches and mice so large that they looked like inflatables, the manager said.
“When I walked into some of those apartments, it was almost like a death scene in a scary movie,” the former manager said. “It’s like someone would come out of the closet and kill you.”
Insider visited Southern Towers in July and witnessed borderline living conditions, including what appeared to be dark mold around heating units of five apartments. In one, the 6-year-old autistic son of Laila, a woman from Morocco who was then pregnant with another child, was sick for much of the past winter, the mother said.
The CIM representative told Insider in October that an environmental assessment done at the time of the purchase found no campus-wide mold issue.
Tenants, especially immigrants who weren’t native English speakers, complained that CIM didn’t take their complaints seriously. One property manager told Laila that if she didn’t like the conditions in her apartment, she could move to a more expensive apartment, or leave, she said.
Evictions pile up
Many tenants faced difficulties in paying rent early in the coronavirus pandemic because their service-industry jobs were disrupted or they felt forced to quit. Bourma, who was a cafeteria chef, was laid off in March 2020.
The US government scrambled to mitigate the economic pain. By March 2020, the regulated housing enterprises Freddie Mac and Fannie Mae adopted a range of anti-eviction policies. By June 2020, Virginia had launched its Rent Relief Program, which would pay landlords back for unpaid rent.
But CIM forged ahead with eviction measures, filing proceedings across 255 households in its first six months of ownership, or more than 10% of all households, according to an Insider evaluation of a study commissioned by African Communities Together, the activist group helping the tenants.
Many of these households had multiple proceedings filed against them, bringing the total number of measures filed to 541. According to the study, the Towers represented 21% of the filings in Alexandria during the period, even though Southern Towers was just 6% of the city’s rental stock.
CIM did not dispute the eviction-related activity but noted that the Towers had actual eviction rates of just 0.43% and 0.78% in 2021 and 2020, compared with the city’s 2021 rate of 1.62%.
Still, even though CIM was barred from actually kicking anyone out for not paying rent, the eviction notices still had a significant impact on the community, according to tenant leaders and the two former property managers. Many tenants, perhaps unaware of their rights or terrified of going to court, left the Towers after receiving a notice, they said.
“There’s a lot of immigrants in this community, and if you tell them they have to go to court, they get scared,” Bourma said.
Turn to investors
CIM has been hired by pension funds to invest billions in real estate. ACT sent some of these funds a letter earlier this year, asking them to intervene and make sure that CIM not “displace immigrant residents” and that it provide “livable conditions.”
Bourma started to speak out at pension-fund meetings, including at a PSERS public forum in June. PSERS wasn’t a direct investor into Southern Towers but had given the group $250 million for an infrastructure fund earlier in 2022. He explained why the tenants were fighting.
“They’re pushing us out of our city — they’re pushing us out of the place we’ve built for years,” Bourma said, according to an excerpted recording of the meeting, provided by ACT.
The pressure appeared to pay off. By July, the tenants and ACT had won a seat at the table with CIM executives. There, they demanded a pause in evictions, better maintenance, and a more compassionate attitude from the building staff.
Disagreements ensued. At the first meeting, CIM said it had filed evictions only to help tenants apply for Virginia’s Rent Relief Program. Tenants blasted the explanation because eviction filings weren’t required for them to collect state rent relief. Their credit was unnecessarily tarnished, they said.
The back and forth continued over two more meetings, culminating with some concessions from CIM: a short-term cap on rent increases, more money for pest removal and lobby staff, frequent efforts to gather feedback from tenants, and repairs for leaky windows and roofs that may have caused some mold growth.
Still, Bourma kept up with the pressure. Sometimes, the tension has boiled over in public forums.
In September, Bourma joined a panel about ethical housing investment at a gathering of the Council of Institutional Investors, where CIM investors would be in attendance. He described the issues he said he and other tenants had faced in an appeal to the conscience of investors who he hoped were factoring social and governance issues into their investments.
For Jerry Thomas, a managing director of CIM’s on-site property team who showed up unexpectedly, it was time to set the record straight, as he saw it. After distributing three-page flyers with CIM’s position, Thomas disputed Bourma’s characterizations in a tone so aggressive that it jarred some audience members, according to two who attended and were not affiliated with CIM or the tenants.
A CIM representative dismissed Thomas’ behavior as unsurprising given what the person called the “unfair characterizations” of his staff and their work.
“We’re not going to leave”
The Southern Towers tenants aren’t the only ones following the money. Minnesota tenants of HavenBrook Homes, which is ultimately owned by the investment firm Pretium — asked the Minnesota State Board of Investment in 2021 to review its relationship with Landmark Partners, a private-equity real-estate firm that has worked with Pretium, because of poor living conditions and high fees. Similar scenes have played out in California as well.
The tenants’ actions come at a time of growing tension between renters and landlords with close Wall Street connections. In Cincinnati, the Port of Greater Cincinnati Development Authority stepped in to buy properties to stop them from falling into the hands of out-of-town investors. In November, Southern Towers resident Roslyn Gadley joined a group of dozens of tenants from across the country organized by advocacy group People’s Action to push the White House to pass a pro-tenant executive order that would boost federal oversight of institutional landlords, with the help of progressive Congresspeople like Elizabeth Warren and Cori Bush. And tenant movements from New York State to Orange County, Florida, have helped pass rent control and tenant rights laws.
Bourma told Insider in December that he had seen some improvement since the tenant meetings. His air-conditioning unit, and those of a few other tenant leaders, have been cleaned of mold.
CIM, most likely eager to put the issue behind it, says it worked “individually” with its renters over “specific issues.” It cited a high level of recent lease renewals and a building survey as signs of contentment, though responses to the survey totaled just 117, a fraction of a complex with 2,300 units.
But Bourma and the tenants are far from satisfied. He said less-vocal tenants continued to have issues, and a back door to one of the buildings remains broken since Insider’s visit. This, he said, means the fight will drag on.
“We’re not going to leave,” Bourma said. “We’re going to continue to put pressure on. You can make your money, but we need a peaceful place to live.”