Napa Valley Feud Puts Real Estate Startup Against Homeowners

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Patty Dallea walked out one morning last month in Napa, California to speak to a young man who pulled up in a vintage sports car to tour the house across the street.

“You might not want to buy there,” she said, telling a man who was there to consider investing in a home. “We don’t want our neighborhood to become a timeshare area. And we will do everything in our power to prevent this from happening. “

Such scenes are becoming more common in California wine towns, where real estate startup under the Pacaso name, buys up million-dollar homes and then sells shares of the ownership to those looking for a second home to weekend asylum seekers.

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San Francisco-based Pacaso co-founded

Zillow Group

It was founded by Spencer Raskoff, and he considers the former CEO of Starbucks Corp. to be one of the first investors in the company. Howard Schultz. The company claims to have achieved unicorn status faster than any other company in US history, reaching a $ 1 billion valuation within six months of launching last year.

IN COVID-19 pandemic was a boon to business. Distant work inspired many to spend time away from cities, but rising house prices and shortages The number of homes meant that fewer people could afford to buy an entire second home.

Members of the Rainier Alliance, a group of residents opposed to Pacaso, met on June 10 at the home of Ms. Dullea, who was wearing sunglasses.

The Pacaso opposition in Napa is the latest attempt by homeowners to stop real estate companies from changing the way they live or own homes in their neighborhoods. Homeowners and local governments have struggled for years with the proliferation of short-term rentals through platforms such as

Airbnb,

and high demand during the pandemic for both vacation and mainstream housing is only exacerbated conflicts

Austin Ellison, a Pacaso executive and a Napa resident, said the local troubles were an undue resentment over the larger lack of affordable housing in California… The company’s 14 homes in the region, each selling to eight part-owners, is a drop in the bucket, he said. “This housing crisis is a big problem, much more serious than Pacaso’s,” he said.

Homeowners in Napa Valley say their quiet residential cul-de-sacs are on the verge of becoming busy party areas and are no longer accessible to local families. Anti-Pacaso signs the dotted lines of the property. Groups opposing his presence have organized in several cities: Napa has Communities Against Timeshare (cats); Sonoma has Sonomans Together Opposing Pacaso (Stop); and on the island of St. Helena, areas opposed to the encroachment of Pacaso (None).

Van with a sign opposite Pacaso in Napa; It says “No timeshare” on the sidewalk.

Opponents know how to count early victories. On Ms Dullea Street in Napa, Pacaso announced this month that he would no longer sell shares in the house he bought there. The company cited community feedback in its decision to sell the home to one owner. To allay concerns about a decline in relatively affordable housing, the company also agreed to buy only homes worth over $ 2 million. And to help keep the peace, he installed decibel limiters on stereos in his homes.

The Napa Valley resistance could be a hindrance for the Pacaso model, which relies on offering luxury homes in traditional residential neighborhoods and away from typical recreational areas. The company currently operates in 20 US markets and plans to expand in Europe.

Signs against Pacaso’s activities are scattered across several Californian wine-growing settlements, including Napa.

Ellison said resistance in Napa is likely to affect how the company buys homes in the future, but said he will remain committed to his core idea of ​​acquiring homes in places like Napa Valley, where second homes are already common. … “Luxurious homes in luxury neighborhoods are amazing Pacasos,” he said.

Pacaso sued the city of St. Helena, who told the business that his houses were considered illegal timeshare under the city’s ordinance. Pacaso says his property is technically not timeshare. St. Helena’s lawyer argued that city officials were claiming Pacaso’s timeshares were breaking the law.

The Napa Valley has a long history of conflict between the people who live there and tourists, and some longtime residents say their cities have struggled to find a balance. In the 1980s, locals protested the construction of the Napa Valley Wine Train, a railroad project designed to transport tourists between wineries and resort towns, but failed to stop it.

Pacaso accused some of the locals of illegal entry and intimidation. A Pacaso executive filed a police report after someone responded to an online ad saying, “I will burn any house you buy in Napa,” a company spokesman said. But residents participating in the protest against Pacaso say they do not invade or act aggressively.

“I think people just need to sit back and do their own thing,” said Will Maroon, a Pacaso client on St. Helena who bought a one-eighth stake in a house overlooking the vineyards in the backyard. Mr. Maroon was hosting an outdoor dinner for four at 7:00 pm one evening when a neighbor filed a noise complaint with the police, he said.

The police ordered him to turn off the music, but Mr. Maroon has continued to enjoy tunes by the pool ever since. “They just didn’t call the cops.”

Nancy Gardner and Carl Sherrill said that when a potential buyer comes to tour Pacaso’s home in Sonoma, California, neighbors announce their presence.

At Old Winery Court in Sonoma, residents of an eight-block dead end say Pacaso is a big problem. They hope to repeat the victory won by Ms. Dallea and her neighbors in Napa. They are unhappy with a new home built by a former neighbor who sold Pacaso for $ 4 million this spring. They now worry that their tight-knit community will be overwhelmed with part-time people coming and going home.

Now in every courtyard there is a sign that says “Anti-Pacaso”, and, according to local residents, it is on the cars parked on the street. According to Nancy Gardner and Carl Sherrill, retired homeowners opposed to Pacaso, when a potential buyer arrives to inspect the property, residents warn each other and then leave their homes to announce their presence.

“It’s nothing personal,” Mr. Sherrill said. “You could be the nicest people in the world. But we will be angry. Because we are angry with Pacaso. “

Two Californian wineries will open this spring, the first major wineries to do so since the late 1990s. Winemakers explain the lessons of past proposals from wineries like Mondavi and Ravenswood and explain why they think now is the time to join the IPO battle. Photo: Sean Hayvey for The Wall Street Journal

Write to Will Parker in will.parker@wsj.com

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