Toxic Mold Threatens $929-Million Deal

A lawsuit accusing Pacific Gulf Properties Inc., a Newport Beach real estate investment trust, of failing to repair roof and plumbing leaks at one of its Sacramento buildings could alter terms of a pending $929-million sale of its business complex there.

The California Job Journal, a Sacramento employment publication, alleges in the suit filed last week in Sacramento that its employees were subjected to toxic mold contamination as a result of the leaks at a building in Pacific Gulf-owned Sacramento Commerce Park.

The Job Journal contends that 26 of its 30 employees experienced mold-related illnesses, such as sinus and lung infections, skin rashes and chronic flu-like symptoms.

Pacific Gulf has agreed to sell the 15-building complex to the California Public Employees Retirement System. The deal is expected to close early next month.

“We’ve given the owner two options: They can fix the building and make it toxic-mold free, or they can take it out of our deal,” CalPERS spokeswoman Pat Macht said Thursday. “We won’t accept the building unless it’s in tip-top shape.”

She said her agency is aware of the lawsuit and was told about the mold growth months ago by Pacific Gulf. In large deals, such as this one, finding a problem with one building is not unusual, Macht said. The companies are still negotiating final contract terms, she said.

Glenn Carpenter, Pacific Gulf’s chairman, was not available for comment. He did not return several telephone calls Thursday. His office, however, said the lawsuit would have no effect on the pending sale.

The company’s lawyer, Lewis G. Feldman in Los Angeles, said he and his client haven’t had the chance to review the lawsuit, but “from what we have gleaned, the allegations lack factual accuracy and appear to be motivated by financial opportunism.”

He noted that Pacific Gulf finds it “more than ironic” that the lawsuit was filed right after the company decided not to extend the Job Journal’s lease.

Kathy Masera, the Journal’s president, said her publication decided to file suit now because it feared that it could not seek damages against Pacific Gulf after the sale.

The real estate investment trust is seeking shareholder approval to sell its real estate holdings and liquidate the company. Pacific Gulf owns, operates and manages industrial and office properties throughout California and the Pacific Northwest.

In November 1999, a plumbing pipe in the Job Journal’s building burst and flooded the 6,500-square-foot office. A black toxic mold was found growing underneath the refrigerator, on some office equipment and elsewhere in the office, Masera said.

She said she moved her company in late December into another building in the complex. But the suit alleges that the new location also has a history of chronic leaks that has resulted in toxic mold. The Job Journal lost nearly all of its computers and office equipment to mold growth, Masera said.

Pacific Gulf’s stock fell 6 cents Thursday to close at $27.13 a share on the New York Stock Exchange.