Maitri sues AHF over
thrift shop space
by Seth Hemmelgarn
Maitri hospice is suing the AIDS Healthcare Foundation, claiming that the Los Angeles-based nonprofit hasn't paid the rent for one of its Out of the Closet thrift store locations since August.
Maitri, the San Francisco agency that provides 24-hour residential care to people living with AIDS, has rented space to AHF at 100 Church Street for more than a decade. The foundation uses the space, which is adjacent to Maitri, for the thrift store, a pharmacy, and other services. AHF provides medical care and advocacy around the world.
Through its civil complaint, filed in October in San Francisco Superior Court, Maitri seeks "unlimited" damages over $25,000 for failure to pay rent, failure to negotiate in good faith, and other causes.
AHF filed a response in December, denying Maitri's allegations and denying that the hospice "sustained or will sustain damages ... at all."
In an interview last week, Maitri Executive Director Michael Smithwick expressed support for AHF's work but said, "The rent revenue we receive on that space is almost 10 percent of our total revenue, so for an organization of our size, that's significant, and it certainly creates challenges."
Prompted by AIDS activist and blogger Michael Petrelis, AHF recently released its tax documents, which show that the foundation's budget for the most recently completed fiscal year was $164,870,149.
According to Maitri's complaint, the two agencies entered into a lease agreement in September 2003. The deal provided for two five-year renewal options, the first of which AHF exercised in 2008. The agreement was set to expire September 30, 2013.
For that period, the rent was set at $18,250 a month and was eventually increased to about $18,283 in 2011. In 2012, the nonprofits agreed to a rent increase of $100 a month to allow AHF to use Maitri's garbage staging area.
In April 2013, in preparation for a new deal, Maitri provided the foundation with its estimate that the fair market value of the space was $24,820 to $25,550 a month.
The complaint says that on April 2, AHF Bay Area regional director Dale Gluth wrote, "AIDS Healthcare Foundation intends to exercise our renewal option. ... We are in the process of compiling our estimates and will follow up with you shortly."
Maitri then notified AHF that the proposed fair market rent would be $25,185 a month.
The nonprofit "reasonably and justifiably relied on AHF's statement that it was exercising its second renewal option under the lease," the court documents say, but "AHF has never provided its estimate of the fair market rent" and "has not negotiated in good faith – or at all." AHF also hasn't "requested that an arbitrator be appointed" pursuant of the amended lease, the complaint says, and Maitri holds that its estimate of the fair market rent "prevails."
AHF is supposed to pay the hospice $25,185 a month to rent the Church Street space from October 1, 2013 through September 30, 2018, as well as $100 a month to use the garage area. The larger nonprofit should also pay the annual property taxes on the space, according to Maitri.
In addition to losing out on rent money, Maitri has also "been deprived of the economic security of an additional five-year lease of its property at a fair market rental value," the nonprofit claims, and AHF "has made it difficult to find a replacement tenant."
In an interview this week, Tom Myers, the foundation's general counsel, was supportive of Maitri's services but said, "The rent they're seeking is way out of proportion to what the market will bear."
Myers added, "We worked with them in trying to find resolution to this." He said the foundation "made an offer to stay for a reasonable amount of time to allow for a reasonable transition," but the amount Maitri wanted "was not going to work."
Myers didn't know when the last time was that AHF, which also operates other Out of the Closet stores, paid the rent on the Church Street space. He also didn't know what the nonprofit's plans are as far as vacating the location, and he didn't know how much money AHF makes off the shop each month.
Cuts at Maitri
Faced with reduced government funds, especially from the Ryan White HIV/AIDS Treatment Modernization Act, Maitri has been cutting costs.
Over the last three years, Maitri's annual spending has decreased more than 15 percent, Smithwick said. The budget for the 2012-13 fiscal year was $2,367,110.
Four positions were eliminated in November, but Smithwick said, "All of them were administrative, so there was no cut to direct resident care." Maitri now has about 23 regular full-time paid staff.
The hospice has 15 rooms, which Smithwick said are always filled.
Along with staff cuts, reductions have come in expenses related to the annual Bliss gala, as well as printing costs and other areas. The nonprofit's also been working to bring in more money from non-government sources.
Tax records for the 2012-13 fiscal year list Smithwick's total compensation as $104,410.