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Pacaso pledges $20,000 donation with each multi-owner sale

The controversial fractional home ownership start-up Pacaso on June 2 announced changes to its business operations in Napa and Sonoma counties in response to what the company described as “community feedback.”

Currently valued at $1 billion, Pacaso was founded by former Zillow executives Austin Allison and Spencer Rascoff in late 2020, and it has been making waves in wine country since its first real estate purchases here in early 2021.

The company is in the midst of a lawsuit against the city of St. Helena, which has banned its fractional homeownership model, citing an ordinance prohibiting timeshares. Pacaso disputes that its properties are timeshares.

According to its website, Pacaso is currently reselling fractional ownership stakes in two Sonoma County houses: A $4.5 million house in Healdsburg at 6165 W. Dry Creek Road, which is available to eight potential owners at $677,000 each; and a home outside city limits in Sonoma at 1405 Old Winery Court, which the company valued at $4.05 million with eight ownership stakes available at $606,000 each.

This week, the company announced a commitment to only purchase homes in Napa and Sonoma counties valued at more than $2 million. For each Pacaso home sold, the company said it will donate $20,000 (or, $2,500 for each one-eighth ownership interest) to “a local nonprofit supporting housing affordability.”

As part of its announcement, Pacaso has backed off plans to resell a home it owns at 1627 Rainier Ave. in Napa to fractional owners and instead will resell the house to a single owner.

The property was sold to Pacaso for $1.13 million in April, but the company came under fire from community members for snapping up a house that could be considered part of the town’s workforce housing stock.

Pacaso also noted it will expand its owner code of conduct, which prohibits parties and vacation rentals, to include the implementation of decibel limits on all home sound systems. A point of contact assigned by Pacaso will also be available to field feedback from neighbors seven days a week.

Ellen Haberle, Pacaso’s director of government and community relations, said in materials provided to the Index-Tribune that Pacaso “look(s) forward to working together to help the community thrive over the long term.”

Brad Day, spokesperson for Sonomans Together Opposing Pacaso (STOP), said the group is happy to see Pacaso pulling out of the Bel Aire neighborhood in Napa, but it’s not enough.

“It's obvious the community doesn't want them there, just like here,” he said. “A company with a moral compass would announce that they are backing out of all residential neighborhoods. Fractional ownership time shares destroy the fabric of communities by turning local neighborhoods into a revolving door of people on vacation. Pacaso is kryptonite to communities.”

Pacaso has paid an average of $4.1 million for its 14 homes to date in Napa and Sonoma counties, according to a company spokesperson, and each home sits on an average of 2.1 acres.

With its stated focus on luxury high-end homes and the average home sale price in Sonoma Valley already over $1 million, according to MLS data as of May, Pacaso’s new purchase floor of $2 million is unlikely to affect its current or potential acquisitions locally, says Compass real estate agent Tracy Reynes.

First District Supervisor Susan Gorin bought a small fractional ownership in a house at Northstar near Lake Tahoe after she lost her house in the 2017 Nuns fire. She told the Index-Tribune that she believed fractional ownership in a resort area with many houses and units rented out for the short-term “is very different” than converting a single-family home in an established neighborhood to the model.

“It is not surprising neighbors are angry about this ownership model intruding into their neighborhoods, especially when there is a vacation rental exclusion zone already overlaid on that neighborhood,” Gorin said.

“There is an impact on neighborhoods from fractional ownership homes. A single-family home might have a certain level of services coming into the neighborhood to maintain the house, but probably not at the frequency required for this ownership model.”

One local business representative has stepped forward to defend Pacaso’s business model, according to the company marketing materials.

“Empty second homes with absentee owners are not a good solution for the economic recovery of our small business community,” Napa Chamber of Commerce CEO Travis Stanley said in Pacaso’s press materials. “Pacaso’s business model actually provides more sustainable economic support, and utilizes local vendors to buy, sell, sustain and maintain the properties on a year-round basis.”

An Index-Tribune request for additional comment from Stanley ‒ or comment from Sonoma Valley Chamber CEO Mark Bodenhamer ‒ were not returned.

The operating changes announced do not affect Pacaso’s lawsuit against St. Helena, filed on April, 6, according to company spokesperson Larry Kamer with the Napa-based Kamer Group. At issue is whether Pacaso’s home ownership structure is technically a timeshare.

The federal lawsuit, filed in the U.S. District Court for the Northern District of California, seeks “to guarantee the legally protected rights of (Pacaso’s) homeowners to enjoy the benefits of owning property in the beautiful surrounds of St. Helena.”

Pacaso owns or manages five homes in St. Helena. Its lawsuit claims that the city’s letters “have scared real estate agents and chilled their efforts to buy and sell ownership interest in Pacaso properties,” according to the Napa Valley Register.

Some Sonomans are not happy, as evidenced by signs displayed at virtually every home on Old Winery Court, on Thursday, May 20, 2021. (Photo by Robbi Pengelly/Index-Tribune)
Some Sonomans are not happy, as evidenced by signs displayed at virtually every home on Old Winery Court, on Thursday, May 20, 2021. (Photo by Robbi Pengelly/Index-Tribune)

In Sonoma Valley, the neighbors on Old Winery Court are still hopeful that they can prevent Pacaso from reselling its house there to eight owners.

Cul-de-sac resident Holly Kulak believes Pacaso has a “deeply flawed” business model.

"(Pacaso) is not the answer to solving any kind of housing challenges in communities,“ she said. ”They want their IPO windfall on Wall Street at our expense.”

Contact Lorna at lorna.sheridan@sonomanews.com.

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