This story originally appeared in Friday morning’s print edition of the Post. Most of the Post’s news stories don’t appear on this website. For exclusive local coverage, pick up the Post at 1,000 Mid-Peninsula locations.
BY SARA TABIN
Daily Post Staff Writer
Palo Alto City Manager Ed Shikada is advising City Council to approve a controversial plan to turn the President Hotel, which has been an apartment building since 1968, back into a hotel.
Shikada’s recommendation is an abrupt reversal of previous rulings by the city in the past year.
A Chicago hotel investment group, Adventurous Journeys Capital, bought the apartment building at 488 University Ave. in June 2018 for $65 million without obtaining permission from the city to convert the 75-unit building into a hotel.
The buyer evicted the 75 tenants, who paid relatively low prices such as $2,000 a month for a studio apartment.
The backlash over the evictions and the attempt to convert the six-story building into a hotel led to protests and long council meetings. Residents from throughout the city said that allowing the conversion would eliminate affordable housing in a community that has only been able to approve one rent-subsidized development in the past five years.
AJ Capital’s first application to turn the building into a hotel was rejected by the city. The city determined that remodeling the building while converting it into a hotel isn’t allowed under the city’s zoning code. That’s because of the city’s grandfathering laws, which allow older buildings that are too tall or dense to comply with current zoning code to remain in use, but prevents them from changing use unless the new use complies with the current code.
Planning Director Jonathan Lait said in 2018 that the grandfathering portion of the city code contained a mistake and was holding up four projects. The city changed the code, meaning the conversion can happen now.
The owners still need a waiver from council to proceed. They are arguing council must allow them to make the change under the Ellis Act, which says local governments can’t prevent owners from taking their property out of residential use.
Legal risks
Shikada said he is advising council not to try and fight the project because of legal risks. He said a thorough analysis of the legal risks will be provided to the council confidentially along with his report on the project.
The city also eased restrictions on ground floor non-residential space last year.
In September, the company turned in a new application. The new application will come before council on June 22. Shikada said council should allow the building to be turned back into a hotel.
Shiakda said the project now complies with city codes. He said the renovations will make the building safer because it will get seismic upgrades.
The renovations are estimated to take 16 months. The city will get $8,068,996 for parking in-lieu fees and nearly a million in housing impact fees.
I’m suspicious of this flip flop and I think council should release the city attorney’s legal opinion so we can understand her thoughts on this. AJ Capital won’t be suing now that they’ve got what they wanted, so there’s no reason why it should be kept confidential.
So everything Shikada, Lait and Stump have said for the past two years is suddenly wrong? This is crazy. Looks like this secret meetings the developer had with council members really paid off!!!
This all comes down to money! As housing, this property doesn’t produce much money for the city other than the ordinary property taxes anyone pays. But as a hotel, it will add several million a year to the city’s budget because of the city’s 15.5% hotel tax. Now that the city is facing a recession, the idea of getting revenue from this property must have looked very enticing to the city manager and his staff. Money talks bulls— walks.
Allowing the conversion of the President is an excellent idea. As an apartment house, it was becoming rundown and important upgrades and maintenance were being put off. As a hotel, the new owners will put several million into renovations (electrical, sewer and HVAC) as well as a new elevator for the disabled. They even plan to have a rooftop restaurant/bar. This will significantly improve this part of University Avenue. Yes, it hurts to lose affordable housing, but the city is going to gain a great hotel and business. City Council should vote YES.
You left out the fact that the ROI is much higher for a hotel owner than a residential landlord.
What’s stopping the council from hiring an outside attorney and getting a second opinion? If you’re doctor said they had to cut off one of your legs, wouldn’t you want a second opinion? But this council is so lame they’d probably not want to offend their city attorney.
The city CAVES to a big developer. The city won’t fight for affordable housing. I’d say things are back to normal in Palo Alto!!!
I am not sure why the city manager has changed position on this. There is no takings (San Remo Hotel v. City and County of San Francisco, 27 Cal. 4th 643) and the Ellis Act is not implicated at all. The purpose of the Ellis Act is to do the opposite–preserve the housing stock on the market.
To clarify, developers tried the same thing in the San Remo case and lost. It was NOT a taking under California law.