News


President Hotel: The deal and the deadlines

AJ Capital offers tenants thousands of dollars, and an extended stay, if city cooperates

When tenants of the President Hotel received eviction notices from new building owner AJ Capital on June 12, they were promised help finding new housing, along with $3,000 in relocation assistance.

Now four months later, the tenants — aided by attorneys and the Palo Alto City Council — could walk away with upwards of $20,000 in cash and/or reduced rent, based on their individual circumstances.

The increase was sparked at least in part by zoning roadblocks that are preventing AJ Capital from moving ahead with the downtown building's conversion into a hotel, providing the company with incentive to negotiate with tenants and the city. Public outcry over the evictions also may have greased the negotiation wheels.

Lawyers for the tenants and AJ Capital started discussing the terms of an agreement in late summer, culminating in an Oct. 26 deal. According to the terms, tenants would be allowed to stay through at least Jan. 31, 2019, and possibly until June 16, 2019, rather than be evicted on Nov. 12; pay only half of their rent from November through January (or through June); and receive voluntary assistance payment in multiples of half of their rent, depending on when they move out.

The agreement is notable, however, for the benefits it gives to tenants if the city officials give AJ Capital what it wants by two deadlines: Dec. 10 and Dec. 17.

The voluntary assistance payment would kick in only if the city and the company "reach binding consensus on or before Dec. 10, 2018, on the applicable parking issues and planning department approvals" needed for the conversion, according to the Oct. 26 tenant agreement.

If the council were to approve two separate zoning changes by Dec. 17, then tenants would be allowed to stay through next June 16.

New documents released by the city of Palo Alto in response to a Public Records Act request filed by the Palo Alto Weekly give a glimpse inside the negotiating process.

Just before Labor Day, the developer offered to reduce tenants' rents by half and extend their tenancy through June 2019. According to an update that David Lanferman of law firm Rutan & Tucker provided to AJ Capital on Sept. 12, the tenants had been "mollified" by the proposal but wanted "MORE $$$ and more time." Lanferman said he indicated some "incredulity" as to the tenants' proposal, particularly their desire to get a $25,000 payment upon execution of the settlement agreement, eight months before they would have to relocate.

The tenants' attorney, Scott Emblidge, reportedly acknowledged that he had "cautioned the tenants about the legal vulnerability of their fairly extravagant demands" and the constraints of Ellis Act, according to Lanferman. (The Ellis Act ensures certain conditions and rights related to when a property owner closes a rental property and evicts all tenants.)

By October, a final deal had been struck: Residents who signed it agreed that they "shall withdraw all existing objections to, and shall not future contest, protest or otherwise interfere or attempt to interfere with, directly or directly, any permit application(s) or other submittals made by AJ CP to the city concerning the President Hotel restoration project."

The tenants are also forbidden by the contract from taking "any other action, directly or indirectly, that would potentially hinder, impede or delay the President Hotel restoration project," according to the contract.

Costing AJ Capital more money beyond the Oct. 26 agreement, the council adopted an urgency ordinance on Aug. 27 that required certain Palo Alto property owners to pay evicted tenants between $7,000 and $17,000 in relocation assistance, depending on the size of their rental. As an urgency ordinance, it applied only to those tenants making below the area median income, a restriction proposed by Councilman Greg Scharff. But on Sept. 17, when adopting a permanent ordinance, the council agreed to remove the income restriction, ensuring that every President Hotel tenant would be eligible for some additional compensation.

As the council considered the ordinance, AJ Capital strenuously objected, with Lanferman submitting a letter arguing that such an ordinance would be illegal. Adopting the ordinance "may needlessly expose the city to the risk of costly legal proceedings by many affected parties," Lanferman warned.

The Oct. 26 agreement, however, did include the city-mandated $7,000 in relocation assistance for President Hotel tenants in studio apartments, $9,000 for those in one-bedroom units, with an additional $3,000 given to persons who are of low-income, elderly, disabled or have a minor child living with them.

This article is part of a larger story titled "Documents reveal secret dealings over President Hotel."

Watch Weekly journalists discuss this issue on an episode of "Behind the Headlines."

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Follow the Palo Alto Weekly/Palo Alto Online on Twitter @PaloAltoWeekly and Facebook for breaking news, local events, photos, videos and more.

Comments

22 people like this
Posted by anon
a resident of Another Palo Alto neighborhood
on Nov 30, 2018 at 1:15 am

Tenants were fortunate that more renter protections had been talked about for a year before the President Hotel issue came up. Otherwise, I assume the city council would never have passed the relocation benefits that are mentioned here, to be paid by AJ and not conditional on the city changing its laws to cater to AJ. These are benefits that cannot be taken away from tenants like their free speech rights have been.

The council must support its laws and not cater to this or other destructive demands that are destructive to our city, Council must not end the Cap, change the grandfathering clause or accommodate AJ's nutty parking scheme, depriving the City of millions of dollars in in-lieu parking fees.


28 people like this
Posted by Amazing
a resident of Barron Park
on Nov 30, 2018 at 7:42 am

Palo Alto must be the only town in America that gives away free money...to avaricious developers and displaced tenants alike.

No wonder everyone wants to move here.


10 people like this
Posted by Move here?
a resident of College Terrace
on Nov 30, 2018 at 1:27 pm

More like live in Woodside and own commercial property in Palo Alto that can be a money mint. Or better still, live overseas and invest in property that can be redeveloped.


6 people like this
Posted by YSK
a resident of Community Center
on Dec 3, 2018 at 10:54 am

Oh cool! That sum will cover 4 months rent in this area. How comforting. So excited that another overpriced hotel is coming to the downtown area.


22 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Dec 3, 2018 at 10:57 am

Online Name is a registered user.

YSK is right, How far do you think $20K will go toward getting a whole new life in another community so the city can use shoddy excuses to fill its coffers with another over-priced, under-parked hotel.

Is the city still considering giving the owners a $13,000,000 parking exemption credit that we the taxpayers have to fund?


5 people like this
Posted by rsmithjr
a resident of Duveneck/St. Francis
on Dec 3, 2018 at 11:16 am

rsmithjr is a registered user.

When we create tenant protections, we generally also increase the costs to builders and landlords. Like all businesses, builders will try to mitigate these expenses, generally by passing them on to the tenants. The government imagines that we are reducing their profits, but this is likely not the case. If the costs are so severe that they would materially affect profits, then the result is that the landlords are driven away.

As to the tenants, we have no idea what the economic situations of the tenants actually are. It is understandable that they may not want to leave and pay more rent, but that does not mean that they can't afford it. Perhaps the real situation is that they have been getting a good deal for some time and now it is over.


6 people like this
Posted by sunshine
a resident of Crescent Park
on Dec 3, 2018 at 11:16 am

I thought there was a problem with the zoning. The President was a grandfathered use of the property and as such had to continue to be used for the same purpose--residential units; it could not be switched ti a hotel.
What happened to that part the I thought would allow the small shops and residents to keep their spots?
Undone once again by an avaricious majority on the council.
What happened to all our good residentialists?


7 people like this
Posted by YUK all highly inappropriate
a resident of Another Palo Alto neighborhood
on Dec 3, 2018 at 11:37 am

Steve Elmslie has brought on 27 University (while inside City), and from the "outside" since the Castilleja expansion, President Hotel, the Marissa Meyer project

why do we have a Council?

City staff weaves in all sorts of sound bytes about copy and paste problems or how "good" this or that would be to fool the public long enough for us to forget...but the deals are meant to $#@* others big time, namely residents stiffed with the costs from the overreach

Zoning should not be in the control of City staff, now what?


19 people like this
Posted by ballot box
a resident of College Terrace
on Dec 3, 2018 at 11:59 am

In two years we will have a chance to change the current council majority that encourages development over the interests of residents. As long as residents aren't fooled again by candidates posing as one thing then doing another once elected, or not saying much at all so voters can read what they want into their platform, or lack thereof.


4 people like this
Posted by BlackbeardsMom
a resident of Midtown
on Dec 3, 2018 at 1:09 pm

BlackbeardsMom is a registered user.

These comments continue to outrage me! I am a 4th generation San Franciscian who finds myself blessed to be here now. $20,000 is a HUGE amount by anyone's standards. We all know this, yet we for some reason, feel the tenants demands should be not only met, but, exceeded. Yes, they may have to relocate, like MOST of my own family have. My children, nieces, nephews, have. Eventually I may as well. A few were also "unfairly evicted", however they understood this is progress so they packed their things as most adults do, and moved on with their lives. Hard lessons to be learned but life isn't easy. Most who experience a challenge such as this don't have the bulk of their city and Council fighting for them. The remaining tenants are fortunate to have such voices backing them, not to mention an attorney working on their behalf. Unfortunately, their greed seems to be showing and they aren't taking their own attorneys advice. In most business situations you get one or the other, time or money. They seem to want both. Time to start adulting folks, and let the Council and the city move on to things more important.


16 people like this
Posted by Nice Windfall For Getting Evicted
a resident of another community
on Dec 3, 2018 at 1:18 pm

> That sum will cover 4 months rent in this area.

The displaced residents don't have to remain in Palo Alto. That $20K will go a lot farther somewhere else.

Nice windfall for getting evicted. Rather than complaining, why not be grateful for the remuneration?


10 people like this
Posted by Novelera
a resident of Midtown
on Dec 3, 2018 at 2:28 pm

Novelera is a registered user.

@Nice Windfall Easy to say just move somewhere else. What about having a sense of community as a long-time resident of downtown? And, from some of the quotes I've read from the tenants, many of them work in Palo Alto. Now you think it's fine for them to move to a cheaper area and spend an hour on the freeway to get to work? Or need to get a car in case, like some of the tenants quoted, they haven't needed one? Spend LOTS on gas to drive from a less expensive area? Pay for the inevitable repairs because of all the miles on the vehicle?


24 people like this
Posted by Ahem
a resident of Another Palo Alto neighborhood
on Dec 3, 2018 at 2:29 pm

The real-estate industry has learned how to use liberal guilt to bully, shame, and gaslight Palo Alto residents into acquiescing to their self-serving plans to exploit Palo Alto by re-develop every piece of real-estate over and over and over again until every affordable dwelling or business location has been replaced by something much more expensive and much more profitable.

After years of emotional abuse by this viscous industry and their enablers in city government, Palo Alto residents suffer from a collective form of battered wife syndrome.


19 people like this
Posted by Doublespeak As Usual
a resident of Another Palo Alto neighborhood
on Dec 3, 2018 at 3:06 pm

>>What about having a sense of community as a long-time resident of downtown?

A 'sense of community' is sometimes highly overrated. All in the mind. Move and make new friends. Others do.

>>many of them work in Palo Alto...you think it's fine for them to move to a cheaper area and spend an hour on the freeway to get to work? Or need to get a car...Spend LOTS on gas to drive from a less expensive area? Pay for the inevitable repairs because of all the miles on the vehicle?

This particular concern goes 'in one ear and out the other' when Millennials and lower-income people bring the topic up to the residentialist/anti-development faction whose response is always 'well live somewhere else' but don't overdevelop housing in Palo Alto. Why do the President Hotel residents get all the sympathy? It's like there are two rules in play...one for the soon to be former hotel residents and another for other people who also wish to reside in PA.


12 people like this
Posted by What Sense of Community?
a resident of Another Palo Alto neighborhood
on Dec 4, 2018 at 1:06 pm

"What about having a sense of community as a long-time resident of downtown?"

An idealistic albeit vague concept. The homeless in Palo Alto have a sense of community (i.e. sharing spare change/booze etc.) and the RV dwellers often look after each other's vehicles. No one's raising any concerns about them except maybe to eradicate them from the city streets.

A true sense of community is not bound by specific or shared geography but by a collective consciousness.

On that note, the upwardly-mobile in Palo Alto share a collective-consciousness of sorts...to keep others out of their fair city. So if you want to call that a sense of community so be it.


8 people like this
Posted by A Reality Bite
a resident of another community
on Dec 6, 2018 at 8:19 am

"What about having a sense of community...?"

There is absolutely no sense of a 'collective' community in Palo Alto.

It is essentially the 'haves' VS the 'have nots' as most PA residents care only about their own self-serving issues and concerns.

Don't delude yourself.


4 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Dec 6, 2018 at 8:56 am

Posted by A Reality Bite, a resident of another community

>> There is absolutely no sense of a 'collective' community in Palo Alto.

>> It is essentially the 'haves' VS the 'have nots' as most PA residents care only about their own self-serving issues and concerns.

Not universally true. Some neighborhoods are (still) very neighborly.


10 people like this
Posted by A Reality Bite
a resident of another community
on Dec 6, 2018 at 9:14 am

> Not universally true. Some neighborhoods are (still) very neighborly.

Holding a block party or chatting over the hedge does not constitute a sense of collective community. If anything, it's exclusive and unrelated to the rest of Palo Alto.


12 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Dec 6, 2018 at 12:59 pm

Online Name is a registered user.

"Holding a block party or chatting over the hedge does not constitute a sense of collective community. If anything, it's exclusive and unrelated to the rest of Palo Alto."

Wouldn't want you to feel excluded especially since it's such a hassle to find fence repair and tree-trimming people who are booked months in advance. Please feel free to help us find the right people and share the costs of tree trimming and fence repairs. When can you be here to fetch the kids' balls when they go over the fence and deliver each other's mis-delivered mail?


2 people like this
Posted by Oh Really?
a resident of Duveneck/St. Francis
on Dec 6, 2018 at 1:43 pm

> Please feel free to help us find the right people and share the costs of tree trimming and fence repairs.
> When can you be here to fetch the kids' balls when they go over the fence and deliver each other's mis-delivered mail?

Palo Alto's purported sense of community is indeed a most peculiar one.

How reassuring to know that most neighborhoods in Palo Alto share such expenses and courtesies so willingly and freely.

It almost reminds me of Mayberry...not.


6 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Dec 6, 2018 at 2:09 pm

Online Name is a registered user.

It's not the neighborhoods; it's the people in the neighborhoods cooperating with and helping each other. You're the one who said you felt excluded so just trying to make you feel better by being neighborly and including you. :->


2 people like this
Posted by Oh Really?
a resident of Duveneck/St. Francis
on Dec 6, 2018 at 2:44 pm

> There is absolutely no sense of a 'collective' community in Palo Alto.

>> It's not the neighborhoods; it's the people in the neighborhoods cooperating with and helping each other.

This makes far more sense and thank you for clarifying. Having good neighbors is one thing and completely different from having a collective sense of community on a far larger scale...which Palo Alto most certainly doesn't have.


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