Editorial: Having failed so far, President Hotel buyers try financial inducements to build support for zoning changes it needs | News | Palo Alto Online |

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Editorial: Having failed so far, President Hotel buyers try financial inducements to build support for zoning changes it needs

Chicago-based boutique hotel firm thinks it can overcome opposition with pledges to nonprofits

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It's not clear whether Adventurous Journeys Capital Partners (AJ Capital) did a terrible job at researching the zoning obstacles they would face when buying the 75-room President Hotel in 2018 or brashly thought they could just steamroll Palo Alto officials and residents into approving their conversion of an apartment building back into a hotel.

But the privately held firm, which has developed some 20 hotels in college towns since its Graduate Hotels chain was started in 2014, has now opted to pursue a transactional strategy of pledging $2.4 million to popular community organizations if it can win approval of its project.

Saying it wanted to become part of the "fabric of the community," the company recently published a slick, 43-page promotional brochure describing its vision for the renovation of the now-empty University Avenue apartment building and hosted an "open house" Tuesday at Il Fornaio to chat up the public and answer questions. Guests, many of whom oppose the conversion, enjoyed free wine and appetizers as a handful of protesters carried signs outside.

Ironically, among the promised recipients of a million dollars is Palo Alto Housing, the nonprofit housing developer that should be leading the opposition to the loss of rental housing that would result from the President's conversion to a hotel. Other announced potential beneficiaries of AJ Capital's "philanthropy" are the Downtown Streets Team, Palo Alto Partners in Education, the Palo Alto History Museum and the Palo Alto Transportation Management Association.

None of these organizations have announced support for the President Apartment project, and several said the donations being pledged were not being viewed as firm commitments because they were contingent on AJ being issued a building permit. A footnote in the AJ Capital brochure makes similar qualifiers.

Offers of cash in exchange for zoning changes may have been a successful strategy for AJ Capital in other projects, but it would be unprecedented in Palo Alto. While development proposals are usually required to mitigate their impacts through fees and, sometimes, negotiated infrastructure improvements, community benefits unrelated to the development have been limited to special "planned community" developments where such benefits were required. Partially because of the appearance that developers were just paying money for the right to exceed zoning requirements, this practice was halted by the City Council several years ago.

Facebook has made many donations to nonprofits in the east Menlo Park and East Palo Alto communities prior to seeking approvals of its various developments from the Menlo Park City Council, hoping that such philanthropy will create good will. But it has not conditioned such gifts to specific approvals.

AJ Capital is therefore plowing dangerous ground as it both curries favor among some Palo Alto nonprofits and prepares for a legal challenge against Palo Alto's zoning laws.

City zoning requires 200 parking places for a hotel of this size, and only 10 spaces currently exist. That total can be cut through the use of valet parking and incentives for restoring an historic building, but even with those measures there would be a large parking deficit, and potential in-lieu parking fees could reach $10 million.

In addition to the parking problem, the city passed an ordinance in April banning the conversion of residential uses to non-residential ones. AJ argues this doesn't apply to them because it took effect after all the tenants had moved out, rendering the apartments no longer a residential use. Such logic would mean that any apartment building property owner could simply allow a building to become vacant and then proceed with converting it to non-residential use. That is clearly not the intent.

But besides these and other legal obstacles, the conversion would eliminate badly needed housing at a time when housing creation and protection is a top city priority. By all accounts, AJ Capital is a quality developer whose recent hotel projects in college towns have been tasteful and well-received. If Palo Alto was short on hotels and the preservation of moderately priced housing was not such an urgent need, it might be the ideal developer of such a project.

"Where others see challenges, we see opportunity" is the prominent slogan on the AJ Capital website. In this case, AJ has miscalculated. Having acquired the President Hotel apartment building assuming it could woo support for its concept, zoning be damned, it should hear loudly and clearly that project approvals in Palo Alto aren't for sale, nor are our nonprofits going to be pawns in a quid pro quo for their support.

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Comments

43 people like this
Posted by Abitarian
a resident of Downtown North
on Nov 1, 2019 at 8:55 am

From the above:

"It's not clear whether Adventurous Journeys Capital Partners (AJ Capital) did a terrible job at researching the zoning obstacles they would face when buying the 75-room President Hotel in 2018 or brashly thought they could just steamroll Palo Alto officials and residents into approving their conversion of an apartment building back into a hotel."

As documented in this paper and other local press, incompetence and/or malfeasance on the part of senior city leadership gave AJ Capital every reason to believe they could do as they please.

First, despite existing zoning law, former City Manager Jim Keene told AJ Capital they could convert the President back into a hotel. So, of course, they did not expect zoning obstacles.

Second, at that time Interim Planning Director Jonathan Lait claimed the zoning provision that prevented the conversion from apartment to hotel use was a "typo" and tried to get the provision removed. Please.

Third, former City Council member Greg Scharff had secret meetings with AJ Capital leadership in attempt to expedite the process.

The whole fiasco reeks of corruption; however, given the above as well as City Hall's long history of favoring developer interests above all else, it is not surprising AJ Capital expected their plans to be approved without hassle or delay.

Hopefully, our city will stand strong and send AJ Capital on their way.


12 people like this
Posted by george drysdale
a resident of Professorville
on Nov 1, 2019 at 9:17 am

The free market system is the worse system except for all the rest of the systems. "The highest and best use" should prevail. Housing can be build elsewhere. Palo Alto is not an island. Look to San Jose and all that wonderful land to put into rental units. Higher and best use means the hotel will bring in more tax revenues. Think.

George Drysdale land economist and educator


12 people like this
Posted by Summer
a resident of Another Palo Alto neighborhood
on Nov 1, 2019 at 9:59 am

Arbitarian- one wonders why the editorial ignored the facts as reported in its own pages ( actions of city leadership). [Portion removed.]


7 people like this
Posted by Reality
a resident of Another Palo Alto neighborhood
on Nov 1, 2019 at 10:11 am

I remember once being surprised by EO Wilson's statement about conservation, that attempts to preserve life were far more successful than attempts that focused just on ecosystems (and assumed this would preserve the living creatures) which often failed.

I think there is an analogy here. The die was cast when AJ Capital purchased the property with the expectation of getting its way and the residents were evicted. Even if they convert the hotel to housing now, with a few bones for affordable housing (cash or units), it will never be affordable to the people who were evicted, and another cohesive community under attack loses in Palo Alto.

Affordable housing projects do usually need a higher density to work. For-profit developers have figured out how to use this to bust zoning and densifying, which in an in-demand job center always ends up ratcheting up housing costs overall and making the affordability problem worse. Here, I think the majority of residents now are far more willing to allow just affordable projects to have somewhat higher density, especially if it means they can protect the area from rapacious developers, but people are also beginning to see the serious ills of confusing that with for-profit developers weakening zoning and pushing out existing residents by wholesale densification and the way it ratchets up costs overall.

Existing low-income and regular-income residents (life) are not interchangeable with housing units (ecosystem) as far as the community is concerned, either.

AJ Capital seems to think PAHC and other community organizations can be bought.
But AJ Capital has evicted the residents, and there is no way at this point that any housing put in there will ever be equivalent to what was lost, or help the residents whose stable affordable housing stock and community were destroyed -- because of our town's past willingness to weaken zoning for hotel spaces and density, and to sell neighborhood zoning for a price.

Friends of BV and Winter were successful because the way they did it focused on the residents (life), and because, frankly, the Maybell referendum showed the developers that residents could enforce the zoning (the developer pulled out at BV right after the referendum and no other large ones were willing to get involved, so the sale for residents was possible). Those gargantuan new hotel blocks on San Antonio punctuating the monoculture of hotels in South Palo Alto from Page Mill to San Antontio, and the City's deafness to residents impacted by those monstrosities, almost certainly encouraged AJ Capital to see where the City's priorities lay (not with residents and quality of life).

I see the protests now, but what do protesters hope will be the end result here? If so many of them had all not been so eager to densify and weaken local zoning (ecosystem) no matter what it actually does to housing costs (wrongly believing density was always good for affordability when it does the opposite in in-demand job centers), this would never have happened in the first place.

Things have changed. Affordable housing advocates must start seeing that if they are to sincerely make a difference. I fear it is too late for the residents of President Hotel. Shame on everyone who made enabled that.


10 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Nov 1, 2019 at 10:15 am

Posted by george drysdale

>> "The highest and best use" should prevail.

>> George Drysdale land economist and educator

Mr. Drysdale, as a land economist, you should understand that zoning is a constitutional part of the process. Here is a nice summary of why zoning is usually upheld when there is a legal challenge:

Web Link


3 people like this
Posted by rsmithjr
a resident of Duveneck/St. Francis
on Nov 1, 2019 at 10:23 am

rsmithjr is a registered user.

We need to move beyond the controversy of last year and ask what is currently the best thing to do with the property.

Returning it to a hotel use is probably the best for the community.

If the community persists with its stance, we are likely to see a locked-up building for some years. Possibly the building will be sold to another owner, or the building will be demolished. We are facing a long and contentious future over this issue, perhaps like the International Hotel controversy in San Francisco 40 years ago.



16 people like this
Posted by Summer
a resident of Another Palo Alto neighborhood
on Nov 1, 2019 at 10:43 am

I wonder why renters at the president and their supporters think that renting a room there have them a lifetime home. Sounds like these people want a lifetime home without the responsibilities that come with home ownership.


9 people like this
Posted by rsmithjr
a resident of Duveneck/St. Francis
on Nov 1, 2019 at 11:24 am

rsmithjr is a registered user.

@Summer,

I suspect that people think that a decent home is a human right.

I can sympathize with this but I don't understand how to make it work.

The current approach in Palo Alto appears to be to demonize the folks that have invested in residential housing. The Jisser family at Buena Vista and AJ Capital at the President Hotel for example. Uniquely, these property owners are singled out to subsidize housing for renters.

If the government wants to provide subsidized housing, then let's see tax dollars used for this purpose. Our city leaders don't seem to want to invest in residential housing.


15 people like this
Posted by Citizen
a resident of Community Center
on Nov 1, 2019 at 12:05 pm

If the City wants to preserve housing as a public benefit, then it should use its funds to purchase the property and dedicate it for such a public purpose, rather than penalizing individual private property owners and forcing them to fulfill the City's public policy goals, which it seems unwilling to pay for.


30 people like this
Posted by more corruption
a resident of Downtown North
on Nov 1, 2019 at 12:31 pm

Consultants to developer AJ Capital include
Steve Emslie, ex Deputy City Manager and ex Planning Director, and
Richard Hackman, was an assistant to the City Manager, (Keene).

No coincidences, Mr. Keene supported developers, not the city.


3 people like this
Posted by george drysdale
a resident of Professorville
on Nov 2, 2019 at 12:07 pm

Would you youthful idealists please begin to develop a sense of numbers. Like five grade math (addition, subtraction, multiplication). "Affordable housing" just doesn't work in places like Palo Alto. Take a drive by the Buena Vista trailer park boondoggle. At around 750K for a one bedroom (land valuation again), there can only be "affordable housing" for the disabled not economic refugees. Take your conspiracy theories and . . . it.

George Drysdale (remembrance of high school econ and the famed economics 101).


9 people like this
Posted by Curmudgeon
a resident of Downtown North
on Nov 2, 2019 at 6:29 pm

"The current approach in Palo Alto appears to be to demonize the folks that have invested in residential housing. The Jisser family at Buena Vista and AJ Capital at the President Hotel for example."

Huh? When did AJ Capital invest in residential housing? Just last Tuesday it had an open house touting its plans for a commercial hotel.


4 people like this
Posted by Curmudgeon
a resident of Downtown North
on Nov 2, 2019 at 6:34 pm

"Would you youthful idealists please begin to develop a sense of numbers. Like five grade math (addition, subtraction, multiplication). .... At around 750K for a one bedroom (land valuation again), there can only be "affordable housing" for the disabled not economic refugees."

There's a number in there all right, but zero math and gobs of unsupported opinion.


7 people like this
Posted by Not a Fan
a resident of Old Palo Alto
on Nov 3, 2019 at 9:34 am

Wow, Weekly, you are really addressing the difficult issues. Way to take a stand. Wimps.


4 people like this
Posted by george drysdale
a resident of Professorville
on Nov 4, 2019 at 9:38 am

The necessity of social studies teachers. Curmudgeon: You were doing so well in class up until now. 750K for a new one bedroom in Palo Alto. It's the last unit of development that determines the replacement price. In Los Angeles the last price is 750k for a new unit of apartments. Palo Alto is probably now even more. A winner of the "affordable housing" lottery gets a better newer apartment than most of the market rate renters. Keep those board of supervisors out of Silicon Valley. Stanford just gave up in disgust.

George Drysdale initiator and educator


7 people like this
Posted by more corruption
a resident of Downtown North
on Nov 5, 2019 at 4:37 pm

Drysdale writes, "Stanford just gave up in disgust."

Disgust is a human emotion. I see no humanity in Stanford's unending acquisitions, only greed and aggression.
Have you seen the list of what they own? More than Apple, Google and Facebook COMBINED.


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