For nearly two years, the proposal to convert the iconic President Hotel on University Avenue from an apartment building to a hotel has been widely criticized by residents and city officials for reducing the city's housing stock and violating local zoning laws.
But even as the COVID-19 pandemic has decimated the local hotel industry, the project continues to move ahead. And last week, it picked up a key victory when the city's Historic Resources Board unanimously supported the developer's plans to renovate and seismically upgrade the 1930 building at 488 University Ave.
The May 14 vote does not, in of itself, allow the project to move ahead. The board did not comment on the most controversial element of the project, the conversion of 75 apartments into 100 hotel rooms. It will ultimately be up to the City Council to grant the property owner, AJ Capital Partners, a waiver to convert residential space to non-residential space. The council approved a law in March 2019 to prohibit such conversions, though the attorney for AJ Capital has argued that the law does not apply to the President Hotel project. The building was no longer residential at the time of the law's passage because by then all the tenants had been evicted, attorney David Lanferman argued in a September 2019 letter.
Even if the law applies, the council agreed to allow applicants to seek waivers to allow such conversions, subject to a public hearing. AJ Capital had indicated that it would seek the waiver if the city deems that the ban on conversions of residential projects to non-residential ones applies to President Hotel.
The city's Planning and Development Services Department also had determined last year that the project does not comply with the city's parking laws and its retail preservation requirements.
For the project to advance, the developer would also need to win approval from the city's Architectural Review Board, which has yet to review the plans.
But the vote by the Historic Resources Board hands a rare victory to a project that has generated significant community opposition since June 2018, when AJ Capital bought the building. Since then, the Chicago-based developer has evicted all the tenants from the apartment building in preparation for the conversion.
The project does not include any additions to the building or changes to its mass or scale. The plan calls for merging the retail spaces on the ground floor of the building and creating a corridor to Cowper Street and renovating the roof terrace. The building's storefront windows and doors would be replaced and its stucco walls, balconies and mullions would be painted. Non-historic tiles would be removed and replaced with ones that match historic tiles.
In advocating for the project, Alex Stanford, chief development officer for the west coast at AJ Capital, cited the state of disrepair that the building has fallen into over recent decades.
"Unfortunately, as many of you witnessed during tours earlier this year, the building has suffered from decades of deferred maintenance and is in urgent need of restoration and upgrades to critical infrastructure, including seismic retrofit, installation of sprinklers and fire alarm systems and accessibility improvements," Stanford told the board on Thursday.
Built in 1930, the Birge Clark-designed building functioned as a hotel until 1968, when it became a residential building known as Hotel President Apartments. According to a historic evaluation by the consulting firm Page & Turnbull, much of the building was already occupied by permanent residents at the time of the conversion. The report cites Melville Mack, president of the Hotel President Corporation, who estimated in 1968 that permanent residents had historically occupied 40% of the building and that the change "carries out a long trend toward accommodating permanent residents at the hotel."
The Page & Turnbull study suggested that other factors also may have contributed to the hotel's conversion into an apartment-only building. This includes increased competition from other hotels.
"Increasing numbers of auto-friendly motels and resort-style hotels were constructed along El Camino Real, the main thoroughfare for travelers down the San Francisco Peninsula," the report states. "These cheaper accommodation options brought stiff competition to Palo Alto's two main downtown hotels, the Cardinal Hotel on Hamilton Avenue and Hotel President."
By contrast, the city's hotel scene was seeing a resurgence in 2018, when the project was introduced. Marriott was proceeding with a plan to construct two new hotels on San Antonio Road and several other hotels had recently opened in other parts of the city, including Hilton Homewood Suites, the Epiphany Hotel (now known as Nobu Hotel Palo Alto) and Hilton Garden Inn. Many hotels had occupancy rates of 85% or higher before the COVID-19 pandemic, which has forced many hotels to shut down entirely and has reduced the occupancy rates at those that remain open to single digits.
The proposal by AJ Capital found instant opposition in the community, with many residents pointing to the city's housing shortage and arguing that the last thing that the city needs is a project that would take away 75 relatively affordable apartments. During an open house last October, protesters held signs opposing the conversion while AJ Capital representatives made their pitch for the project.
The Historic Resources Board expressed no qualms about the loss of housing, an issue outside its purview. It did, however, laud the proposal to restore the building, particularly at a time of deep economic uncertainty. Board member Deborah Shepherd said the city is fortunate to have a hotel-management company with a track record of restoring historic properties move ahead with the conversion.
"Particularly in light of the downturn we're looking at, I think this opportunity to showcase a building as important as this one and to use it to generate street traffic to support retail, to support restaurants, to support gyms — I think we are very fortunate."
Chair David Bower agreed, even as he acknowledged at the beginning of the meeting the board's limited purview over the application. Bower suggested that the rehabilitation will "give a significant extension to the life of the building and the public access to this building at a very difficult time in this country, economically."
"I don't think any of us are clear (about) what we're going to be looking at in the future, as we try to climb out of this pandemic," Bower said. "But this is really a significant effort by this company to not only preserve a building that is largely untouched. … In need of renovation, certainly, but it's not been stripped like many buildings of its age."