Historic downtown apartment building sold to hotel developer

AJ Capital Partners expects to close escrow on former President Hotel in Palo Alto

The President hotel, located at 488 University Ave., houses studios and one bedroom apartments over ground-floor retailers. Photo taken May 15, 2017, by Veronica Weber.

Watch Weekly jouranalists discuss the implications of the President Hotel sale on an episode of "Behind the Headlines."


The one-time fashionable President Hotel, whose iconic rooftop sign defined Palo Alto's downtown skyline during its heyday, could once again open its doors to hotel guests for the first time in 50 years.

A Chicago-based development company has purchased the six-story Spanish Colonial building at 488 University Ave. that now serves as an apartment complex and plans to turn it back into a hotel.

Palo Alto Councilwoman Lydia Kou said representatives from the Graduate Hotels division of AJ Capital Partners told her they planned to close escrow on the property today, June 12. Scores of residents currently live in the 75-apartment building.

The Graduate Hotels division is a collection of boutique hotels that AJ Capital has developed in college towns across the country. The collection includes 12 operating hotels and another five under development, according to the company's website. Fast Company ranked the hotel collection No. 50 on its 2018 World's Most Innovative Companies list.

Representatives from AJ Capital Partners would not comment on the President Hotel Apartments transaction when contacted on Monday, June 11.

Residents said that as of Monday they had not been notified of the pending sale but had heard from some of the ground-floor merchants about the conversion of the property, which includes six shops on the ground floor and 70 studio apartments and five one-bedroom units ranging between 250 and 800 square feet on the upper stories.

"We've been kept in the dark. Everyone is devastated," said resident Pemo Theodore, who has lived at the President for three years. "It really is the most amazing community, and none of us will be able to reproduce this anywhere else we go."

Theodore described her neighbors as a quirky mix of eccentric entrepreneurs, artists, retired people, single mothers and political players who, like herself, were drawn to the "funky feel" of living in the old former hotel, where the rooms are tiny, the building creaks and sometimes the apartments can be stiflingly hot in the summer. She said the building's oddities have brought them closer together.

Designed by noted Palo Alto architect Birge Clark, the Spanish Colonial-style hotel boasted a lush rooftop garden, a tiled entryway with an ornate wrought-iron grille, a beamed-ceiling lobby and a grand spiral staircase that climbed all the way to the top floor when it opened in 1929.

According to, each guest room had a private bath and featured in-room radio service, allowing guests to choose between channels as they showered, shaved or relaxed in their suites.

AJ Capital renovated a similar historic property in New Haven, Connecticut, last September that included residential units. The developer assisted in the relocation of tenants and paid for moving expenses and security deposits within the first two months after purchasing the 123-year-old Duncan Hotel, according to the New Haven Register.

Theodore said residents at the President Hotel Apartments don't want to leave. Some of them have lived there for as long as 37 years.

"There's no way all of us can get accommodations in Palo Alto, and there's no way for us to find what we're paying here to live in one room," said Theodore, whose monthly rent for her studio is $1,900. Median rent in Palo Alto stands at $2,520 for a one-bedroom apartment, according to

Theodore said tenants have approached a law firm to make sure their rights are looked after.

"The bottom line is people don't want to leave," she said. "The reality is we probably won't be able to do anything about it, but from my point of view, I'm going to do as much as I can until I hit the wall."


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119 people like this
Posted by Anon
a resident of Barron Park
on Jun 12, 2018 at 8:32 am

Anon is a registered user.

This is an awful mass displacement of more Palo Alto renters and a loss of the affordable housing. The median rent there is $1900 a month - compare that to the studio rents at the newly approved VTA lot at Page Mill and ECR - $3000 a month.
So we are now losing more housing than that just approved at the VTA lot. And what we are losing is actually affordable as opposed to that at the VTA, including its so called workforce housing.
The City should throw every road block it has in the way of this going through and short of that, wring out every relocation concession legally possible. Some have lived there for decades.
And 6 on the City Council refused to even discuss more renter protections to add to those we have - shame on you! Renters make up 44% of residents in town. Remember that in November - Tom DuBois wanted to discuss more protection for renters- Cory Wolbach did not and voted to kill doing so. I’m voting for Tom, not Cory and every renter should do likewise.

8 people like this
Posted by Rob
a resident of Atherton
on Jun 12, 2018 at 8:41 am

I'm glad they're turning this back into a hotel.

[Portion removed.]

39 people like this
Posted by Angie
a resident of Crescent Park
on Jun 12, 2018 at 9:31 am

This should be a reminder to the city that we need more protections for renters and more apartments near transit. How could anything that reduces the number of high density, transit oriented housing be approved right now? We all know there is a serious housing shortage.

And if renter protections had been seriously considered this year then these tenants might have been able to negotiate space in a renovated building nearby or realistic relocation assistance.

16 people like this
Posted by YIMBY
a resident of Community Center
on Jun 12, 2018 at 9:41 am

Private property sells. Displacement is a consequence that can be tragic.

But to be clear, the issue is supply. We need to increase supply. I honestly don't understand what Dubois is doing suggesting sweeping rent control, without even being open to compromise. It's such a political stunt.

You want to address the problem, create incentives to build more. We need more housing. More supply. You all think that the efforts imposed to thwart the "developers" are somehow hurting them. But in reality, the process is so broken that every developer's project that comes online does so in a virtual monopoly - setting new records in the sales process.

Let's allow every R1 parcel to be rebuilt as a duplex (convert R1 to R2). Who knows, if 25% of our R1 parcels became sites for two families over the next decade we'd make good progress to overcoming this crisis.

20 people like this
Posted by Deja vu
a resident of Fairmeadow
on Jun 12, 2018 at 10:25 am

Here we go again! Joe Simitian better start pulling together public funds to save this "affordable" housing stock. It was done for Buena Vista so why not for these apartments? Maybe the current residents are not diverse enough to warrant a public handout.

36 people like this
Posted by Allen Akin
a resident of Professorville
on Jun 12, 2018 at 10:27 am

Allen Akin is a registered user.

So long as commercial uses are more profitable than housing, large amounts of housing won't be built. (And as in this case, some housing will be converted to commercial use.)

Rezoning won't have any significant effect. You can already see this all around the valley, where new mixed-use developments could include lots more housing, but developers are choosing to build overwhelming amounts of commercial space instead.

The key to fixing this situation is to change the economic incentives to favor housing over commercial uses. That could take many forms -- head taxes, cap-and-trade system for development rights, ordinances for housing-neutral development, etc. But don't forget the additional infrastructure investment all this new population will require.

Like this comment
Posted by @Rob
a resident of another community
on Jun 12, 2018 at 10:40 am

[Post removed due to deletion of referenced comment.]

3 people like this
Posted by @Allen
a resident of another community
on Jun 12, 2018 at 10:42 am

Zoning is actually a major source of the housing problem. There is extremely high demand for housing right now, to say that it's not profitable to build it ludicrous.

Web Link

13 people like this
Posted by Fuhgettaboutit
a resident of Duveneck/St. Francis
on Jun 12, 2018 at 11:02 am

Fuhgettaboutit is a registered user.

Palo Alto will never be naive enough to enact Rent Control. It has a proven track record of hurting the communities and demographics it is supposed to protect---->Reducing mobility, lack of investment in housing, increased homeless, lack of incentive for repair...thats another can of question is why is Tom Dubois pushing for rent control when he knows it will never pass? Looks like a talking point for his re-election campaign...

15 people like this
Posted by build more housing
a resident of Downtown North
on Jun 12, 2018 at 11:21 am

maybe we should build more apartment buildings like this! The hotel president would be illegal to build under today's zoning, and yet it is EXACTLY the type of housing we need! I could care less it's becoming a hotel --> JUST BUILD MORE HOUSING.

16 people like this
Posted by Marie
a resident of Midtown
on Jun 12, 2018 at 11:23 am

Marie is a registered user.

Does it require a change in zoning for this apartment building to become a hotel? If so? The answer is simple. Don’t change the zoning. Didn’t they have to change the zoning to convert the hotel into apartments?

Unfortunately, the chances of this are nil due to the huge increase in income to the city from TOT hotel tax. The city administration will do anything to keep their overly generous pension plan funded.

Is there any protection for this historically significant building, designed by Borge Clark?

They could offset this loss by tightening restrictions on Air bnb units, by enforcing current zoning restrictions or by implementing a new ordinance as they did in SF limiting Air bnb rentals. But again, since Air bnb collects TOT for the city, the interests of city employees will most likely win out over the interests of the city residents.

One way to change this is to vote for Tom Dubois and not to vote for Cory Wolbach. Look how they voted, not what they say.

It is so sad to see longterm housing go away.

24 people like this
Posted by Profiles in Cowardice
a resident of Midtown
on Jun 12, 2018 at 11:39 am

Rents are so high because of speculation from investment companies, not because of lack of supply. Housing is not like other products, it is treated more like the stock market and speculation is key. YIMBY, and others, do not understand this. When has trickle-down economics ever worked? YIMBYs want to make us believe that by adding more housing the value of those new housing units will trickle down to lower rents, but trickle-down housing works as good as trickle-down economics during the Reagan era. It is terribly distressing seeing these so-called "liberals" proclaim trickle-down economics is the solution for our region's housing issue. I also echo comments made regarding Wolbach's decision to not even study the issue of renter protection. It is clear he is for developers, and against us renters. I will surely vote against him in the fall.

8 people like this
Posted by chris
a resident of University South
on Jun 12, 2018 at 12:01 pm


The basic point you are missing is that speculation/investment in housing is profitable because governments limit the supply of housing so tightly. Governments need to rebalance the supply of housing and commercial.

Commercial spaces/land need to be converted to residential, not just the reverse.

Rent control will not be successful in the long-term.

13 people like this
Posted by Jocelyn Dong
editor of the Palo Alto Weekly
on Jun 12, 2018 at 12:35 pm

Jocelyn Dong is a registered user.

@Marie: About the zoning, the parcel is zoned CD-C (commercial downtown - community) which permits a hotel to operate there. No zoning change is needed. See Web Link

6 people like this
Posted by Profiles in Cowardice
a resident of Midtown
on Jun 12, 2018 at 12:38 pm


Look at historical examples of cities that have rent-control, or have ended rent control. NYC had some of their biggest private residential building booms during the strictest rent control, and Cambridge MA saw the rents in all their rental properties (both covered under rent control and not) skyrocket after the state ended rent control.

I'm not saying rent control is the panacea to solve the housing crisis, far from it. However, it can be an effective tool in certain municipalities if used appropriately. We clearly need to address the issue renters are facing state-wide, and this could be a tool to address that. To not even study the issue, which City Council voted on, is disingenuous for people who claim to be "pro-housing".

6 people like this
Posted by Barbara
a resident of Downtown North
on Jun 12, 2018 at 12:38 pm

I very much welcome the return of the President Hotel as what it was intended to be - a hotel!

23 people like this
Posted by Allen Akin
a resident of Professorville
on Jun 12, 2018 at 1:35 pm

Allen Akin is a registered user.

The very reason we're having this discussion is that the President is more profitable as a hotel than as housing. Zoning isn't the issue.

Consider the Vallco project. The developer originally proposed about 2m sq ft of office space and 800 housing units. That works out to a jobs/housing ratio of about 11. Public review forced the developer to go up to 2400 units, for a jobs/housing ratio a little worse than 3. The developer then invoked SB 35 to prevent further public review. Unless Cupertino's zoning rules state that 2400 is the maximum number of housing units allowed on this property, zoning isn't the issue for Vallco, either.

"...downtown San Jose — seen as a cornerstone of the city’s economy — is one of the sections where development of new housing is unlikely to produce profits for developers..." Web Link

A few months ago I checked costs for apartments and offices in Palo Alto. Average apartment rental rate was about $3.70 per sq ft per month. Average office lease rate was about $5.77 per sq ft per month. Economically, it makes sense for developers to build more offices than housing here, and that's exactly what's happened.

You can see why upzoning R-1 to R-2 won't have much effect. There's already opportunity to build more housing, but when they have a choice, developers would rather build commercial space because it's more profitable.

As a couple of other people have mentioned, rezoning commercial properties for housing might be a good idea. That would make commercial space development more expensive, and housing development less expensive, so the economic incentives would improve.

21 people like this
Posted by anon
a resident of Another Palo Alto neighborhood
on Jun 12, 2018 at 3:51 pm

Renter protection can be many things. I don't know why people are hung up on just a couple alternatives types. All that was asked of the City Council ultimately was to look the many possibilities for renter protection - some that many towns have enacted years ago without dire economic consequences for property owners of rental property.

I own rental property in a town that has some renter protection that Palo Alto doesn't, and it's fine. Tenants are sitting ducks, subject to gentrification and displacement, or a change of use such as this where rich people want to get richer - there's a lot of that going around. So some of these tenants will, after decades at the President Hotel, leave a town, some having grown up here, and the Bay Area, to go where they know no one, and nothing about.

Here is a renter protection we now have in Palo Alto - a required 1-year lease for new renters. We could require it for the 2nd year unless there is just cause not to, and the renter wants it. Another we could require is free mandatory mediation between tenants and property owners over specific types of issues.

4 people like this
Posted by Over It
a resident of Old Palo Alto
on Jun 12, 2018 at 4:44 pm

Quit whining about the cost of housing. Either go out and make more money or just move to Sacramento.

22 people like this
Posted by Not over it
a resident of Fairmeadow
on Jun 12, 2018 at 5:11 pm

Not over it is a registered user.

*sigh* I'm whining about the cost of housing, even though I'm sitting pretty. I don't like living with a homogeneous set of rich people. I don't like living in a town where the local workers -- teachers, city staff, etc -- can't afford to live here. If I did, I'd live in Atherton. I want to change our town's zoning and policies so that we once again have a more diverse town. End of story.

7 people like this
Posted by george drysdale
a resident of Professorville
on Jun 12, 2018 at 6:27 pm

I think it outrageous that the Ohlone indians were displaced. Don't people have any respect for the original inhabitants? After a while old buildings wear out, become too expensive to maintain, lead in the piping etc. If people want to live in one of the most expensive places in the world shouldn't they pay the price? Think with math not your heartfelt sympathies. The growth of entitlements is harnessing the younger generation with a massive debt.
George Drysdale social studies teacher and land economist

4 people like this
Posted by @Over it
a resident of another community
on Jun 12, 2018 at 7:09 pm

You're exactly why Prop 13 shouldn't exist.

8 people like this
Posted by Annette
a resident of College Terrace
on Jun 15, 2018 at 12:33 pm

Annette is a registered user.

It hurts when our development policies smack us around as this one is doing. 75 people being displaced is an extra serious problem here b/c of our housing inventory realties: limited affordable housing and essentially no BMR housing. We have steadily exacerbated the jobs:housing imbalance by adding more office space than we can sustain housing-wise. It's past time to take a different approach. Limiting office growth and the resulting additional demand for housing is a necessary first step. After that, require developers who present office projects to include housing with those projects. This does not have to mean that Palo Alto is transformed by corridors of stack and pack housing. Stanford's Maybell project on upper Cal Ave is an example of a varied housing community. The ROI for housing is not as attractive as the ROI on commercial development, but it is painfully obvious that we cannot continue ignoring reality.

The 75 residents of the President Hotel represent the human cost of unsustainable growth.

We can and must do better. After all, this is Palo Alto.

5 people like this
Posted by Moderately Conservative
a resident of Another Palo Alto neighborhood
on Jun 15, 2018 at 2:18 pm

What the City Council should do is kick-out the scammers in Lytton Gardens who are not truly low-income renters who need help with low rent. They are turning a blind eye towards this. There are a lot of people there who do not speak English, thus, they qualify for low-income housing because they can't get jobs. Meanwhile, we have people who work hard in Palo Alto but can't afford to rent here and they have to commute long hours. Lytton Gardens should be for employed citizens.

4 people like this
Posted by No Tenants Protection/No Housing Preservation in Palo Alto
a resident of another community
on Jun 16, 2018 at 4:39 pm

Distressing that a solidly Democrat community like Palo Alto doesn't seem to have much in the books in terms of tenants protection -even for a most basic relocation package- or housing preservation -no net loss of housing units, no conversion from residential to other use...-.

If hotels are a permitted use, maybe Palo Alto can at least try to refuse a permit for that property?

12 people like this
Posted by Resident
a resident of University South
on Jun 16, 2018 at 5:00 pm

Last year three council members tried to move forward with consideration of stronger renter protections. DuBois, Holman and Kou were voted down by the council majority including Wolbach who purports to be a progressive Dem. Go figure.

10 people like this
Posted by No Tenants Protection/No Housing Preservation in Palo Alto?
a resident of another community
on Jun 17, 2018 at 6:24 am

Wasn't there a precedent when Casa Olga (closed in 2009) made way for the Epiphany Hotel (opened in 2014)? Preserving Casa Olga's SROs (single room occupancy) use could have gone a long way in addressing the current homelessness crisis.

2 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jun 17, 2018 at 6:23 pm

Online Name is a registered user.

Maybe the city could require each hotel to provide a floor or three of housing instead of removing units from the the area's available housing stock and thus raising prices for everyone by increasing competition. y

Sorry, but further commenting on this topic has been closed.

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