The Palace Hotel

A court order issued a week ago has paved the way for completion of a sale of the landmark Palace Hotel in downtown Ukiah.

Buyers are Paru and Jitu Ishwar, an Ukiah Valley couple who own franchises in four local motel/hotel operations and are engaged in city and county tourism promotion programs. 

They could not be reached Monday for comment, but their initial plans call for at least a portion of the Palace Hotel to be renovated into an upscale boutique hotel, with a restaurant/retail space on the ground level, according to people familiar with the deal.

Court documents show the Ishwars through their Twin Investments LLC successfully bid $972,084 in 2019 for the 16,000-square-foot hotel and State Street property, which included covering unpaid receivership fees and money advanced to the court appointed receiver to prepare documentation for the sale. Until now, clear title to the property was tied up in receivership issues.

Deputy City Manager Shannon Riley said the City Council will be publicly briefed on the Palace status, and the Ishwars’ plans “within two weeks.”

Superior Court Judge Ann Moorman on April 6 signed an order dissolving the court-appointed receivership that has controlled the Palace’s fate since January 2017. Moorman acted after a settlement was reached among the Ishwars, court receiver Mark Adams of Santa Monica, and the city of Ukiah to allow the sale of the Palace to be completed.

“Twin Investments has entered into, and the court has approved a Letter of Intent to negotiate a (final) purchase and sale agreement,” according to the settlement terms. The Ishwars will be provided “a nine-month due diligence period to develop plans and financing for rehabilitation of the Palace in accordance with a development agreement between the buyers and the City.” 

Deputy City Manager Shannon Riley said the City Council will be briefed publicly on the details ‘within two weeks” about the plans. 

The Palace Hotel fronts State Street in the downtown core and is listed on the National Register of Historic Places. A three-story brick portion was constructed in 1891, and an adjoining 20-room was built in the 1920s. For years it was the center of social life in Ukiah. It enjoyed a brief revival in the 1980s after a ‘cosmetic’ renovation before closing for good. 

The Palace fell into such disrepair that it was declared a dangerous building and public nuisance in 2011 but even then, the out-of-town property owner refused to voluntarily abate the conditions. Finally in 2015, the city petitioned to wrest control of the building from the owner and have the structure placed under court receivership, a move formally granted by the court in 2017. 

Since then, efforts to sell the structure have been ongoing. by the court receiver have been ongoing.

Todd Schapmire, a real estate agent, said the issues over his five years of involvement have been ‘very complex.’ 

Schapmire said during his time overseeing sale of the property he realized that the highest and best use was an upscale historic hotel operation in a downtown showing a revival in restaurants and specialty shops. 

“I know that years ago there was a lot of talk about demolishing the Palace but in my five years I never met anyone who was interested in the property advocating that,” he said.

There are a host of issues surrounding a possible rehabilitation of the Palace, and available parking is among them. But it is now believed valet parking services, and the availability of city parking after hours is seen as addressing parking related issues if the hotel is reopened.

Deputy City Manager Riley said the recently completed $7 million street improvement project in the downtown area has spurred development interest. Old water and sewer lines have been replaced, and new landscaping, sidewalks and streetlights have been installed.

“We saw the streetscape project as a municipal investment, and we think it will lead to more projects like the Palace possibility,” said Riley.

The Palace seemingly got a new lease on life after an investigation in 2017 determined that it was not cost effective to demolish the structure over possible rehabilitation. It raised hope that the decaying structure could be restored in some fashion.

Mark Adams, the court appointed receiver, at the time said it was probably not feasible to repair the building all at one. He said then he believed a portion could be developed and turned into a revenue-generating venture while the rest of the Palace waited for rehabilitation. At the time, Adams suggested the 20,000-square-foot first floor of the Palace could be developed into a boutique hotel, restaurant, bar, and retail shops. 

In 2017, Adams won approval to spend $438,000 on the building to protect it from further deterioration including a fire alarm system, a temporary roof, ceiling supports, preliminary seismic retrofitting and asbestos evaluation. Tons of interior debris and attempts at securing the building had been made by then owner Eladia Laines, a Marin County real estate agent. Multiple efforts by Laines to keep the Palace from deteriorating further failed, and the city finally acted to wrest control of the landmark structure. She and other associates had bought the building in 1990 at a bankruptcy sale for $115,000.