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The Palace Hotel Deal: A Predictable Collapse

I hate to say “I told you so”, but in my column a year or so ago, when Minal Shankar, the Wall Street whiz kid who was then expressing an interest in taking on the Sisyphean task of revitalizing the old ruin of the Palace Hotel, I predicted that, however great her enthusiasm and efforts may be, that they would come to naught.

I was surprised though, at what exactly brought the no doubt great efforts of she and her crack team of architects, historic preservation experts, engineers, etc. to a halt; that one Jitu Ishwar, the local head of an investment group that apparently owns most if not all of the local large hotel/motels, who became the most recent owner of the Palace when he bought up the debts of the much ballyhooed “public receiver,” rejected her offer to purchase the property.

It is an enduring mystery to me why any sensible person capable of the most rudimentary due diligence would offer ANYTHING for the Palace ruins; after decades (I’ve lost track of how many exactly) of complete neglect, with its enormous leaking roof promoting rot and mold inside, the Palace property is no longer an asset, but strictly a liability to whatever entity is burdened with it on its balance sheet.

In that last column on the subject (it seems like I have been writing letters to the editor and opinion columns about it for almost as long as it has been abandoned), I suggested that Ms. Shankar do some simple, back-of-the-envelope calculations about how much it would cost to bring her renovation dream to fruition, compared to how much rental income she could reasonably expect to see from the project.

Ukiah presently, and for many years now, has had a large number of vacant commercial rentals in the downtown core, so clearly there would be a fairly modest limit to what one could expect to rent the newly remodeled commercial space for.

In light of these facts, while I’m sure that Ms Shankar is disappointed about having her offer rejected (IMHO, one dollar would be an overly generous offer for this tar baby of a project), I would suggest that it may be a blessing in disguise; whatever stranded assets she has got to now write off on this abortive endeavor, they’re just a tiny taste of the much greater losses she could expect were she to fund the entire dreamt-of transformation of the property. She’s better off and still has that money that she would have squandered to perhaps put toward another project that might have some chance of yielding a return on investment.

I have said for years that if you were to offer me the Palace Hotel property along with a bank account with half a million dollars in it, I would not hesitate to turn down the deal; without a demolition permit in hand, ownership of this ill-starred property is nothing but a ticket to endless expenses involved in maintaining and paying taxes on it, without the slightest hope of it ever generating any kind of income.

I’ll bet that Mr. Ishwar will, sometime in the future, rue the day that he turned down Ms Shankar’s offer, once his new crop of naïve potential investors figure out that the property is literally worth less than nothing.

It may be too late to even consider such a thing, after millions have already been spent on infrastructure for the vast new ‘courtrooms only’ courthouse down by the railroad tracks, but the only feasible owner of the Palace property is the state or county, where cost-effectiveness is not an issue, and where there are bottomless deep pockets to deal with something like surprise buried fuel tanks, should reason ever prevail and the lot is cleared; It could have been the ideal new courthouse location; right in downtown, where it would generate foot traffic for local businesses.

If the whole site were excavated, they could created a large amount of underground parking, and if it were tall enough and they chose to preserve part of the old courthouse for the many other agencies currently housed there who have no space at the new courthouse down Perkins Street, they could even have secure third floor walkway from there to the old courthouse, instead of expecting all these lawyers and various bureaucrats to somehow schlep all their papers the several long blocks to the new courthouse in summer heat or winter rain.

Of course any of these rational considerations are simply anathema to the local planning and zoning agencies, which seem to be based strictly on which side of the bed the local bureaucrats got up on that morning. A typical example of the arbitrary and capricious nature of the city’s planning and zoning occurred recently after a local Savings and Loan put a great deal of time, money and energy into a plan to build a branch where the old Dragon’s Lair gift shop is soon to be demolished.

Reasonably enough, since the new courthouse will have no room for the many other agencies who currently make their homes in the old courthouse, it would make a lot of sense to build larger office buildings along that stretch of Perkins Street, between the old and the new courthouse, but wouldn’t it have been nice if they had promulgated this idea to potential developers, so that we would not have ended up with situations like this, where a good local business is allowed to spend who knows how much money on their development plan before having it shot down, even though it may have complied completely with all the applicable current planning and zoning regs?

No wonder California has developed such a bad reputation for maddening over-regulation!


  1. George Hollister August 18, 2023

    I just returned from a trip to Eastern Ohio, and Western West Virginia. There are many old commercial brick buildings there that have been successfully renovated and are in use. But these buildings have numerous distinctive features that the Palace Hotel lacks. Also, there has not been an earthquake there since before Jesus, and no California regulations, high construction costs, or taxes. The Palace Hotel is a symbol for why California can’t, and the disconnection from reality so many of the monied here have.

    • George Hollister August 18, 2023

      Good point. Most of the earthquakes have been in western Ohio, and all the major ones as well. The part of Ohio, and West Virginia I was visiting has had zero reported earthquakes since 1776.

      • Bob A. August 18, 2023

        Oh come on, George! Just admit it this one time that you were wrong about something. USGS data show recorded earthquakes all over Ohio and West Virginia. Not as frequently as elsewhere, but they do happen. Ever wonder where those hills and hollows came from?

  2. George Dorner August 18, 2023

    Mr. Arteaga is the third writer to outline how the Palace location is the ideal spot for the new courthouse, joining myself and Stephen Rosenthal in that explanation. It’s already known that the proposed continual transfer of files and people between the proposed two courthouses is going to be an obstruction to court proceedings. To buy into such a foreseen problem is rank stupidity that will impede the course of justice.

  3. Mike J August 18, 2023

    Did Minal relocate here?

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