Ukiah's Palace Hotel too costly to demolish

Ukiah’s sprawling 125-year-old Palace Hotel, shuttered and allowed to deteriorate for nearly three decades, could be a candidate for rehabilitation.

Mark Adams, a Los Angeles-based, court-appointed receiver, is charged with determining whether the decaying structure can be restored and, if so, overseeing the work needed to give it new life.

He’s optimistic the hotel can be saved, but said during a phone interview “it’s premature to know for sure.”

What is certain is that it’s not cost effective to demolish the structure, Adams stated in a report to the Mendocino County Superior Court, which appointed him in January to take over management of the Palace Hotel after its owner failed to make adequate repairs to ensure public safety.

Tearing down the three-story, 60,000-square-foot structure would cost an estimated $400,000, well in excess of its 2006 assessed land value of $300,000. Adams said it’s “virtually impossible” to obtain financing for demolition under such conditions.

It’s also not feasible to repair the building all at once. He proposes rehabilitating sections of the structure over time in order to limit the immediate costs, for which he must find financing. A portion could be developed and turned into a revenue-generating venture while the rest of the project is pending, he said.

Adams has proposed developing a hotel, restaurant, bar and retail shops in the estimated 20,000-square-foot first floor. The upper two floors, built in 1891 and 1921, would need some limited seismic retrofitting for now, he said. Adams did not provide a cost estimate for the proposed retrofit in his report, but said modifying the upper two floors alone could cost $1 million.

Adams said the building needs to be stabilized and further evaluated before proceeding. He submitted a request to the Mendocino County Superior Court about 10 days ago seeking permission to spend $438,000 on the building, largely to protect it from further deterioration. The proposed work includes a fire alarm system, a temporary roof, ceiling supports, preliminary seismic retrofitting and an asbestos evaluation.

The building’s owner, Marin County real estate agent Eladia Laines, has protested the asbestos work. She contends the building was cleared of asbestos before the court gave control of the building’s rehabilitation to Adams. But Adams said he’s received no confirmation such work was completed.

Under pressure from the city, Laines had made multiple efforts to rehab the building she and several partners bought at a bankruptcy sale in 1990 for $115,000. But the efforts fell short of what was necessary to halt the building’s deterioration and keep it from becoming a public safety issue, city officials said. The city threatened, cajoled and set deadlines before petitioning the court for a receivership in 2015. A judge requested additional negotiations before approving the request in January and appointing Adams.

Ukiah Mayor Jim Brown said Adams’ report buoys the city’s outlook on the hotel’s future, which has become an eyesore in the heart of the historic downtown district.

“I’m all jazzed it might be salvageable,” Brown said.

City Councilman Doug Crane, a building contractor, said he had some questions about construction details in the report, but added it was “a step in the right direction.”

A court hearing on the report is scheduled for today.

You can reach Staff Writer Glenda Anderson at 707-462-6473 or glenda.anderson@pressdemocrat.com. On Twitter @MendoReporter.