There seems destined never to be a dull moment at the Palace Hotel. Its illustrious and somewhat shady history begins in 1929 with a Mufti, a Jewish contractor and a guns slick. Seventy-six years later, it welcomes the son of a Hungarian egg seller who dreams of bringing the height of luxury to a city down at heel. In September 2005, the Palace Hotel, located at the end of Agron Street, just opposite the Mamilla complex and the David Citadel hotel, was sold to the Reichmann brothers, who are European-born, Canadian-bred ultra-Orthodox real-estate tycoons who have built extensively in Toronto, New York and London's Canary Wharf. In the $20-million deal they purchased the rights to both the hotel, used until recently as the Ministry of Industry and Trade, and the adjacent Duty Building. They have promised to renovate the Palace into a 210-room deluxe hotel, while the Duty Building will become private luxury apartments that will enjoy the services of the adjacent hotel. "It's a gutsy move," says Moriel Matalon, Advocate for Gornitzky and Co. the lawyers representing Paul Reichmann in the handover from the previous owners, Regency Jerusalem. "But the Reichmann brothers always go for gutsy moves. They're not doing it for the revenue. They're doing it because Paul Reichmann, now in his seventies, feels he wants to do something for Jerusalemâ€¦ and this is a most unique project." The Palace Hotel was built in 1928-9 at the initiative of the Supreme Muslim Council during the term of Raghib Nashashibi, British-appointed mayor of Jerusalem. It was the Mufti of Jerusalem, Haj Amin al-Husseini, who signed the agreement with British contractor Baruch Katinka for the Palace. In One Palestine Complete: Jews and Arabs Under The British Mandate, Tom Segev describes the complex and delicate dealings that surrounded construction. Katinka reasoned that a Jew would never get the job and entered into a partnership with an Arab contractor. Together, the two of them worked with Tuvia Dunia, another Jewish builder, and Chaim Weizmann's brother-in-law to conclude the deal with the Supreme Muslim Council. The Mufti demanded that preference be given to Arab workers and that Friday would be a day of rest. However, in the interest of business, he chose Katinka (and not the Arab contractor) as his confidant. Five-hundred workers completed the four-story building within 11 months, despite taking ten days off for the August 1929 riots. Their speed was unsurprising. The contract stipulated that if the Palace was not competed within 13 months, there would be a 1,000 pound fine for each day of delay; they weren't willing to take the risk. The results of the 70,000-pound investment were impressive: Designed by Turkish architect Nahas Bey, this was an eclectic mixture of Greco-Roman, Renaissance, Gothic, Romanesque, neo-Moorish and Mamluk elements, which graced the fa ade and were topped by an inscription from the Koran that reads "Constructed and built just as they did and built." (The reference is to the builders of the seventh-century Temple Mount.) Inside the hotel there were 145 rooms. 45 of these even had private bathrooms, something unheard of at the time. Moreover, there were three lifts and central heating, something that even the city's rich could only dream of. The entrance lobby, with its octagonal skylight and sweeping staircase (see photos), was the talk of the town. The hotel was designed by Turkish architect Nahas Bey. Valentine Vester, 93, one of the original owners of the American Colony Hotel, remembers Jerusalem in the days of the Palace Hotel. "There was nothing that luxurious," says Vester from her elegant, high-ceilinged American Colony apartment. "The American Colony was just a hostel until 1948. My father took me to visit it and it was very pilgrimy, lots of archaeologists and Christians. We used to sit at these very long tables eating simple dinners. There was the Fast Hotel, but there really was nothing else of that standard in Jerusalem." But under the glitz and the glamor, before the paint had even dried, the rot already started to set in. Segev describes how a short time after they began excavations, bones were found under the hotel's lot. Not one or two, but whole skeletons. They were assumed to be part of the Muslim cemetery that was opposite in Mamilla, and Katinka asked the Mufti what to do. Haj Amin ordered the matter be kept secret. If it was known to Mayor Nashashabi, it would be cause for him to stop construction - particularly since he sought to discredit a rival Husseini. The skeletons were disposed of at night, and construction continued. But the Mayor made difficulties elsewhere, refusing to link the building to the city's sewage system. A rather unsavory solution was found. The waste was partly treated and dumped in the opposite Muslim cemetery. The pipes were laid in secret. The deceit didn't end there. Katinka managed to build two caches for Jewish-owned weapons within the hotel walls. These sliks, as they were known, were scattered around Jerusalem (including one at the recently defunct Fink's restaurant). All the trouble and energy expended by the Supreme Muslim Council over the hotel soon proved somewhat pointless, however. The hotel's upkeep proved too much for them, and it was leased to hotelier George Barsky, who also ran the Fast Hotel. When the King David opened in 1931, the Palace's hotel days were numbered. It couldn't compete with another luxury hotel down the road, and the fact that Barsky was accused of waste and fraud probably didn't help matters. The Palace ended its career as a hotel soon after, at least for the 20th century, but remained notable for other reasons. It housed the Royal Peel Commission, which investigated the ongoing Arab riots and recommended the partition of Palestine in 1937. At the time, the hotel was being used as administrative and military offices of the mandate government, but the guns cache was never found. When the British left in 1948, the Palace gave the Ministry of Industry and Trade a home. One of those who served as a senior official in the Mapai-dominated offices was Rudolph Kastner, a controversial Hungarian Jewish figure who successfully negotiated the transport of over 3,000 prominent Jews from Cluj, Hungary, through to Swiss labor camps. Kastner was murdered by three Jewish extremists who believed that he had sold out to the Nazis, saving a select few and turning a blind eye to the murder of millions. The Ministry continued to operate from the Palace Hotel until 2003. Plans came and went for the Palace's revival throughout the decades. Architect David Kroyanker proposed a 1980 plan to convert it back into a hotel and received local and district backing, but nothing materialized; in 1999, the building was purchased by the Hyatt Regency Jerusalem and elaborate plans for a 240-room, 30,000-square-meter hotel and adjacent apartments were made. Those plans, like the others that preceded it, were left to gather dust as the Intifada raged and tourism dropped over the next six years. Since the Ministry's departure in 2003, the hotel has been abandoned, kept under lock and key and essentially left to rot. Behind the bars on the windows, old papers, broken desks and strewn chairs provide a home for nothing more than stray cats. The outside still shows the original intricate engravings, but they are seen through inches of grime and decay. The Reichmann takeover promises happier, more luxurious days. Talking to their lawyers it seems clear that what happened with the Hyatt Regency Jerusalem takeover will not happen with Olympia and York Properties Corporation. This time, it looks like things will progress fast. This is true not only because Paul Reichmann, now in his early seventies, has never been one to get cold feet over a project and seems to enjoy a good challenge. But also because the Reichmann company already has a handful of architects under consideration, and once one has been chosen, and the property registration passed, building will begin, or so promise their representatives. "The Reichmann company intends to retain the '20s fa ade and the entrance, but provide the modern facilities that will make it the best hotel in Jerusalem. That said, inside and outside will not jar. It won't be period style on the outside and ultra-modern on the inside," promises Matalon. "Paul Reichmann would like things to move fast with the Palace." The purchase comes at a time when many of Jerusalem's hotels are planning renovation, undergoing ownership changes and applying for extensions. The Windmill Hotel recently became the Prima Royal, the Crowne Plaza opposite the ICC received permission from the planning committee for a 430-room extension, and the Mount Zion hotel will also be moving forward with further extensions. Eli Mizrahi, formerly head of the Contractors' Organization of Jerusalem, is planning a hotel in the Nahalat Shiva area and there are a number of other plans afloat for 'boutique' hotels in the center of town. Even directly opposite the Palace, it seems that the slumbering Mamilla project is about to move toward completion. All of these seem to indicate increasing optimism about Jerusalem's tourist industry. Yonatan Harpaz of the Jerusalem Hotels Association believes there is good reason for this. "There was a rise of 48 percent in the number of nights spent at Jerusalem's hotels in 2004 compared to 2003," he says, "and there was a 52% rise in the number of rooms booked between January and October 2005 as compared to 2004. The forecast for 2006 definitely looks good." If the trend continues, says Harpaz, "we could be looking at figures for 2006 that are similar to 2000 [pre-intifada]." While Harpaz expressed happiness about the Palace takeover, he does wonder whether another 5-star hotel is really what's needed in the capital. "We have a lack of 4-star hotels, and even 3-star hotels in Jerusalem. The rise in occupancy is comprised largely of Christian pilgrim groups. Many of them don't want to pay 5-star prices. "But that's the Reichmanns' decision, and it's an economic one," says Harpaz. The Municipality had little to say about the Palace Hotel. In Jerusalem presented the municipal spokesman with questions regarding the muncipality's involvement in the purchase (if any); the impact that the purchase will have on the city; and the impact that the Hotel might have on the city. In response, Gideon Schmerling, the municipal spokesperson, replied that, "The municipality was not involved in the sale of the hotel," and continued: "The municipality sees great importance in developing the tourism and hotel industries in Jerusalem. In order to promote this, the new master plan for Jerusalem offers various solutions to this field, ranging from opportunities to establish B&B's and middle-class hotels as well as promoting many larger hotels, including premium and luxury hotels." But for the Reichmann brothers, this isn't just another hotel to feed the tourist industry. "It's a bold move, and its got a lot of support from the current and previous mayor," says Matalon. "It's also getting a lot of attention from the municipality. On the one hand, a lot of support. On the other, they'll be watching what's going on there with scrutiny. "They're doing it because he [Paul Reichmann] feels that he wants to do something for Jerusalem. This is the most important investment that he has taken on in the capital, and its really the first new hotel in six years. "Its location near the old city and wailing wall is paramount, and I think it's a circle that's closing now, with an Orthodox Jew coming to own the Palace Hotel. It's most definitely a challenge," concludes Matalon.