SAN JOSE — An iconic San Jose hotel has been seized by its lender in a foreclosure that priced the tower at a fraction of its value, a gloomy sign that lodging woes still haunt the city’s fragile downtown.
The Signia by Hilton San Jose, the South Bay city’s largest hotel, has been taken back by its lender through a foreclosure proceeding and the sale of the property to its lender.
BrightSpire Capital, acting through an affiliate, took ownership of the hotel in a foreclosure that placed an $80 million value on the 541-room hotel.
An appraisal disclosed in November 2024 estimated the hotel tower was worth 217.4 million, or $402,000 a room, according to an appraisal by HVS Consulting & Valuation, which specializes in consulting and appraisals for the hospitality industry.
That means the $80 million value that BrightSpire Capital placed on the hotel tower is 63% below the appraised value and 41% less than the $134 million loan that BrightSpire’s affiliate provided to the hotel.
The foreclosure of San Jose’s biggest hotel casts uncertainty over the city’s downtown economy.
Downtown San Jose is battling to recover from the economic maladies unleashed by wide-ranging business shutdowns ordered by state and local government officials to combat the spread of the coronavirus.
The shutdowns torpedoed the hotel markets in the Bay Area and worldwide.
A growing number of Bay Area hotels have suffered foreclosures, plunging property values, loan defaults and even abrupt closures.
The problems are particularly acute in San Francisco and East Bay cities such as Oakland.
The foreclosure of the Signia by Hilton’s loan also appears to end a long-running fight by the hotel’s prior owner, a group headed up by Bay Area business executive Sam Hirbod, to keep the hotel from falling to its lender.
“I lost 30 years of my life equity in there,” Hirbod said in an interview with this news organization.
The legal events included proceedings in two bankruptcy courts and Santa Clara County Superior Court.
Late last week, Superior Court Judge Shella Deen ruled against the Hirbod-led group, which had sued BrightSpire to block the foreclosure attempt until financing could be found. The hotel owners also filed two federal bankruptcy proceedings to reorganize the hotel’s finances.
The transaction to foreclose on the loan and transfer the property to the lender occurred on Monday outside the Santa Clara County Superior Court in downtown San Jose.
Hirbod had attracted commitments from two lenders, but those deals ultimately weren’t completed in time in the headlong legal and financial race by Hirbod to hang on to the property.
It wasn’t immediately clear whether BrightSpire Capital intended to keep the hotel long-term or seek a swift sale.
The $80 million the lender paid to gain ownership of the property works out to
Hirbod said he spent his own money and equity to undertake wide-ranging upgrades and renovations to the hotel to help the lodging rebound from the economic fallout resulting from the coronavirus.
“All $180 million that we put into the hotel that I had earned over 30 years of hard work is gone,” Hirbod said.
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