Bay Area hotel market wobbles in San Jose, San Francisco, Oakland

Fresh signs have emerged that hint at a wobbly Bay Area hotel market — including efforts to scout for one or more investors willing to take over a faltering loan for a lodging icon that’s perched atop San Francisco’s famed Nob Hill.

The Stanford Court Hotel, a historic lodging at 905 California Street in San Francisco that’s one of the best-known hotels in the region is the focal point of an attempt to find a new holder of the loan on the property, according to a marketing flyer that this news organization has reviewed.

The primary financing vehicle for The Stanford Court Hotel is a “non-performing senior loan with a total outstanding balance of $108.2 million,” stated the marketing package that’s being circulated by Eastdil Secured, a commercial real estate firm.

Stanford Court isn’t the only historic hotel on Nob Hill that faces a delicate financial situation.

The next block over, at 1075 California Street, the Huntington Hotel is in default on a $56.2 million loan on the property, San Francisco county records show.

Deutsche Bank, the lender on the Huntington Hotel property, has scheduled and canceled multiple public auctions that could produce a new property owner or enable the bank to seize ownership of the 136-room lodging site.

The indications of a difficult market for the hotel sector in the Bay Area extend beyond San Francisco. Two high-profile hotels in downtown Oakland and downtown San Jose were put up for sale but couldn’t find a buyer:

• Oakland Marriott City Center, a hotel located at 1001 Broadway between 10th Street and 11th Street, was put on the market in early 2022. A few months later, the 500-room hotel’s owner, Los Angeles-based Gaw Capital, canceled its plans to sell the hotel, according to commercial property sources familiar with the sales efforts. Gaw Capital might attempt to refinance the existing $80 million loan on the hotel site.
• Hotel De Anza, a historic 100-room downtown San Jose hotel, was put up for sale in the fall of 2022. The sales price was $30 million, according to sources familiar with the effort to sell the 10-story hotel. A buyer wasn’t found and the hotel at 233 West Santa Clara Street in San Jose was taken off the market, the sources said.

The economic ailments caused by the coronavirus afflicted the hotel and travel sectors in the Bay Area and worldwide. Experts believe the lodging market in the Bay Area has yet to fully recuperate.

The hotels facing the toughest roads to recovery are in business-dependent markets such as San Francisco, downtown Oakland and downtown San Jose, commercial property analysts say.

The loan difficulties that have engulfed The Stanford Court Hotel and the Huntington Hotel in San Francisco, as well as the unsuccessful sales efforts that involved the Marriott in downtown Oakland and the De Anza Hotel in downtown San Jose fit the template of a shaky hotel sector in parts of the Bay Area.

Nevertheless, all four hotels are in markets that have good long-term prospects, once tourism and business travel begin to fully rebound, real estate experts say.

“The hotel had a strong life in an earlier time and it will have a strong life in a future time,” Ritchie said of the De Anza.

The Stanford Court Hotel was touted as a property with excellent fundamentals, even with the reality that the property’s loan is deemed to be non-performing, according to the Eastdil Secured sales package.

“The offering presents a rare opportunity to acquire a senior mortgage secured by high-performing, irreplaceable real estate located in one of the top lodging markets globally,” Eastdil stated in the Sanford Court Hotel marketing pakage.