Big San Jose hotel files for bankruptcy but will keep operating as usual
SAN JOSE — A landmark San Jose hotel has filed for bankruptcy for the second time in three years but will keep its doors open and operate as usual while its owner seeks fresh financing for the lodging tower.
The entity that owns the iconic Signia by Hilton San Jose hotel in the city’s downtown has filed for a Chapter 11 bankruptcy proceeding ahead of a scheduled auction of the lodging property, U.S. Bankruptcy Court records show.
“The hotel will operate exactly as it has been,” said Sam Hirbod, principal owner of the Signia by Hilton at 170 South Market Street in downtown San Jose. “The doors are staying open. The guests will notice no difference.”
The bankruptcy filing is the latest visible sign of a financial conflict between the 541-room hotel, which is one of the largest in the Bay Area, and the lender for the high-profile property, BrightSpire Capital.
BrightSpire had provided the hotel with a financing package that as of July 2024 totaled about $165.3 million.
The default, however, involves only a portion of the overall financing package. A junior loan totaling roughly $15 million is delinquent.
BrightSpire has filed a notice of default and has scheduled an auction on the property. BrightSpire’s auction could result in a foreclosure on the hotel. The bankruptcy filing is designed to forestall the auction.
“The bankruptcy will give us the time we need to get the financing the hotel needs,” Hirbod said. “Our goal is to replace the current lender BrightSpire.”
Hirbod believes the current lender hasn’t been cooperative.
“We are dealing with an aggressive lender that wants to take ownership of the hotel now that the tough times have occurred and the hotel has been renovated and repositioned,” Hirbod said.
BrightSpire, in Hirbod’s view, hopes to become the new owner of the hotel and then sell in about a year at a profit. BrightSpire couldn’t immediately be reached for comment.
The hotel’s ability to stay open this time is in stark contrast to its fortunes in 2021 when it was forced to shut down largely due to the evaporation of the worldwide lodging and travel industry as the coronavirus outbreak raged on.
For decades, the hotel was known as the Fairmont San Jose but when it reopened, it did so with the prestigious Hilton chain’s Signia brand.
In 2023, Throckmorton Partners, a Bay Area real estate company, bought the 264-room southern tower of the Signia by Hilton Hotel from a group headed up by Hirbod as part of a $113 million purchase, financing and renovation package.
That overall amount includes the $73.1 million that Throckmorton Partners paid for the property.
The deal dramatically diminished the number of hotel rooms in downtown San Jose, a reduction in supply that helped to intensify demand for lodging.
The Signia by Hilton has been able to increase its occupancy levels because of the reduced number of available rooms.
“Our occupancy is going up and 2025 looks like it’s going to be a great year,” Hirbod said.
The Hirbod-led group that owns the hotel property stated that both its assets and debts ranged from $101 million to no more than $500 million, according to documents filed on Nov. 5 with the U.S. Bankruptcy Court.
The vast majority of the debt appears to be the BrightSpire loan package, documents on file with the Santa Clara County Recorder’s Office show.
The largest unsecured creditor listed in the filing is JLL, a commercial real estate firm, which is owed $165,000 for consulting work related to a property tax appeal.
Separately, the hotel operator and ownership group have reached an agreement on a new labor contract with union-represented hotel workers, according to Hirbod and a prepared release issued by Unite Here Local 19.
The labor deal means workers will remain protected and retain their jobs despite the bankruptcy filing.
Hirbod maintains he has attempted to coax a compromise from the lender until he could secure new financing to replace and repay the current loan.
“Our lender BrightSpire forced us to do this,” Hirbod said.
Despite the wide-ranging uncertainties that any bankruptcy case produces, Hirbod said he is battling to retain his group’s ownership of the hotel because he believes in the prospects for the Signia.
“I am committed to the long-term success of this hotel,” Hirbod said.