Big San Jose hotel tower attracts new lender in bid to avoid foreclosure
SAN JOSE — The owner of a bankrupt downtown San Jose hotel has found a lender willing to provide fresh financing that would replace the lodging tower’s existing main loan, court papers show.
The Signia by Hilton San Jose, an iconic hotel tower in the downtown’s hip and trendy SoFA district, has found a lender that’s willing to provide a $145 million loan to refinance the current mortgage on the property, according to a Jan. 8 filing with a U.S. Bankruptcy Court in Delaware.
An affiliate of Bridge Investment Group, a real estate and financing firm, has agreed to a proposed new loan for the Signia hotel at 170 South Market Street in downtown San Jose, the court files show.
The 541-room tower is San Jose’s biggest hotel and one of the largest lodging properties in the Bay Area.
The hotel’s principal lender – an affiliate of New York City-based BrightSpire Capital – is attempting to seize it through a foreclosure of a small portion of the hotel’s overall real estate financing.
The ownership group for the hotel (the debtors in the case), headed up by Bay Area business executive Sam Hirbod, filed for bankruptcy in 2024 for the second time in three years, hoping to ward off BrightSpire’s attempt to foreclose the loan and seize the hotel property. The first bankruptcy was filed in 2021. Both cases are ongoing, in separate courthouses.
“The debtors have known about the need to refinance the BrightSpire debt even before the receipt of a default notice in July 2024,” the hotel ownership group stated in the court filing. “The debtors have sought to obtain a loan proposal from a variety of potential lenders.”
On Dec. 31, the search for funding bore fruit when Bridge Investment Group sent the hotel owner a proposal to provide $145 million in financing to replace BrightSpire’s existing primary loan for the lodging tower.
The BrightSpire loan totals $136 million. A junior loan from Hilton totals $30 million.
An appraisal that’s part of the public record in a U.S. Bankruptcy Court case involving the owner shows the hotel is worth considerably more — on a per-room basis — than it was in 2018 when the ownership group, headed up by Bay Area business executive Sam Hirbod, bought it.
Hirbod’s group paid $223.5 million for what in 2018 was an 805-room hotel with two towers, which works out to about $278,000 a room.
The hotel — now 541 rooms and one tower after a deal to sell and convert the south tower to student housing — was worth $217.4 million, or $402,000 a room, in October 2024, according to an appraisal by HVS Consulting & Valuation, which specializes in consulting and appraisals for the hospitality industry.
Multiple court documents, including the appraisal and the Hirbod filing, show that the hotel’s prospects have improved considerably — a sharp contrast to prior financial woes that included the first bankruptcy and the hotel’s shutdown for about a year.
This time around, the doors remain open and the hotel continues to operate.
Hirbod’s group began to engineer a dramatic upswing in the hotel’s financial standing through a deal with a real estate firm to sell the hotel’s south tower, which has been converted to student housing for San Jose State University.
In November 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, including at the Signia by Hilton.
As a result, Hirbod believes the hotel’s prospects are much brighter than in recent years.
“Since completing our renovation in March 2024, our occupancy had reached 71% for September, with projections indicating the same for October,” Hirbod stated in court papers. “The hotel was on a clear path to stabilization.”
The potential new loan from Bridge Investment Group would have a three-year term and provide a variable interest rate, adjustable each month, the court papers show.
The Hirbod-led ownership group is convinced the new loan from the Bridge Investment affiliate will help it capitalize on a potential improvement in the South Bay lodging market.
“The loan should enable the debtors to reorganize and will enhance the value (of the hotel property) for the benefit of all creditors and interested parties,” the hotel ownership group stated in the court filing.