A Silicon Valley hotel sold for some $20 million, marking the biggest hotel sale in the area in two years, even as the property went for about 20% less than it changed hands for just two years ago.
Texas-based investment firm Shreem Capital purchased the 229-room Sheraton San Jose Hotel at 1801 Barber Lane in Milpitas, a town at the southern tip of San Francisco Bay. The seller was an affiliate of Highgate Hotels, a hospitality investment and management company that paid $25 million for the property in December 2023. The latest purchase price was also well below the property’s assessed value of just over $38 million as of January, according to CoStar.
The discounted sale is the latest sign that the region’s hospitality market is still coping with an extended hangover from the COVID-19 pandemic.
The financial challenges for hotels in San Francisco and East Bay cities like Oakland have been particularly acute, especially as loans have come due, according to CoStar Senior Director of Hospitality Analytics Michael Stathokostopoulos. In May, San Jose’s largest hotel, the 541-room Signia by Hilton San Jose, was seized by its lender, BrightSpire Capital. The firm took ownership of the property in a foreclosure proceeding that valued the downtown hospitality property at $80 million, less than half of the hotel’s appraised value of around $217 million as of late 2024.
San Francisco remains one of the least recovered hotel markets in the U.S. Several large downtown properties have been unable or unwilling to pay off maturing loans taken out before the COVID-19 pandemic hit in 2020, including Hilton hotels in the Financial District and Union Square and the Parc 55 San Francisco.
Meanwhile, the number of hotels sold in California during the first half of 2025 dropped by 7.4% year over year, continuing a trend that dates back several years, according to Atlas Hospitality Group’s California Hotel Sales Survey 2025 Midyear, which reports that 113 individual hotels traded in the first six months of the year, down from 122 during the same period of 2024. Dollar volume increased by nearly 17.3% to $1.39 billion, while the median price per room dipped by almost 2.5% to $145,566.
Foreclosures rising
Those dollar figures received a boost from three hotels that changed hands in foreclosure sales: the 541-room Signia by Hilton San Jose, the 500-room Oakland Marriott City Center for $70.18 million and the 384-room Line Los Angeles for $68 million.
These hotels sold for the prices their lenders bid at the foreclosure auctions, Atlas President Alan Reay previously told CoStar News. If those three trades with a combined price tag of $218.18 million — or 15.7% of the dollar volume — are excluded from the survey, the average price per room in California drops by 16.5%, the median price per room is down 3% and the dollar volume “is basically just flat,” he said.
The number of California hotel foreclosures seems to be increasing, Reay said. Previously, the Atlas Hospitality Group team has seen notice of defaults once every couple of weeks, but now it’s seeing two to three new notices on a weekly basis.
That overall California hotel sales volume is down compared to last year isn’t surprising, Reay said. For instance, in the San Francisco Bay Area, properties are now trading at a substantial discount to their previous sale prices.
For example, the 316-key Hyatt Centric Fisherman’s Wharf sold to EOS Investors in May for $80 million, less than half of what owner Park Hotels & Resorts bought it for in 2019 as part of it acquiring fellow real estate investment trust Chesapeake Lodging.
“When you see these kinds of sales and how much they’re selling at a discount compared to what they previously sold for six, seven, eight years ago, it’s making buyers rethink where they’re going to be at in terms of what they want to buy,” Reay said.
For the record
Paramount Lodging Advisors represented the seller in the transaction.