San Jose’s largest hotel has been seized by its lender following a foreclosure sale that ended a long-running struggle by its Bay Area-based owner to hold on to the establishment.
BrightSpire Capital, acting through an affiliate, took ownership of the 541-room Signia by Hilton San Jose in a foreclosure proceeding that valued the downtown hospitality property at $80 million, reported the San Jose Mercury News, citing public records. That is less than half of the hotel’s appraised value of around $217 million as of late 2024, only 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, said CoStar Senior Director of Hospitality Analytics Michael Stathokostopoulos. The sale was a blow to the Signia hotel’s prior ownership group, led by businessman Sam Hirbod, who went to court in February in an attempt to hang on to the property.
“This is nothing short of a devastating loss,” Hirbod told CoStar News. “At every turn, our lender either tried to disrupt our financing or make it near impossible to pay them … our backs have been against the wall.”
Hirbod’s Eagle Canyon Capital group bought what was then the 805-room Fairmont San Jose in 2018 for $250 million, according to CoStar. Hirbod said he invested some $70 million in updates to the hotel, which was built in 1987. The owners declared bankruptcy in 2021 following the pandemic shutdowns, and the hotel shut down for a year, reopening in 2022.
The following year, Eagle Canyon sold the 264-room southern tower of the hotel to a Bay Area real estate firm for conversion into badly needed student housing at San Jose State University. The loan for the northern tower went into default in 2024, and the owners filed for bankruptcy with the intention of reorganizing the hotel’s finances.
In February, Hirbod and his group filed a lawsuit in a Santa Clara County court in a bid for more time to cobble together enough cash to pay off the BrightSpire loan. But this month, Superior Court Judge Shella Deen declined to halt the foreclosure.
Hirbod said his group had attracted commitments from two lenders, but those deals were delayed by “last-minute paperwork.”
It wasn't immediately clear what BrightSpire's plans are for the property.
Hotel woes
The hotel is only the latest in a long string of Bay Area hospitality properties to shut down or run afoul of lenders. The landmark 500-room Oakland Marriott City Center hotel, the largest hotel in the East Bay, this year defaulted on a $100 million loan from Invesco CMI Investments.
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.
While the market still ranks in the top five nationally for room rates, the average daily rate is more than 10% below 2019 levels.
In San Jose, the Bay Area’s largest city and the urban center of Silicon Valley, Hirbod said business has made a comeback in recent months. According to CoStar, revenue per available room in the San Jose/Santa Cruz hospitality market increased by 7.5%, outpacing the national growth rate of 2.4% and making it one of the few California markets to experience strong RevPAR gains, buoyed by the recovery of business travel and group meetings.
“The hotel is crushing it now,” Hirbod said. “We just couldn’t get anyone to listen.”