Fairmont hotel in downtown San Jose files for bankruptcy
SAN JOSE – The Fairmont Hotel, a downtown San Jose landmark, filed for bankruptcy on Friday and closed – but says it will reopen and resume operations within two to three months.
The owners of the iconic 805-room hotel said they closed the Fairmont while they tried to find a management partner and extend existing mortgage debt.
The Fairmont in San Jose is not alone in experiencing financial difficulties amid the economic fallout triggered by the coronavirus, which has driven conventions and travelers out of hotels.
“We know that by taking this difficult step, we will return to a more vibrant hotel for the benefit of everyone in San José, including the vibrant downtown area of the city, nearby businesses and Silicon conventions. Valley in a post-COVID-19 world, ”said Sam Singer, a representative for the Fairmont hotel.
A growing number of hotels around the world – and in the Bay Area – have gone bankrupt or faced funding problems.
“Unfortunately, this is a local reflection of the devastation the hotel industry has suffered around the world,” San José Mayor Sam Liccardo said in an interview with this news agency.
In the year 2020, only 14 notices of default for an overdue loan were filed against hotels located in California, according to research statistics provided to this news organization by Alan Reay, president of Atlas Hospitality Group, which tracks the statewide accommodation market.
In January 2021 alone, at least 20 formal notices were filed against hotels in California, Reay said.
“The hotels that have suffered the most are in business centers and hotels in convention centers,” Reay said. “This is definitely the situation at the Fairmont.
The affiliate that owns the Fairmont San Jose hotel property has listed debts ranging from $ 100 million to $ 500 million, according to a filing with the U.S. bankruptcy court.
San Ramon-based Eagle Canyon Capital, chaired by Sam Hirbod, is the hotel’s primary owner and operator, according to court records.
“The hospitality industry has been absolutely crushed by the pandemic,” said Scott Knies, executive director of the San Jose Downtown Association.
Major creditors with unsecured claims against the bankrupt hotel include the city of San José, which is owed $ 1.06 million, according to court records.
According to some sources, the owners of the hotel have good relations with its major creditors and lenders.
“We will be back in 60 to 90 days with improved finances and a new hotel management team,” Singer said.
The hotel has moved guests from the San Jose Fairmont to other nearby accommodations.
However, not all guest departures went smoothly. Kevin Simmonds, a San Francisco resident and writer who had planned a two-night stay and the Fairmont San Jose, went out for about three hours to take in the good weather and put the finishing touches on a book. He returned to find a confused situation at the place of accommodation.
“The manager of the hotel asked me if I was staying at the hotel, I said yes and she told me I had to leave,” Simmonds said. “I asked why and she said, ‘I can’t tell you.’ I said, ‘What do you mean you can’t tell me? This is madness. She told me that the Fairmont had ordered all guests to go to the “Hilton” nearby.
Simmonds asked the hotel manager if the Fairmont San Jose would compensate guests for the lost night. “She said, ‘No, we’re not going to compensate you.’ Said Simmonds.
Simmonds finally decided to return to San Francisco.
“I am absolutely stunned,” said Simmonds. “I knew the front desk couldn’t do anything. But they could at least have treated me with dignity and respect.
In 2018, a subsidiary run by Sam Hirbod paid $ 223.5 million for the hotel. At the time of the purchase, the buying group secured a $ 173.5 million loan from NS Income Opportunity REIT, according to county property records.
In March 2020, this loan was assigned to a new lender, CLNC Mortgage Sub-REIT, which is controlled by Colony Credit Real Estate, a company that provides financing and debt for a range of commercial real estate properties.
The Fairmont lost at least $ 18 million in 2020 and is expected to lose at least $ 20 million in 2021, the hotel owners said.
“We look forward to the Fairmont opening its doors in time for our downtown rebirth in the coming months,” Liccardo said.