SAN JOSE — The seizure of a downtown San Jose hotel in a foreclosure is a fresh sign that Bay Area lodging markets are still struggling to recover from their coronavirus-induced economic maladies.
The Signia by Hilton San Jose hotel was taken by the tower’s lender on May 12 in a foreclosure triggered by a $134 million delinquent loan.
The foreclosure priced the hotel at $80 million, based on what lender BrightSpire Capital paid to seize ownership of the lodging tower at 170 South Market Street in downtown San Jose. That value was 41% less than the $134 million loan that was in default.
“We’re going to see more of this for big full-service hotels, not only in San Jose, but also in Oakland and San Francisco,” said Alan Reay, president of Atlas Hospitality Group, which tracks the California lodging sector.
The economic challenges in the wake of the coronavirus mean major urban centers such as downtown San Jose must find ways to attract visitors, in the view of Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.
“San Jose is offering an experience downtown, not the way downtowns used to be before the coronavirus,” Staedler said.
Unique venues such as Urban Putt and Pete Be Lounge can become destinations and help downtown San Jose to rebound, an upswing that would also underpin the fortunes of the city’s hotels.
For now, however, hotel owners throughout the Bay Area must face the grim reality that multiple economic factors have coalesced to shove property values lower.
“There are problems all over the Bay Area,” said Mark Ritchie, president of San Jose-based Ritchie Commercial, a real estate firm. “There are still a lot of distressed sales. It’s going on in all the cities.”
The hotel sector’s ailments are particularly grave in San Francisco and Oakland, whose downtown districts appear to be locked in an economic “doom loop” of fading property values, crime, empty commercial buildings and retail flight.
In San Francisco, multiple hotel loan failures have emerged, including the foreclosure of a historic hotel that has a prominent perch atop swanky Nob Hill and the decision of multiple hotel owners to simply hand over their properties to lenders rather than continue to make loan payments.
“The problems in San Francisco are widespread,” Reay said. “People are just giving lenders the keys to the hotel and walking away.”
In Oakland, defaults, foreclosures, failing loans and a nosedive in values have haunted multiple hotel properties.
Here are some examples of the difficulties in Oakland:
— Hilton Oakland Airport, the hotel that’s closest to the East Bay city’s airport, slashed 152 jobs and abruptly closed its doors in August 2024. The hotel remains closed.
— Courtyard Oakland Downtown, a Marriott-branded hotel, was bought in October 2024 for $10.6 million. The purchase price represented a jaw-dropping plunge of 76% compared to what the buyer paid in 2016.
— The 145-room Waterfront Hotel in Jack London Square shut down without warning in January 2025.
— Oakland City Center Marriott, a 500-room hotel next to the city’s convention center, flopped into default in February 2025 on a $100 million loan and faces foreclosure if the delinquency isn’t cured.
— A hotel at 1431 Jefferson Street in downtown Oakland with dual Marriott brands was seized by its lender through in March 2025 through foreclosure of a delinquent $112 million loan for the lodging tower.
“Interest rate costs are rising, which makes it very difficult for owners to find financing to replace their prior loans,” Reay said. “The owner sees the monthly mortgage payments will be greater than the income from the hotel. So they just decide to walk away and stop making loan installments.”
This means the challenges of feeble values and loan burdens will continue to overshadow positive trends such as rising occupancy and revenue levels.
“We are seeing a big spike in loan defaults,” Reay said. “Analysts are estimating that one out of three hotel owners is giving back the keys to the lenders.”
This sets up a cascading scenario, according to Reay.
“The dominoes are falling,” Reay said. “Hotel owners see that asset values are going to plunge. The owner just says it’s time to fold their cards.”
All of this is a reminder that the Bay Area’s three greatest downtown districts must cope with the reality that their pre-coronavirus local economies have been fundamentally altered.
“The structure of the downtowns and the people who go to them are not the same,” Ritchie said. “Things are improving but it’s not going to get back to where it was. It’s a different world now.”
