The Signia by Hilton San Jose Hotel in California, US, has entered Chapter 11 bankruptcy proceedings for the second time in three years, with assets and liabilities ranging from $101m to no more than $500m, Silicon Valley reported.
The move comes as the hotel’s owner seeks to secure new financing and avoid a scheduled auction of the property due to financial disputes with its lender, BrightSpire Capital.
As of July 2024, the lender had provided a financing package that amounted to approximately $165.3m.
The hotel is currently behind on a junior loan of around $15m, which has triggered a notice of default and the potential auction of the property. The unpaid debt stands at $139m, according to BrightSpire’s auction documents.
Despite the bankruptcy filing, the hotel remains operational. The filing aims to delay the auction, but the trustee confirmed the auction was postponed.
Signia by Hilton principal owner Sam Hirbod said: “The hotel will operate exactly as it has been. The doors are staying open. The guests will notice no difference.”
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By GlobalDataThis legal manoeuvre mirrors the hotel’s previous financial distress when it exited bankruptcy in late 2021 with a rebranding deal from Hilton and additional financing.
The hotel, formerly known as the Fairmont San Jose, reopened under the Signia brand of the Hilton chain.
In a separate transaction last year, Throckmorton Partners acquired the 264-room southern tower of the hotel for a combined purchase, financing, and renovation deal worth $113m.
This acquisition by Throckmorton Partners, which converted the tower into student housing for San Jose State University, effectively reduced the number of hotel rooms available in downtown San Jose, thereby increasing the demand for lodging in the area.
Hirbod added: “The bankruptcy will give us the time we need to get the financing the hotel needs. Our goal is to replace the current lender BrightSpire. Our occupancy is going up and 2025 looks like it’s going to be a great year.
“I am committed to the long-term success of this hotel.”
Hirbod has sought to negotiate a compromise with the lender while he works to obtain new financing to replace and repay the existing loan.