SAN JOSE – The Fairmont Hotel, a landmark in downtown San Jose, went bankrupt on Friday and closed its doors – but says it will reopen and resume within two to three months.
The owners of the iconic 805-room hotel said they closed the Fairmont while trying to find a management partner and expand the existing mortgage debt.
The Fairmont in San Jose is hardly alone with financial struggles amid the economic consequences unleashed by the coronavirus, which has driven conventions and travelers away from hotels.
‘We know that through this difficult step we will produce a more vibrant hotel for the benefit of all in San Jose, including the vibrancy of the city center, nearby businesses and Silicon Valley events in a post-COVID-19 world , ”Said Sam Singer, a representative of the Fairmont Hotel.
A growing number of hotels worldwide – and in the Bay – have gone bankrupt or run into problems with their financing.
“Unfortunately, this is a local reflection of the devastation the hospitality industry has suffered worldwide,” San Jose Mayor San Licicardo said in an interview with this news organization.
In the course of 2020, only 14 notices of default for a criminal loan were filed against hotels in California, according to research statistics provided by Alan Reay, president of Atlas Hospitality Group, to the news organization that tracks the accommodation market across the country.
In January 2021 alone, at least 20 notices of default were filed against hotels in California, Reay said.
“The hotels that have suffered the most are in business centers and conference center hotels,” Reay said. “That’s definitely the situation with the Fairmont.”
The subsidiary, which owns Fairmont San Jose real estate, has listed debts ranging from $ 100 million to $ 500 million, according to an application to the U.S. Bankruptcy Court.
The court records show that Eagle Canyon Capital, based in San Ramon, whose president is Sam Hirbod.
“The hospitality industry has been absolutely devastated by the pandemic,” said Scott Knies, executive director of the San Jose Downtown Association.
In the court report, it appears among the leading creditors who have unsecured claims on the bankrupt hotel: the city of San Jose, which owes $ 1.06 million.
According to sources, the hotel’s owners have a good relationship with the major creditors and lenders.
“We will be back within 60 to 90 days with improved finances and a new hotel management team,” Singer said.
The hotel moved guests in the San Jose Fairmont to other accommodations in the area.
Not all the guests left. Kevin Simmonds, a San Francisco resident and author who planned a two-night stay at the Fairmont San Jose, set out for about three hours to enjoy the beautiful weather and put one last finish on a book. He returned to find a confusing situation in the house.
“The hotel manager asked if I was staying at the hotel, I said yes, and she told me to leave,” Simmonds said. “I asked why and she said, ‘I can not tell you. “I said ‘what do you mean, you can not tell me, it’s insanity.’ She told me that the Fairmont ordered all the 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,'” Simmonds said.
Simmonds finally decided to drive back to San Francisco.
“I’m absolutely stunned,” Simmonds said. “I knew the reception could do nothing. But they could at least have treated me with dignity and respect. ‘
In 2018, a subsidiary led by Sam Hirbod paid $ 223.5 million for the hotel. At the time of the purchase, the buying group was obtaining a $ 173.5 million loan from NS Income Opportunity REIT, according to the country’s property records.
In March 2020, the loan was allocated to a new lender, CLNC Mortgage Sub-REIT, which is controlled by Colony Credit Real Estate, which is a business that provides financing and debt to a variety of commercial real estate.
The Fairmont lost at least $ 18 million in 2020 and is expected to lose at least another $ 20 million in 2021, hotel owners said.
“We look forward to Fairmont opening its doors in time for the revitalization of our city center in the coming months,” Liccardo said.