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 operations within two to three months.
The owners of this iconic 805-room hotel have said they have closed Fairmont while trying to find a leading partner and expand their existing mortgage debt.
The San Jose Fairmont is hardly alone in financial struggles amid the economic consequences of the coronavirus, which has driven conventions and hotel travel.
“We know that by taking this difficult step, we will return to a more vibrant hotel for the benefit of all of San Jose, including the vitality of downtown, nearby businesses and Silicon Valley conventions in a post-COVID-19 world.” Said Sam Singer, a representative for the Fairmont Hotel.
An increasing number of hotels around the world – and in the Gulf area – have gone bankrupt or faced with funding problems.
“Unfortunately, this is a local reflection of the devastation suffered by the global hospitality industry,” San Jose Mayor Sam Liccardo said in an interview with the news organization.
In all of 2020, only 14 delinquency loan default notifications have been filed against hotels in California, according to research statistics provided to this news organization by Alan Reay, president of Atlas Hospitality Group, which tracks the nationwide accommodation market. .
In January 2021 alone, at least 20 default notices were filed against California hotels, Reay said.
“The hotels that have suffered the most are in business centers and hotels in convention centers,” Reay said. “This is definitely the case with Fairmont.”
The affiliate who owns the Fairmont San Jose hotel has listed debts ranging from $ 100 million to $ 500 million, according to a case in the US Bankruptcy Court.
Eagle Canyon Capital, based in San Ramon, whose president is Sam Hirbod, is the main owner and operator of the hotel, court data show.
“The hospitality industry has been absolutely crushed by the pandemic,” said Scott Knies, executive director of the San Jose Downtown Association.
Among the top creditors who have unsecured claims against the bankrupt hotel: the city of San Jose, to which $ 1.06 million is owed, court data show.
Sources said the hotel’s owners have a good relationship with its creditors and main creditors.
“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 San Jose Fairmont to other accommodation nearby.
However, not all guest departures went smoothly. Kevin Simmonds, a San Francisco resident and writer who had scheduled a two-night stay at Fairmont San Jose, went out for about three hours to enjoy the beautiful weather and put the finishing touches on a book. He returned to find a confusing situation at the accommodation.
“The hotel manager asked me if I was staying at the hotel, I said yes and he told me I had to leave,” Simmonds said. “I asked why and he said, ‘I can’t tell you.’ I said “what do you mean you can’t tell me, this is crazy”. He told me that Fairmont directed all the guests to go to the nearby Hilton.
Simmonds asked the hotel manager if Fairmont San Jose would compensate guests for the lost night. “He said, ‘No, we won’t compensate you,'” Simmonds said.
Simmonds finally decided to drive back to San Francisco.
“I’m absolutely amazed,” Simmonds said. “I knew the reception could do nothing. But he could at least have treated me with dignity and respect. “
In 2018, an affiliate led by Sam Hirbod paid $ 223.5 million for the hotel. At the time of the acquisition, the shopping group obtained a $ 173.5 million loan from NS Income Opportunity REIT, county property records show.
In March 2020, that loan was granted to a new lender, CLNC Mortgage Sub-REIT, which is controlled by Colony Credit Real Estate, a firm that provides financing and debt for a number of commercial real estate properties.
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 in the coming months,” Liccardo said.