SAN JOSE — A big San Jose hotel has won a weeks-long reprieve from the threat of a foreclosure on its delinquent loan, a delay that gives the lodging tower’s owner breathing room to seek replacement financing.
The Signia by Hilton, a hotel tower at 170 South Market Street in downtown San Jose, faces a possible foreclosure, a menacing prospect that has prompted the lodging property’s owner to seek court rulings to ward off or slow down the real estate proceedings over the delinquent loan.
That potential relief from foreclosure appears to have arrived in the form of a decision that Santa Clara County Superior Court Judge Shella Deen issued on March 24.
Judge Deen has decided to keep in effect until at least May 1 a temporary restraining order that blocks efforts by a lender to foreclose on the hotel’s loan, court records show.
Sam Hirbod, who heads up the ownership group for the 541-room hotel, argued in court papers that an immediate foreclosure would be harmful to both the hotel and himself personally.
What’s more, Hirbod also asserted that only the hotel’s lender, an affiliate of Brightspire Investment Group, would benefit from an immediate foreclosure that would give the financial firm ownership of the property.
With Judge Deen’s imposition of a court-ordered delay, the judge cited multiple reasons why a delay would be more beneficial for all parties, including both the hotel’s owner and the property’s lender, as well as hotel workers.
“The court is concerned that failure to provide plaintiffs (the ownership group that includes Hirbod) with at least an opportunity to secure a new lender could pose considerable risk of harm to the hotel, its staff and junior creditors that stand to lose their interest in the property in the event of foreclosure,” Judge Deen stated in her order.
The judge ordered the Hirbod-led ownership group to provide a status update on April 17.
“Two new lenders are very eager to take over financing of the hotel,” Hirbod stated in papers filed with the Santa Clara County court. “The lenders are expecting to close refinancing in mid-April.”
Bridge Investment Group and Nexpoint have agreed to provide the hotel property with a refinancing of its mortgage.
“We look forward to working with you on this transaction,” Jeehae Lee, manager of Bridge Debt Strategies Fund, wrote in a March 10 letter detailing Bridge’s term sheet.
The Bridge and Nexpoint loans would pay off the existing property mortgage held by Brightspire Investment Group.
“BrightSpire will be paid 100% of the money it is due under the loan agreements,” Hirbod stated in a court filing on March 13.
In 2018, Hirbod’s ownership group paid $223.5 million for what was at that time an 805-room hotel with two towers. That price worked out to about $278,000 a room.
Hirbod stated in court filings that he has invested $170 million into the hotel.
That investment includes a $90 million down payment to buy the hotel in 2018, $26 million in interest payments to the lender while the hotel was closed during COVID-linked shutdowns and $54 million to renovate the hotel in 2023 and 2024.
In 2023, Hirbod took steps to further stabilize the hotel’s finances through the sale of the 264-room southern tower. Throckmorton Partners paid $73.1 million to buy the tower and convert it into housing for San Jose State University students. The southern tower is now known as Spartan Village on the Paseo.
Hirbod used the $73.1 million to pay down the amount of the Brightspire loan.
The Signia by Hilton is now riding a wave of increased bookings for conventions, events and guests, according to Hirbod.
The heightened success appears to have bolstered the hotel’s value. In October 2024, the appraised value of the Signia by Hilton was $240 million, according to a previous court filing.
Despite the economic dislocations unleashed by the coronavirus, Hirbod said he remains confident about the hotel’s prospects.
“While so many business owners in San Jose walked away from their businesses during COVID — leaving their buildings hollow shells and boarded up storefronts on the streets of San Jose — I doubled down during COVID,” Hirbod stated in the court filing.