SAN JOSE – The Fairmont Hotel, a landmark in downtown San Jose, filed for bankruptcy on Friday and closed its doors – but says it will reopen and resume operations within two to three months.
The owners of the iconic 805-room hotel said they closed the Fairmont while it tried to find an administrative partner and extend the existing mortgage debt.
The Fairmont in San Jose is not alone in its financial difficulties amid the economic consequences triggered by the coronavirus, which drove conventions and travelers out of hotels.
“We know that by taking this difficult step, we will return to a more vibrant hotel for the benefit of everyone in San Jose, including the vitality of the city center, nearby businesses and Silicon Valley conventions in a post-COVID- 19, ”said Sam Singer, a representative of the Fairmont Hotel.
An increasing number of hotels around the world – and in the bay area – have gone bankrupt or faced problems with their funding.
“Unfortunately, this is a local reflection of the devastation that the hospitality industry has suffered globally,” said San Jose Mayor Sam Liccardo in an interview with this news organization.
In the entire year 2020, only 14 defaults for non-performing loans were made against hotels located in California, according to research statistics provided to this news agency by Alan Reay, president of the Atlas Hospitality Group, which tracks the hospitality market. lodging throughout the state.
In January 2021 alone, at least 20 defaults were made against hotels in California, Reay said.
“The hotels that have suffered the most are in business centers and convention center hotels,” said Reay. “This is definitely the situation with Fairmont.”
The affiliate that owns the Fairmont San Jose hotel has listed debts ranging from $ 100 million to $ 500 million, according to a lawsuit in the United States Bankruptcy Court.
Eagle Canyon Capital, based in San Ramon, and whose president is Sam Hirbod, is the main owner and operator of the hotel, the court records show.
“The hospitality industry has been absolutely crushed by the pandemic,” said Scott Knies, executive director of the San Jose Downtown Association.
Among the main creditors who have unsecured claims against the bankrupt hotel: the city of San Jose, which owes $ 1.06 million, shows the court’s case file.
Sources said the hotel’s owners have a good relationship with their main creditors and creditors.
“We will be back in 60 to 90 days with improved finances and a new hotel management team,” said Singer.
The hotel transferred guests from the Fairmont de San Jose to other accommodation locations nearby.
However, not all guest departures went smoothly. Kevin Simmonds, a San Francisco resident and writer who had booked a two-night stay and Fairmont San Jose, left for about three hours to take advantage of the good weather and put the finishing touches on a book. He returned and found a confusing situation at the place of lodging.
“The hotel manager asked if I was staying at the hotel, I said yes and she said she needed to leave,” said Simmonds. “I asked why and she said, ‘I can’t tell you.’ I said ‘what do you mean you can’t tell me, this is crazy.’ She told me that Fairmont directed all guests to go to the Hilton ”nearby.
Simmonds asked the hotel manager if the Fairmont San Jose was making up for guests for the lost night. “She said, ‘No, we’re not going to make it up to you,'” said Simmonds.
Simmonds ended up deciding to drive back to San Francisco.
“I am absolutely amazed,” said Simmonds. “I knew there was nothing the reception could do. But they 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 purchase, the buyer group obtained a $ 173.5 million loan from NS Income Opportunity REIT, county property records show.
In March 2020, this loan was granted to a new lender, CLNC Mortgage Sub-REIT, which is controlled by Colony Credit Real Estate, which is a company that provides financing and debt for a number of commercial real estate properties.
The Fairmont lost at least $ 18 million in 2020 and is projected to lose at least another $ 20 million in 2021, hotel owners said.
“We hope that Fairmont will open its doors in time for the revival of our center in the coming months,” said Liccardo.