SAN JOSE — A San Jose hotel has been bought by a Louisiana real estate firm in a deal that hints at the early stages of a recovery in the Bay Area’s COVID-battered lodging market.
Aloft Santa Clara, a 175-room hotel in north San Jose, has been bought by an affiliate of New Orleans-based HRI Properties, whose specialties are owning, developing, and managing hotels and residential complexes in the United States.
Elevate Santa Clara Hotel, the HRI Properties affiliate, paid $54 million for the Aloft in north San Jose, according to public records filed on May 28.
“This is a premium price for a very well-located hotel in a strong market,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market.
The per-room price for the purchase is in the vicinity of $309,000.
“The deal shows there is bullish sentiment about San Jose and Silicon Valley,” Reay said.
HRI Properties owns 26 properties in the United States and manages 36 properties on behalf of third-party investors. The properties, both owned and managed, include hotels and apartment buildings.
“We’re a diversified, national real estate company engaged in the ownership, development, and management of upscale-branded and independent hotels, luxury apartments, and mixed-use properties in urban centers,” is how HRI Properties describes itself on its website.
The economic blows unleashed by the coronavirus have beaten up the hotel market worldwide and triggered mammoth layoffs after businesses shutdowns to combat the deadly bug.
Only slowly have Bay Area hotels begun to reopen, facing minimal occupancy levels.
Some hotels in the nine-county region have been forced into bankruptcy or shoved into foreclosure proceedings.
The financing package for the Aloft hotel deal in San Jose caught Reay’s eye.
The buyer was able to obtain financing from SBNP SIA III, an affiliate of North Carolina-based Barings.
Barings is a storied investment management and financial services firm whose roots go back to its founding in London in 1762. In 1803, Barings provided the money to accomplish the Louisiana Purchase that at the time doubled the size of the United States.
The Barings affiliate provided a mortgage of $41.5 million to the HRI Properties to finance the purchase, the county documents show.
That works out to a down payment of roughly 23% for the hotel, with approximately 77% of the purchase price being covered by a loan.
“Six months ago, there was almost no financing available to buy hotels and you had to put 50% down,” Reay said.
The San Jose hotel transaction points to the prospect that the Bay Area hotel market can extricate itself from its coronavirus-triggered quagmire.
“This shows that investors are optimistic about the long-term prospects for hotels in Silicon Valley,” Reay said.
