SAN JOSE — A big hotel complex in San Jose has staggered into a loan default, a setback that is a reminder the Bay Area lodging sector’s post-coronavirus maladies have yet to run their course.
The 204-room hotel site facing a loan delinquency consists of a Motel 6 and a Super 8 by Wyndham located at 2560 Fontaine Road near the interchange of U.S. Highway 101 and Tully Road in south San Jose.
The lodging property is in default on a $21.7 million loan that Choice Hotels International has provided, according to documents filed on June 6 with the Santa Clara County Recorder’s Office.
An affiliate headed up by Texas-based lodging executive Jagmohan Dhillon obtained the loan in August 2024 from the Choice Hotels group, county real estate files show.
The 2560 Fontaine hotel property is one of several lodging sites in the Bay Area that affiliates controlled by private equity firm Blackstone Group sold in recent years to an array of buyers.
Dhillon-led entities bought some of these from Blackstone-controlled affiliates in recent years.
Two of the hotel properties owned by Dhillon-led affiliates, one in Livermore and the hotel complex on Fontaine Road in south San Jose, have flopped into loan defaults.
The Dhillon affiliate that owns the Livermore hotel has filed for bankruptcy just ahead of a foreclosure proceeding that the property’s lender seeks to orchestrate.
In 2022, a Dhillon affiliate paid $29.9 million to the Blackstone subsidiary for the 204-room south San Jose hotel properties on Fontaine Road, county property files show.
The San Jose hotel site’s property taxes that were due in 2024 have become delinquent, according to real estate records current as of June 1 of this year.
This loan default for the south San Jose hotel is just one of a widening array of financial woes that loom over the Bay Area lodging industry.
— Oakland’s largest hotel, the 500-room Oakland Marriott City Center at 1001 Broadway in the downtown district, went into default in February due to a delinquent $100 million loan. A foreclosure auction is on the horizon.
— Across the street in downtown Oakland, the Courtyard Oakland Downtown was bought by Core Capital for $10.6 million, one-fourth of the $43.8 million that the seller, a Gaw Capital Partners affiliate, paid in 2016, according to documents filed in October 2024 with the Alameda County Recorder’s Office.
— A dual-brand 18-story hotel tower at 1431 Jefferson Street in downtown Oakland was taken back by its lender through a deed in lieu of foreclosure filing that stated the unpaid debt on that hotel was $117 million.
— In downtown San Jose, the South Bay city’s largest hotel, the Signia by Hilton, was seized by its lender through a foreclosure that valued the downtown hotel at $81 million — far less than a recent appraisal.
San Francisco’s hotel woes are even more severe, with huge hotels suffering loan delinquencies and foreclosures.
Park Hotels & Resorts has ceased making payments on a $725 million loan that had two major San Francisco hotels as collateral: the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco.
In 2023, the historic 135-room Huntington Hotel, perched on San Francisco’s legendary Nob Hill, was bought through a foreclosure. The new owner paid about $29.3 million — a price that was roughly one-third the hotel’s assessed value of $87.6 million at the time of the foreclosure proceeding.
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