SAN JOSE – A landmark San Jose hotel has filed for bankruptcy for the second time in three years but will keep its doors open and business as usual while its owners seek new financing for the log tower.
The entity that owns the iconic Signia by Hilton San Jose hotel downtown has filed for Chapter 11 bankruptcy proceedings ahead of a planned auction of the residential property, U.S. Bankruptcy Court records show.
“The hotel will operate just as it has,” said Sam Hirbod, principal owner of the Signia by Hilton at 170 South Market Street in downtown San Jose. “The doors are open. Guests won’t notice a difference.”
The bankruptcy filing is the latest visible sign of a financial conflict between the 541-room hotel, one of the largest in the Bay Area, and high-profile real estate lender BrightSpire Capital.
BrightSpire had provided the hotel with a financing package that as of July 2024 totaled approximately $165.3 million.
However, the default setting only covers part of the total financing package. A junior loan totaling approximately $15 million is due.
BrightSpire has filed a notice of default and has scheduled an auction of the property. BrightSpire’s auction may result in foreclosure of the hotel. The bankruptcy filing is designed to prevent the auction.
“The bankruptcy will give us the time we need to get the financing the hotel needs,” Hirbod said. “Our aim is to replace the current lender BrightSpire.”
Hirbod believes that the current lender has not been cooperative.
“We’re dealing with an aggressive lender who wants to foreclose on the hotel now that the hard times have passed and the hotel has been renovated and repositioned,” Hirbod said.
According to Hirbod, BrightSpire hopes to become the new owner of the hotel and then sell in about a year at a profit. BrightSpire could not immediately be reached for comment.
The hotel’s ability to stay open this time stands in stark contrast to its fortunes in 2021 when it was forced to close largely due to the vaporization of the worldwide lodging and travel industry as the coronavirus outbreak raged.
For decades the hotel was known as the Fairmont San Jose but when it reopened it did so under the prestigious Hilton chain’s Signia brand.
In 2023, Bay Area real estate firm Throckmorton Partners purchased the south tower of the 264-room Signia by Hilton Hotel from a group led by Hirbod as part of a $113 million purchase, financing and renovation package.
The total includes the $73.1 million that Throckmorton Partners paid for the property.
The deal dramatically reduced the number of hotel rooms in downtown San Jose, a reduction in supply that helped intensify demand for lodging.
Signia by Hilton has been able to increase its occupancy due to the reduced number of available rooms.
“Our occupancy is going up and 2025 looks like a good year,” Hirbod said.
The Hirbod-led group that owns the hotel property said both its assets and liabilities ranged from $101 million to no more than $500 million, according to documents filed Nov. 5 in U.S. Bankruptcy Court.
The vast majority of the debt appears to be the BrightSpire loan package, documents on file with the Santa Clara County Recorder’s Office show.
The largest unsecured creditor listed in the filing is JLL, a commercial real estate firm, which is owed $165,000 for consulting work related to a property tax appeal.
Separately, the hotel operator and ownership group have reached an agreement on a new employment agreement with unionized hotel workers, according to Hirbod and a prepared release issued by Unite Here Local 19.
The labor agreement means workers will remain protected and keep their jobs despite the bankruptcy filing.
Hirbod claims he has been trying to get a compromise from the lender until he could secure new financing to replace and repay the current loan.
“Our lender BrightSpire forced us to do this,” Hirbod said.
Despite the widespread uncertainty a bankruptcy case creates, Hirbod said he is fighting to keep his group’s ownership of the hotel because he believes in the prospects for Signia.
“I am committed to the long-term success of this hotel,” Hirbod said.
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