May 28, 2024
San Jose State University is talks to buy a downtown San Jose hotel tower that could become student housing.

SAN JOSE — San Jose State University is engaged in talks to enable the school to buy a prominent downtown San Jose hotel tower that the college could convert to student housing.

The university is eyeing the purchase of the southern tower of the Signia Hilton San Jose, according to several sources with informed knowledge of the potential real estate deal.

The south building of the lodging complex is part of the two-tower hotel at 170 South Market Street that for decades operated as the Fairmont San Jose, an 805-room hotel that is one of the city’s downtown icons.

Sam Hirbod, the principal executive of the group that owns the Signia Hilton in downtown San Jose, had confirmed in April of this year that discussions were underway with a potential buyer for the southern tower.

The negotiations would leave Hirbod’s group with ownership of the 541-room northern tower, which would remain a conventional hotel, Hirbod said in April.

SJSU would buy the 264-unit southern tower from Hirbod’s group, according to the sources, who requested anonymity because they did not have the authority to speak for either the buyer or the seller in the deal.

The university would convert the highrise to SJSU student housing once the deal is completed, according to the sources.

Until a property purchase is concluded, there is no certainty that any deal will be successfully completed.

“The university is always exploring options to increase the availability of housing for its students, staff and faculty,” said Charlie Faas, San Jose State’s vice president for administration and finance. “No transactions have been finalized.”

The attempts to find an alternative use for a section of the Signia Hilton arrive at a time when hotel occupancy levels in downtown San Jose lodging facilities have eroded as a result of the economic woes unleashed by the coronavirus outbreak.

The big problem facing the Signia Hilton in San Jose is the relatively low occupancy in the 805-room complex, although the big hotel is hardly alone in the Bay Area with these sorts of challenges.

Low occupancy levels plague hotels in the downtown districts of San Jose, Oakland and San Francisco alike, along with other parts of the Bay Area — with the noteworthy exception of the thriving and tourist-packed lodging resorts in the Napa and Sonoma wine regions.

The occupancy in the Signia Hilton San Jose is modest enough that the hotel would be able to readily accommodate all of its guests on a typical night, even if they were concentrated solely in the northern tower of 541 rooms.

The north tower also contains restaurants, a lounge, pool, fitness center, cabana, a big conference center and other amenities that would enable it to easily operate as a full-service hotel.

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“We spent $65 million to upgrade and reposition the hotel,” Hirbod said during an interview in April. “We now have one of the nicest hotels in the western United States. We have a world-class operator in Hilton.”

Hirbod believes the hotel would function in a more optimal fashion if it were smaller than its current 805 rooms.

The removal of the 241 rooms from the stock of hotels in downtown San Jose would by definition tighten the lodging supply and increase the chances that downtown hotel operators could offer their rooms at higher rates.

Plus, the addition of hundreds of San Jose State students in a housing tower could heighten economic activity in downtown San Jose.

“If this deal goes through, the hotel will be rightly sized and rightly positioned to serve the San Jose community, business travelers and leisure travelers for decades to come,” Hirbod said in April. “I’m very optimistic about the future of the hotel.”

 

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