SAN JOSE — A deal for the sale of one of the towers of a downtown San Jose hotel that involves a local university is poised to make progress now that city officials are preparing a key approval step for the transaction.
The transaction involves the southern tower of the double-highrise Signia by Hilton San Jose at 170 South Market Street, according to documents prepared for an upcoming San Jose City Council meeting.
The 805-room hotel consists of a northern tower of 541 rooms and a southern tower annex of 264 rooms. The South Tower has been put up for sale and is slated to become student housing, the city documents show.
The potential transaction could lead to the south tower being bought by a real estate firm that would then lease the highrise to San Jose State University, municipal documents show.
SJSU in turn, would make the tower available as student housing, according to the City Council agenda materials. The southern tower is just a few blocks away from San Jose State University.
“The Board of Trustees of the California State University, on behalf of San Jose State University, is currently contemplating a transaction where it would lease the South Tower Property from AG170 LLC, with the option to purchase the property in the future,” according to a city staff memo prepared for a council meeting on Oct. 17.
The current owner of the hotel is SC SJ Holdings, an LLC headed up by Bay Area business executive Sam Hirbod and his company, San Ramon-based Eagle Canyon Capital. In 2018, Hirbod’s group paid $223.5 million for the double-tower hotel.
San Jose State University officials didn’t discuss any details of the property transaction that was sketched out in the city documents.
Charlie Faas, the university’s vice president for administration and finance, said SJSU is tracking a real estate-related item on the City Council’s Oct. 17 agenda regarding a privately owned property in downtown San Jose.
“Our real estate planning team has been exploring workable opportunities to deliver more affordable student housing as quickly as possible,” Faas said in a statement he texted to this news organization.
The university noted that no transactions regarding any downtown properties that could affect SJSU have yet to be fully completed.
“While any such agreements or deals of ours are not final, it is possible that we may be impacted by any of the Council’s decisions should we move further along with our endeavors to grow our housing stock and footprint downtown,” Faas said.
San Jose staffers have requested that the City Council approve multiple actions. Among them: agree to the sale of the southern tower from the Hirbod entity to a Mill Valley-based buyer; agree to the separation of the hotel property into two lots, one parcel with the north tower and one lot with the south tower.
The potential buyer is an LLC that California business documents show is tied to Mill Valley-based Throckmorton Partners, a real estate firm that focuses on investments in multifamily residential such as apartments, according to the company’s website. These include student housing, affordable homes and market-rate residences.
“This is a great bellwether for downtown San Jose, post-COVID,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.
If the deal is completed as contemplated, the outcome can benefit the downtown, the university and the hotel, in Staedler’s view.
“This deal can be a win-win,” Staedler said. “It will activate that part of downtown San Jose, it will increase vibrancy and get more people living downtown. This can get more SJSU students out of their cars and walking to the campus, which is a goal of Climate Smart San Jose. With fewer rooms, the hotel’s vacancy will be lower.”
In the wake of the coronavirus, government-mandated business lockdowns chased workers out of their offices and guests from their hotel rooms.
Even after the shutdowns were lifted, countless downtown districts — especially those in large cities such as San Jose, Oakland and San Francisco — have struggled to lure workers, shoppers and hotel guests back to the devastated urban cores.
The economic woes are particularly acute in San Francisco, which has struggled to attract visitors and is suffering an exodus of retailers and office tenants that has unleashed an economic “doom loop.”
In the case of this potential transaction involving the hotel tower and SJSU, the deal stands to strengthen the university’s already robust role as a downtown San Jose economic pillar.
“San Jose State is an anchor of downtown’s recovery,” Staedler said. “Having more students downtown and having more educational uses downtown can help with that.”
