Historic hotel is bought for far less than its prior price

By GEORGE AVALOS | gavalos@bayareanewsgroup.com | Bay Area News Group UPDATED: October 30, 2024 at 4:13 PM PST

SAN JOSE — The historic Hotel De Anza in downtown San Jose was bought at a price that’s roughly half of what it was previously worth.

Purchased for $11.5 million, according to documents filed Tuesday with the Santa Clara County Recorder’s Office, Hotel De Anza’s price could be an additional sign of weakness in the lodging market.

An ownership group headed up by Dhaval Panchal, a Northern California hotel owner, bought the the 10-story historic hotel at 233 West Santa Clara St. in downtown San Jose.

The $11.5 million price is 43.6% below the $20.4 million that an affiliate of Lowe’s Enterprises paid
in 2014 for the historic high-rise.

“This could hurt hotel values throughout the Bay Area,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market. “San Jose, Silicon Valley, San Francisco, it even affects Oakland.”

Even worse, the price for the Hotel De Anza is 54% below the hotel property’s value of $25.2 million in January 2024, as the Santa Clara County Assessor’s Office estimated.

“Many appraisers have struggled to find recent comparable values for hotel deals,” Reay said. “The price for the De Anza hotel will play into a lot of low valuations, no question about it.”

The purchase price is also about 63% below what investors were willing to pay before the COVID outbreak in 2020.

Panchal, the head of the group that is the new owner of the Hotel De Anza, owns smaller hotels along the California coast, according to Reay.

These are the 20-room Vendange Carmel Inn & Suites in Carmel-by-the Sea and Seal Cove Inn near Half Moon Bay in Moss Beach.

“Owning the Hotel De Anza will be new territory for him,” Reay said of Panchal.

The ownership group headed up by Panchal also obtained a combined total of $13 million in financing at the time of the purchase, county public documents show.

The loans consisted of $5.9 million in Small Business Administration-backed financing from CalPrivate Bank, $3.6 million from Mortgage Capital Development and $3.5 million from Lincoln Capital Management, according to the property records.

The Hotel De Anza property was the collateral for all three loans.

Built in 1931, the lodging tower is one of San Jose’s few Zig Zag Modern, or Art Deco, buildings. Hotel De Anza was added to the National Register of Historic Places in 1982. It was renovated in 2015.

The current meltdown in hotel prices in the Bay Area is worse than even the slump associated with the recession and the financial crisis that began in December 2007 and ended in June 2009, in Reay’s view.

“I have never seen declines in hotel values that are this severe,” Reay said.