Silicon Valley Business Journal
09/09/15

Meet the Downtown San Jose Hotel Being Built Without Many People Knowing About It
By Nathan Donato-Weinstein

http://www.bizjournals.com/sanjose/news/2015/09/09/meet-the-downtown-san-jose-hotel-being-built.html

If you live or work in downtown San Jose, you may have walked by a new hotel under construction and not even realized it.

For the last several months — and somewhat under the radar — construction crews have been swarming 100 E. Santa Clara St. to convert the 27,000-square-foot office building to a 44-room hotel.

Folks, meet “Hotel Clariana” (the name is for the street), which an owner’s representative described to me last week as an “upscale” boutique hotel.

“Everything’s going to be updated,” said Tina Phan, of ownership group RSTP Investments LLC. “It’s not like other hotels. We want to have a really nice place for business people and families.”

RSTP acquired the five-story building back in 2009 through a deed in lieu of foreclosure after the previous owner defaulted on a $4.8 million loan. In 2009, RSTP leased the building to the now-defunct San Jose Redevelopment Agency, which established the Entrepreneur Center there, leasing it to nonprofits and business development groups.

That lease expired a few years ago, and the owners had to decide what to do with the property.

“We were in the hotel business somewhere else before, and I think the location is better for hotel than office,” Phan said.

The project has been proceeding after receiving building permits, but hasn’t received a lot of attention. Even many close downtown observers didn’t know about it until recently.

Boutique operators can be at a disadvantage if they don’t have access to a brand partner’s major reservation network. Alan X. Reay, president of Atlas Hospitality Group, said he thinks the small size of the project and the building’s historic nature (it was built in 1912) probably limits the number of flags that would be interested. Still, he said the property could do well as a boutique independent as long as the owner’s cost basis is low. As I wrote in March, deep demand for weekday travel is driving the development activity in Silicon Valley.

San Jose is undergoing something of a hotel development boom, but most planned properties are in the city’s suburban reaches. One exception: TPG Hospitality and Rockbridge’s 210-room AC Hotel, which is currently a steel skeleton at the corner of Santa Clara Street and the Highway 87 off-ramp.

Phan said she hopes the hotel will help enliven the corner, located at Third and Santa Clara streets, a block away from City Hall. The location is considered a prime corner downtown, but can be a bit dodgy at night.

“That corner needs to clean up a little bit,” Phan said. “With 24-hour service there, it will be a lot better.”

Converting the building to a hotel use is a major undertaking. Every room needs a bathroom, meaning the plumbing work is extensive. There will also be a planned bar and lounge on the ground floor as well as a gift shop and travel agent’s office. There have been few conversions to hotels in the region; in Milpitas, Alps Group is rehabbing and adding onto a research-and-development building at 1201 Cadillac Court to create a 124-room SpringHill Suites by Marriott.

City building records show the property will have eight rooms on the second floor, 12 rooms on the third, 12 rooms on the fourth and 12 rooms on the fifth floor.

Phan declined to share much about the project, saying it’s still early. She said the it will be another few months before construction is complete. The goal is to be open by Super Bowl 50 next February.