Eagle Canyon Capital looks for fresh capital after selling hotel tower for student housing

Aug 1, 2024, 6:02 PM | By TRD Staff

The ownership group of a prominent hotel in downtown San Jose claims to be close to a refinance of its $165 million debt package even as the holder of a $29 mezzanine loan is looking to sell the note.

Commercial brokerage JLL has been hired to peddle Eagle Canyon Capital’s secondary loan on the Signia by Hilton, the San Jose Mercury News reports. Eagle Canyon Capital in San Ramon, led Sam Hirbod, sold one of the project’s two towers to student housing specialist Throckmorton Partners for $73 million and continues to operate 541 rooms in the remaining building at 171 Market Street. 

JLL marketing materials point to ongoing distress despite money from Mill Valley-based Throckmorton, referring to the $29 million loan as “non-performing.”

Brightspire Capital is selling the loan; it’s unclear if the Los Angeles-based firm also holds the main $136 million note on the property.

New financing for the hotel is in the works, according to the Mercury News, which cited unnamed sources who said the owners are near a package that could stabilize the property.

The 243-room tower sold to Throckmorton is meanwhile undergoing a conversion to student housing for San Jose State University. 

The tower that remains a hotel has long been a prominent destination in San Jose and the broader Silicon Valley market. It operated at a Fairmont Hotel for a number of years before Hilton took it over in 2022 on the heels of a major renovation.As an asset class, the hotel market has suffered from a major contraction, particularly in California. A study by consultancy Atlas Hospitality Group found the money spent on buying hotels in Northern California fell 38 percent last year to $1.45 billion, compared to $2.8 billion in 2022. In Southern California, spending fell even more — 60 percent last year.