Another Bay Area Hotel Flops Into Loan Default

Another Bay Area hotel has fallen into default as the area’s lodging sector navigates widespread distress in the post-pandemic years.

The La Quinta Inn & Suites at 1036 North Fourth Street in San Jose is now in default on a $16 million loan, the Mercury News reported. Los Gatos-based Milanben Patel and Anil Patel are the principal managers of the entity that owns the 59-room hotel, according to state business documents cited by the Mercury News.

Central Valley Community Bank provided the owner with a construction loan in 2019, which is now delinquent. The hotel was completed in 2023 and now faces foreclosure if the owner is unable to repay the lender in full.

The La Quinta location in San Jose joins a growing list of hotel properties in the Bay Area that have grappled with falling property values, loan defaults and foreclosures. The distress streak started in 2023 with the foreclosure of the Huntington Hotel in San Francisco at $29.3 million, representing a significant tumble from its $86.7 million assessed value, according to the Mercury News. Since then, hotels and motels from San Francisco and Oakland to Silicon Valley have faced similar woes.

In San Jose, the 541-room Signia by Hilton hotel, the largest in the city, was taken back by its lender last May through a foreclosure that valued the hotel at $80 million. The following month, a Motel 6 and Super 8 by Wyndham in San Jose defaulted on a $21.7 million loan. Elsewhere in Silicon Valley, earlier this spring, the Wild Palms Hotel in Sunnyvale and Hotel Avante in Mountain View received notices of default demanding payment in full for a $54.1 million loan.

Last year, two of San Francisco’s largest hotels, the Hilton San Francisco Union Square and Parc 55, were foreclosed and then sold by a court-appointed receiver for $408 million, representing a 75 percent dropoff in the properties’ values. In Oakland, the 500-room Oakland Marriott City Center was seized by its lender last year in a $70.2 million foreclosure of a delinquent loan. Soon thereafter, the 172-room Moxy Oakland Uptown hotel fell into default on a $35 million loan. The Moxy Oakland Uptown has since closed its doors. — Chris Malone Méndez