Another San Jose Hotel Falls Into Default

Yet another San Jose hotel has flopped into loan default as the Bay Area’s lodging market navigates an ongoing period of distress.

The 52-room Fontaine Inn in east San Jose is in default on a $6.5 million loan, Mercury News reported, citing documents filed on Wednesday with the Santa Clara County Recorder’s Office. The property at 2460 Fontaine Road is owned by a group led by business executive Bharat Patel. State Bank of Texas is the lender and filed the loan default notice.

The Fontaine Inn is coincidentally two doors down from a 204-room hotel complex at 2560 Fontaine Road that is also in default. The Motel 6 and Super 8 by Wyndham face foreclosure due to the delinquent $21.7 million property loan. Another Super 8 by Wyndham in Livermore defaulted on a $7.7 million State Bank of Texas loan in 2022. That property has the same real estate executive owner as the dual Motel 6 and Super 8 by Wyndham property in San Jose who has since filed for bankruptcy.

Hotels from San Francisco and Oakland down south to San Jose and Los Gatos have been confronting loan defaults and looming foreclosures in recent years. Elsewhere in San Jose, last year, the 541-room Signia by Hilton hotel, the largest in the city, was taken back by its lender. Last week, the 59-room La Quinta Inn & Suites in San Jose, which opened three years ago, defaulted on a $16 million Central Valley Community Bank loan.

Earlier this spring in nearby Los Gatos, Denver-based KSL Capital Partners purchased the distressed Toll House Hotel through a deed-in-lieu of foreclosure. The unpaid debt linked to the Toll House was $30 million at the time of foreclosure proceeding, though KSL Capital did not pay more than that amount to take over the property. — Chris Malone Méndez