The sale of the historic Hotel De Anza in Downtown San Jose to Dhaval Panchal for nearly half of what it sold for a decade ago could upend the Bay Area hotel market.
Panchal, behind the locally based 233 W Santa Clara LLC, paid $11.5 million for the 100-room Art Deco landmark at 233 West Santa Clara Street, the San Jose Mercury News and Silicon Valley Business Journal reported.
The seller was a limited liability company with the same address as HotelAVE, a hotel asset management firm based in Rhode Island.
In 2014, Lowe Enterprises Investors, an affiliate of Los Angeles-based Lowe Enterprises led by Robert Lowe, bought the hotel on behalf of a “large state pension plan” for $20.4 million, or $204,000 per room, according to the Business Journal and state business records.
It’s not clear how and when the property ended up in the hands of the HotelAVE affiliate.
The sale of the Hotel De Anza to Panchal works out to $115,000 per room, a 44 percent discount off its last known price. The sale price is also 54 percent below its assessed value in January of $25.2 million, according to the Santa Clara County Assessor’s Office.
In 2022, the property was expected to sell for up to $35 million. In August, some said it could fetch as little as $10 million.
The new comp could dampen hotel valuations across the region, industry experts say.
“This could hurt hotel values throughout the Bay Area,” Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market, told the Mercury News. “San Jose, Silicon Valley, San Francisco, it even affects Oakland.
“Many appraisers have struggled to find recent comparable values for hotel deals,” he said. “The price for the De Anza hotel will play into a lot of valuations, no question about it.”
The Hotel De Anza, known for its glowing rose neon rooftop sign, is a signature landmark for the South Bay city. The hotel closed in May, citing “unexpected maintenance.” Until Monday, it was managed by Hyatt Hotels, based in Chicago.
At the time of purchase, the ownership group led by Panchal also obtained a combined total of $13 million in financing, according to the Mercury News, citing county records.
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. The Hotel De Anza property was collateral for all three loans.
Panchal, the new owner, said he now operates the Jazz Age landmark, built in 1931, as a luxury boutique hotel, with plans to add fine dining and a full-service bar.
He also owns smaller hotels along the coast, according to Reay, including the 20-room Vendange Carmel Inn & Suites in Carmel-by-the Sea and the Seal Cove Inn in Moss Beach, near Half Moon Bay.
His 233 W Santa Clara LLC is based at the same address as San Jose-based MHP Hospitality, where Panchal serves as CEO. MHP owns eight hotels in San Jose, San Francisco, Milpitas, Carmel-by-the Sea, Moss Beach and Hawaii, plus an apartment complex in Monterey, according to its website.
— Dana Bartholomew
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