Irvine Hospitality Firm Buys Historic San Jose Hotel in Deal Worth $62.3M
Tuesday, January 25, 2022
A large, historic hotel in downtown San Jose has been bought by Irvine-based Khanna Enterprises in a deal that produced a rare event: The hotel sold at a loss compared with its price less than five years ago.
The Westin San Jose, formerly known as the Sainte Claire Hotel, has been bought by an affiliate headed up by Khanna Enterprises, documents filed on Jan. 20 with the Santa Clara County Recorder’s Office show.
Khanna Enterprises paid $44.9 million for the hotel structure and the land beneath it, according to the county property records.
It appears South Korea-based Aju Hotels and Resorts, the seller of the Westin San Jose, endured a loss in value for the hotel during the years Aju owned the property.
The seller, South Korea-based Aju Hotels and Resorts, paid $64 million for the hotel in 2017, notably before the pandemic wiped out leisure and business travel.
The hotel’s real estate value in 2022, compared with the real estate value in 2017 purchase, slid 29.8% during the ensuing years.
Aju Hotels, however, says it was paid $62.3 million by Khanna Enterprises.
A representative for Aju provided the (San Jose) Mercury News newspaper with a purchase document that showed the overall deal for the hotel — including the price of the land, the building, the furniture and intangible values for assets in the hotel — was valued at $62.3 million.
Even with that price adjustment, the overall value of the hotel in 2022 was 2.7% less than its value in 2017.
Alan Reay, president of hotel deal tracker Atlas Hospitality Group, believes the Westin San Jose is still a top-notch lodging. “This is a beautiful hotel, a great, historic property,” Reay said. “It’s got a great location.”
Nevertheless, the coronavirus appears to have undermined the hotel’s value.
“This demonstrates the decline in value for hotels that are in markets that depend on business travel and conventions,” Reay said.
In contrast, hotels in popular markets such as the coastal regions of Monterey County and San Diego County, along with the Northern California Wine Country, are seeing record increases in their prices. “Drive-to markets, destination markets, are seeing incredible values,” Reay said.
The 171-room Westin San Jose is located at 302 S. Market St. and is about a block away from the San Jose Convention Center. Constructed in 1926, the six-story landmark hotel was designed in an Italian Renaissance Revival and Mediterranean Revival style of architecture. It was restored in the 1990s.
“The price Khanna paid for Westin San Jose is well below the replacement value to construct a new hotel like this one,” Reay said.
With the deal, the Irvine hospitality firm now owns two hotels within a block of each other in the city’s urban core. And both hotels are brands owned by lodging titan Marriott.
Khanna Enterprises also owns the Four Points by Sheraton mere blocks away, according to the hospitality company’s website. The lodging company, founded in 1989, is headed up by Ravi Khanna.
Reay believes the Westin San Jose is well-positioned to bounce back once travel is back in full swing — or close to normal — in Silicon Valley.
“When the convention and meeting business comes back, the hotel will do great,” Reay said.
Category: Hospitality, Real Estate, Destination Irvine, Hotel