SAN JOSE — A San Jose hotel development site where hundreds of rooms could sprout has tumbled into a loan default and faces foreclosure, a grim turn of events that leaves the project’s future murky.
As currently approved, the proposed hotel could bring 200 rooms to north San Jose’s Alviso district, according to plans on file with city officials. The hotel also was expected to contain 15,400 square feet of retail.
This development project is now up in the air. A lender has filed a notice of default against a loan whose collateral is the land where the hotel was slated to be built, according to documents filed on Oct. 26 with the Santa Clara County Recorder’s Office.
The hotel was proposed as a Shilla Stay. Shilla Stay is one of the brands of Shilla Hotels & Resorts, an affiliate of South Korea-based Samsung Group.
A South Korea-based company, operating as Mirae San Jose, bought the 3.2 acres of land for the hotel site in 2019, paying $22.5 million for the land, county public files show.
Pine Tree Specialized Private Investment Trust and KEB Hana Bank provided a loan of $26.4 million to Mirae San Jose at the time of the land purchase.
Now, the lending consortium claims that the Mirae real estate firm owes $34.4 million in the wake of the loan delinquency. The higher amount owed arises from factors such as interest and late fees.
Pine Tree Specialized and KEB Hana Bank are threatening to seize ownership of the land through a foreclosure process, according to the county records.
The lending group could oblige the borrower to repay the loan in full to avoid foreclosure and seizure.
The outbreak of the coronavirus in 2020 has jolted the travel and hotel markets worldwide, including in the Bay Area.
As a result, hotel occupancy levels have plunged in this region and around the globe. The economic aftershocks from the coronavirus have made the construction of new hotels less viable.
The Shilla Stay hotel site now facing a foreclosure threat is one of two hotels that have been proposed in the vicinity.
A 214-foom hotel that is being planned for a nearby six-acre site is owned by a different group and has nothing to do with the lodging property that’s in default.
The highest-profile new development in the area is the bustling and popular Topgolf San Jose complex, which opened in 2021.
Topgolf has been a steady draw as an entertainment, sports, and dining center. Topgolf operates high-tech driving ranges that allow people to hit golf balls equipped with microchips that record distance and accuracy. The venues typically also include dining and drinking establishments.
Despite owning the 3.2 acres of land at 7 Topgolf Drive for more than three years, the Mirae San Jose group has yet to begin construction on the 200-room hotel.
San Jose officials gave final approval to the hotel in 2019, about a month before the Mirae group bought the land site.