Judge OKs plan for bankrupt Fairmont

Hotel will open its doors again under Hilton Signia brand

SAN JOSE >> A judge on Aug. 18 approved a plan to financially revamp a bankrupt downtown San Jose hotel, clearing the way for the lodging complex to reopen and be operated as a Signia Hilton brand.

The end of the bankruptcy case will enable the 805-room Fairmont Hotel to open its doors again under the new name Signia Hilton San Jose.

“We have the right brand and the right team,” said Sam Hirbod, the principal owner of the hotel, which is located at 170 S. Market St. in San Jose. “We are incredibly confident in Hilton’s approach to hospitality, their understanding of this asset, and their marketplace knowledge.”

The hotel has been closed since March in the wake of coronavirus-linked economic jolts and a dispute with the hotel’s former operator.

A representative for the city of San Jose endorsed the approval of the plan. City officials view the opening of the hotel as a key cog in the revitalization of the downtown district in the wake of coronavirus-linked woes.

“The city supports the confirmation of the plan and looks forward to the reopening of the hotel as soon as possible,” said Richard Robinson, an attorney who represented the city in the bankruptcy proceeding.

Signia Hilton has agreed to provide a $15 million payment to bolster the hotel’s operations and finances. Separately, JPMorgan Chase is providing a $25 million loan as a further bulwark for the hotel.

The confirmation plan was made possible primarily because of a settlement between the owner of the hotel and the operator of the hotel, Accor Management US.

A big obstacle to the reorganization of the hotel’s finances surfaced in June when the bankruptcy judge handling the case estimated that Accor might have suffered as much as $22.2 million in damages when the hotel owner terminated Accor’s management contract in order to pave the way for Signia Hilton.

The hotel owner, a group headed by Hirbod, a Bay Area business executive and real estate investor, is moving to replace Accor with Signia Hilton.

The settlement paves the way for hotel owner Hirbod, through other real estate affiliates that he controls, to sell an array of properties, all Contra Costa County office buildings, to raise cash if more money is needed to pay a higher level of damages.

The four office buildings that Hirbod-owned affiliates could sell, according to court records, are:

• 1600 Riviera Ave., in Walnut Creek, with an assessed value of $42.4 million.

• 2300 Contra Costa Blvd. in Pleasant Hill, valued at $30.5 million.

• 3130 Crow Canyon Place in San Ramon, with a value of $18.2 million.

• 18 Crow Canyon Court in San Ramon, with an assessed value of $11.4 million.

Together, the properties have a combined value of $102.5 million, far above the estimated $22 million in maximum damages suffered by Accor.

However, a sale of any of the four properties might wind up with the proceeds being diluted.

“The properties each have a mortgage,” Rahman Connelly, an attorney for the bankrupt hotel, told the court on Aug. 18 .

This disclosure means the lender on each property would have to be paid off first for the existing loan and the seller, Hirbod’s affiliate, would then recoup the remainder.

Plus, as with any property sale, no assurances can exist that a buyer would be interested in purchasing the Hirbod-owned office buildings if they were placed on the sales block or that a certain price could be achieved.

Separately, Hirbod completed the sales of multiple gas station and convenience store properties in the East Bay in early July.

Eagle Canyon Capital sold a site at 828 Willow Ave. in Hercules for $16.1 million, a property at 2050 Automall Parkway in Fremont for $7.5 million, and a parcel at 34867 Ardenwood Terrace in Fremont for $5.2 million, according to county property records.

“We look forward to welcoming everybody back to this hotel from around the Bay Area, around the world, and from Hilton Honors,” Hirbod said. “We look forward to building upon Hilton’s

exceptional network worldwide.”

Alan Crowley, an attorney for Unite Here, a union that represents certain categories of hotel employees, said the roughly 100 unionrepresented workers welcome the chance to get their positions back.

“The sooner the plan is confirmed, the sooner the hotel can reopen and these 100 jobs can be restored,” Crowley said Aug. 18 just ahead of the judge’s approval of the bankruptcy reorganization plan.

The precise timeline for the reopening wasn’t immediately known, however.

“The hotel will be opening up again soon,” said Sam Singer, a spokesman for the hotel. “The owner will be meeting with Hilton, talking to the city, working with the union. They will be doing what is right for the city of San Jose, the downtown, and their guests.”