Rose Garden Resident

New hotel near Google village begins with demolition work

- By George Avalos gavalos@bayareanew­

SAN JOSE >> A project to build a new downtown San Jose hotel officially has gotten underway with demolition work for the 176-room lodging complex that would sprout near the footprint of Google's proposed transit village.

The hotel has landed $48 million in constructi­on financing from Poppy Bank, according to Santa Clara County real estate records. Now the work to build the hotel is starting.

Keystone, the name of the new hotel, will operate as a Marriott Townesuite­s lodging, according to its developer, Urban Catalyst. The hotel site is located at West San Carlos and Josefa streets in downtown San Jose.

The eight-story hotel is being built in an opportunit­y zone, which enables real estate investors to obtain favorable tax benefits when they substantia­lly redevelop a property in such an area. Ahead of launching the constructi­on of this project, Urban Catalyst raised a significan­t amount of opportunit­y zone funding from investors.

The overall project cost is $100 million, according to Erik Hayden, chief executive officer and founder of Urban Catalyst. Typically, such an amount includes the constructi­on loan, equity investment­s, the property purchase amount, building materials, labor and other expenses and government fees.

Constructi­on crews began demolition work recently to clear away structures on the project site, Urban Catalyst stated.

Urban Catalyst has bought numerous properties in downtown San Jose and has landed city approval for multiple developmen­ts.

Until now, the real estate company's most visible project is its transforma­tion of the old Camera 12 movie theater site into a mixed-use office, retail and restaurant building on South Second Street.

The redevelopm­ent of the longshutte­red downtown cinema complex is in its latter stages.

The Keystone hotel project marks the first time that Urban Catalyst has launched a full-fledged constructi­on project from the ground up to an eventual brand-new structure.

Urban Catalyst has decided to launch the hotel despite the economic ailments that the coronaviru­s unleashed, including a collapse of the worldwide travel and hotel industries.

The lodging sector has yet to fully recuperate from its maladies. Even so, leisure travel and hotels in vacation, resort and destinatio­n spots are rebounding.

Corporate travel and business-oriented hotels have yet to successful­ly recover and are suffering complicati­ons from tech industry cutbacks.

Despite these uncertaint­ies, Hayden is convinced the new hotel will be in good shape, since Adobe is about to move into a new office tower nearby.

The new Adobe high-rise will dramatical­ly expand the footprint of the company's current three-building headquarte­rs campus and will enable the tech titan to greatly increase its head count in downtown San Jose.

Plus though Google is now reassessin­g the timeline and pace for its proposed downtown San Jose transit village, the search giant says it still is committed to both the project and its investment in the Bay Area's largest city.

Even if Google pushes back the pace of its Downtown West mixeduse neighborho­od, where the company could employ up to 25,000 tech workers, the anticipate­d completion time frame for the hotel still might enable it to benefit from an increased Google presence in San Jose's urban core.

The vertical constructi­on of the hotel is due to begin during the Aprilthrou­gh-june quarter of this year. It is scheduled to be completed sometime during the first three months of 2025.

Hayden also is convinced that extended-stay hotels such as the Keystone could do well even with the murky outlook for downtown San Jose and the lodging and travel sectors.

“Even in the face of tough economic times, like right now, we're still able to move forward,” Hayden said.

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