Downtown hotel near Google village gets key loan
Ground broken on facility after it lands construction funding
SAN JOSE » A big downtown San Jose hotel slated to sprout near Google's proposed transit village is pushing forward now that the lodging project has landed a vital construction loan.
Keystone, a Marriott TowneSuites Hotel that will total 176 rooms, has broken ground a short distance from the footprint of the neighborhood the search giant is creating on the western edges of downtown.
Urban Catalyst, a real estate company that's active in downtown San Jose, is developing the all-suites hotel at the corner of West San Carlos Street and Josefa Street.
“It's great to see that even in a difficult economic environment, a lender is confident in downtown San Jose and our project,” said Erik Hayden, founder and managing partner with Urban Catalyst.
Poppy Bank provided $48 million in construction financing for the hotel project, according to documents filed Jan. 30 with the Santa Clara County Recorder's Office.
“The Keystone project is a bellwether for the development future of downtown San Jose,” said Bob Staedler, principal executive with Silicon Valley Synergy, a land use consultancy. “Obtaining financing for a hospitality project shows the investment and banking community's faith in Urban Catalyst and 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, Hayden said. Typ
ically, this sort of amount includes the construction loan, equity investments, the property purchase amount, building materials, labor and other expenses and government fees.
The hotel is also expected to include a rooftop lounge and bar, according to Hayden.
The project site is close to the edges of Google's proposed new neighborhood, known as Downtown West, near the Diridon train station and SAP Center.
“Hotels, especially extended-stay hotels, are expected to do very well,” Hayden said, “And we are also just 300 yards away from the Google village.”
The village is slated to include office buildings, homes, shops, restaurants, lodging facilities, open spaces, cultural activities and entertainment hubs. The search giant expects to employ up to 25,000 people in the new neighborhood when it is fully built out.
Urban Catalyst has proposed several downtown San Jose projects. Among them:
• Icon/Echo, a two-tower complex that would consist of an office tower totaling 511,000 square feet and a housing tower with 389 apartments at East Santa Clara Street and North Fourth Street.
• The Fountain Alley project near South First Street and East Santa Clara Street that consists of 67,000 square feet of office space and 19,500 square feet of retail space.
• Paseo, an office and retail project at 201 South Second Street that is nearly complete and has attracted multiple retail tenants.
The just-financed Keystone hotel project is expected to take 27 months to complete, which means it could open its doors by the summer of 2025.
“Poppy Bank feels the same way about the downtown as we do,” Hayden said of the hotel loan. “Downtown San Jose is really the only true urban environment in Silicon Valley. It's the most logical place for infill development.”