The Mercury News
San Jose Hotel Purchase Suggests Hot Silicon Valley Lodging Market
By George Avalos
SAN JOSE — A big Holiday Inn north of downtown San Jose has been bought by a New York-based group in a nearly $62 million deal that points to a healthy hotel market in Silicon Valley.
“This is a very strong hotel market right now,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the California lodging market.
SJ 1st Street Hotel — a group controlled by White Plains, N.Y.-based real estate investment firm True North Management — paid $61.75 million in cash on Dec. 4, county records show. The 354-room hotel is located at 1350 N. First St., near East Gish Road.
True North Management has bought, financed or made equity investments in “office, retail, hospitality, multifamily and other property types.” Its investments have a combined transaction value of $965 million, according to the company’s website. True North couldn’t be reached for comment on Tuesday.
The Holiday Inn’s seller was Aju Hotel San Jose, a South Korea-based conglomerate that also paid $64 million in June for the iconic downtown Westin San Jose, also known as the Sainte Claire Hotel.
The Aju firm, which is in the resort business, turned a significant profit on the Holiday Inn.
In January 2015, Aju paid $53.45 million for the hotel. Its sale price this week was 15.5 percent higher than the 2015 deal, for an average gain of more than 5 percent a year. That tops the annual general inflation rate in the Bay Area for the same period.
“Aju did well with its investment,” Reay said.
The hotel is on a light rail line and is close to both downtown San Jose and the city’s international airport. Business travelers are frequent visitors to this Holiday Inn.
Some observers believe that plans by Google to build a transit village in downtown San Jose have sparked increasing interest in property investments in the vicinity. Google is eyeing development of 6 million to 8 million square feet of offices, enough space to accommodate 15,000 to 20,000 of its employees.
In October, the San Jose and Campbell lodging market posted an average daily room rate of $192.37, up 3.3 percent from the same month the year before. Occupancy rates were 79.7 percent, essentially unchanged from October 2016. The revenue per available room was $153.27, up 3.3 percent from the prior year. Over the same one-year period that ended in October, revenue per available room was up 2.8 percent in the United States and up 1.7 percent in California.
“San Jose and Silicon Valley are very desirable from an investor standpoint,” Reay said.