SUNNYVALE — Two hotels in Silicon Valley have defaulted on their mortgages and face murky futures, fresh evidence that the economic woes unleashed by the coronavirus may widen.
A mortgage on the hotels, one in Sunnyvale and one in Mountain View, has landed in default and could be foreclosed, public documents filed in September in Santa Clara County show.
The hotels that primarily serve the hotel and business markets are taking the biggest hit,” said Alan Reay, president of Irvine-based Atlas Hospitality Group, which tracks the lodging market.
The South Bay hotels whose loans are in default, according to county property records filed in early September:
— Wild Palms Hotel, with 208 rooms, located at 910 E. Fremont Ave. in Sunnyvale.
— Hotel Avante, with 91 rooms, at 860 E. El Camino Real in Mountain View.
An analysis of the hotels a few years ago showed that both the Wild Palms Hotel and the Hotel Avante are part of the Joie de Vivre hotel group, which is a boutique chain that’s owned by Hyatt Hotels. Hyatt completed a purchase of Joie de Vivre in 2019.
Both of the hotels, located next to major tech hubs in Silicon Valley, rely greatly on patronage from high-tech companies in the vicinity, according to an assessment filed with the Securities and Exchange Commission in 2014 by a mortgage trust.
“The Wild Palms Hotel property realizes 71.2% of its occupied room nights from corporate clients, which accounts for 67.9% of the revenue at the Wild Palms Hotel property,” the analysis of the properties filed with the SEC stated.
Google, Yahoo, Hewlett Packard, Apple, Juniper Networks, and Amazon were listed as among the principal corporate clients of the Wild Palms.
“The Hotel Avante property realizes 78.7% of its occupied room nights from corporate clients, which results in 76.8% of the revenue at the Hotel Avante property,” the SEC documents stated.
Google, Intuit, Symantec, LinkedIn, Microsoft, Yahoo, and AOL were listed as the primary corporate visitors to the Avante.
Numerous tech companies have shifted a considerable amount of their encounters to virtual meetings such as Zoom sessions.
As a result, a number of tech companies have slashed their corporate travel activity. The resulting fallout has wrecked the finances of a growing number of hotels.
The property owners of the Hotel Avante and Wild Palms Hotel sites have defaulted on a $37 million loan that was provided by Cantor Commercial Real Estate Lending in 2014, county documents show.
Two veterans of the hotel sector, Stephen Conley and Jeffrey Eisenberg, head up affiliates that are the owners of the hotel properties in default.
Conley is the founder and former chief executive officer of the Joie de Vivre Hospitality firm, which under Conley’s leadership became the nation’s largest boutique hotel chain, according to the 2014 assessment of the hotels.
Eisenberg, the owner of a portfolio of Bay Area hotels, also is an executive with AREA Real Estate Partners, a realty fund.
The last time Hotel Avante and Wild Palms Hotel were formally appraised, they had a value of $57.7 million, according to hotel industry experts.
The county documents show that the loan payments were delinquent for at least 90 days as of early September.
A number of hotels that aren’t in prime tourist destinations face dire prospects, Reay warned.
“Business travel has been pretty much taken out of the picture,” Reay said.