Bankrupt downtown San Jose hotel may not reopen in 2021
SAN JOSE – A bankrupt downtown San Jose hotel may not reopen until December – if it does – based on a proposed new schedule for the hotel owner to file a reorganization plan from its finances in ruins, according to court documents.
The current timeline envisioned by the owner of the bankrupt Fairmont San Jose, located in the city’s downtown hotel district, pushes the timeline for the final approval of a hotel reorganization plan until after the 30th. November.
SC SJ Holdings and FMT SJ, two groups controlled by hotel owner Sam Hirbod, a Bay Area business executive, have asked the bankruptcy court to extend the period during which he has the exclusive right to file a comprehensive plan to revamp iconic downtown San Jose. accommodation.
The Hirbod group has asked the U.S. bankruptcy court to extend the deadline for filing a plan until October 4 this year. The hotel owner also wants the court to extend until November 30 the deadline for seeking support from the property’s creditors to approve the proposed new reorganization plan.
This means the court would likely not be able to confirm the plan until December at the earliest.
“The debtors have proceeded in good faith and have made substantial progress towards confirmation,” the bankrupt entities said in court documents filed on July 2.
Complicating hotel reorganization and reopening efforts: an increasingly fierce battle between accommodation owner and hotel operator, Accor Management US
The hotel group and the hotel operator became adversaries over a one-year period starting in March 2020, roughly around the time the coronavirus rocked the finances of Fairmont and hotels around the world.
Business enemies have accused each other of acting in bad faith and harming each other’s interests.
“The debtors have been involved in an extremely time-consuming litigation with Accor,” the hotel owner said in court documents.
As part of the reorganization effort, the hotel owner hopes to oust Accor as manager and operator of the hotel.
The Hirbod Group has chosen the Signia brand of Hilton as the new operator and manager of the downtown hotel. This agreement is in the process of being finalized.
“The debtors did not advance their plan in good faith,” Accor Management said in a July 16 court filing.
Accor also accused the hotel owner of being behind Accor’s back in efforts to bring Hilton’s Signia unit on board as the new manager.
The Hirbod group “conspired with Hilton for over a year to take over the hotel” and engaged in “covert operations” to allow Hilton to secretly visit the Fairmont San Jose to assess the property, Accor said in his court file.
“The debtors made a calculated and bad faith attempt to use the plan confirmation process to move to Hilton, restructure their obligations and inappropriately manipulate the bankruptcy process,” Accor said.
The hotel owner argued that installing Hilton as the new manager would strengthen the hotel’s finances.
Hilton has agreed to inject about $ 45.8 million in funding to help stabilize the hotel, court documents show.
JPMorgan Chase Bank has also agreed to provide additional funding of $ 25 million to the hotel to help it come out of bankruptcy.
The biggest creditor the hotel owes money to is Colony Capital, which holds a mortgage on the hotel for $ 173.5 million. Colony Capital, however, has provided financial assistance to help keep the hotel afloat and is not looking to foreclose on the home loan.
“The debtors have proceeded in good faith and have made substantial progress towards confirmation,” the hotel owner said in the July 2 filing.
Still, the latest proposal to extend the deadline to file a new version of the reorganization plan clearly signals a significant delay in reopening the hotel, warned Alan Reay, chairman of Atlas Hospitality Group, which monitors the hospitality market. accommodation in California.
“The earliest the Fairmont San Jose is likely to reopen is in 2022,” Reay said.
The financially troubled hotel closed in March 2021, at the same time the hotel owner filed for bankruptcy.
“You have other major disputes between the ownership and management of hotels across the country, and these are delaying the opening of these hotels,” Reay said. “This is what is happening with the Fairmont.