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San Jose hotel development site faces foreclosure after default

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SAN JOSE — A San Jose hotel development site where hundreds of rooms could sprout has sunk into default and faces foreclosure, a grim turn of events that leaves the future of the project cloudy.

As currently approved, the proposed hotel could bring 200 rooms to the Alviso neighborhood of North San Jose, according to plans filed with city officials. The hotel was also to contain 15,400 square feet of retail space.

This development project is now in the air. A lender filed a notice of default against a loan secured by the land where the hotel was to be built, according to documents filed Oct. 26 with the Santa Clara County Recorder’s Office.

The hotel was offered as a Shilla stay. Shilla Stay is one of the brands of Shilla Hotels & Resorts, a subsidiary of the South Korea-based Samsung Group.

Hotel development site at 7 Top Golf Drive in the Alviso neighborhood of North San Jose, shown in outline. The limits are approximate. (Google Maps)

A South Korea-based company, doing business as Mirae San Jose, bought the 3.2 acres of land for the hotel site in 2019, paying $22.5 million for the land, files show. county public.

Pine Tree Specialized Private Investment Trust and KEB Hana Bank provided a $26.4 million loan to Mirae San Jose when the land was purchased.

Now, the loan consortium says real estate company Mirae owes $34.4 million as a result of the loan default. The higher amount owed stems from factors such as interest and late fees.

Pine Tree Specialized and KEB Hana Bank are threatening to seize ownership of the land through a foreclosure process, according to county records.

The lending group could force the borrower to repay the loan in full to avoid foreclosure and foreclosure.

The 2020 coronavirus outbreak has rocked travel and hospitality markets around the world, including in the Bay Area.

As a result, hotel occupancy levels have plunged in this region and around the world. The economic repercussions of the coronavirus have made the construction of new hotels less viable.

The site of the Shilla Stay hotel, which faces a threat of foreclosure, is one of two hotels that have been proposed in the area.

A 214-room hotel that is planned for a nearby six-acre site is owned by a different group and has nothing to do with the defaulting accommodation property.

The hottest new development in the area is the bustling and popular Topgolf San Jose resort, which opened in 2021.

Topgolf has been a constant draw as a center for entertainment, sports and dining. Topgolf operates high-tech driving ranges that allow people to hit golf balls equipped with microchips that record distance and accuracy. Venues typically also include food and drink establishments.

Despite owning the 3.2 acres of land at 7 Topgolf Drive for more than three years, the Mirae San Jose Group has yet to begin construction on the 200-room hotel.

San Jose officials gave the hotel final approval in 2019, about a month before Mirae Group purchased the land.