San Jose hotel that might become housing complex is bought at weak price

"The Sonesta ES Suites hotel in north San Jose has been bought for $16 million by an affiliate headed up by San Diego-based Kalthia Group Hotels, according to documents filed on Dec. 17 with the Santa Clara County Recorder's Office. Earlier this year, Kalthia Group Hotels executives floated a preliminary proposal to convert the 114-room suites hotel into residences. "This makes sense as a housing conversion," said Alan Reay, president of Atlas Hospitality Group, which tracks the California lodging market."

"In 2018, Hospitality Properties Trust, through an affiliate, paid $21.3 million for the hotel, county property files show. This means the most recent price is about 25% below what Hospitality Properties Trust paid for the hotel, which is located at 1602 Crane Ct. The latest purchase deal involving the Sonesta ES Suites places a value on the hotel of roughly $140,350 a room. "This is a good acquisition for the buyer," Reay said. "It's a great price.""

"Developing an identical hotel would cost roughly $250,000 to $300,000 a room, Reay estimated. This means Kalthia Group bought the San Jose hotel for well below its replacement price. The hotel could benefit from the trifecta of world-famous sporting events that are headed to the South Bay in 2026: the Super Bowl, a bracket for the men's college basketball tournament, and several matches of the FIFA World Cup."

An affiliate of Kalthia Group Hotels acquired the 114-room Sonesta ES Suites in north San Jose for $16 million. The purchase price is about 25% below the $21.3 million paid by an affiliate of Hospitality Properties Trust in 2018, valuing the property at roughly $140,350 per room. Suites feature kitchens, which eases potential conversion to residences, and executives previously floated a preliminary housing-conversion proposal. Replacement cost for a similar hotel is estimated at $250,000–$300,000 per room, so the acquisition was well below replacement price. Upcoming 2026 sports events could provide near-term revenue opportunities.

Read at The Mercury News