SAN JOSE—Silicon Valley travelers have another option when staying overnight and it's strategically located downtown. The newest hotel property adds much-needed capacity to San Jose's hotel market, which has recorded tight availability in recent years. Other area hotels have received funding, which coincides with the record-breaking passenger counts at Mineta San Jose International Airport last year.

The Marriott family AC Hotel recently opened at 350 W. Santa Clara St. The 210-room select-service property features all king beds, lounge areas, a full bar, and a large gym and pool. It's the first AC Hotel on the West Coast, and one of only 12 of the European-inspired properties opened so far around the world, according to the San Jose Office of Economic Development.

The property was “designed for entrepreneur-minded people,” says Benoit Racal, AC Hotel global brand director.

The location is amid downtown's Fortune 100 office tenants, SAP Center and cultural destinations such as the City National Civic. It is also convenient to Mineta San José International Airport, which had a boost in passenger count last year. Passenger travel increased by 10.2% during 2016 and its percentage growth in available seats topped the 50 largest US airports, GlobeSt.com learns.

The nearly 1 million new fliers meant 10.8 million passengers used the airport in 2016, the fourth straight year of passenger growth. Of the 1.6 million new seats available last year at the airport, up 12.5% from 2015, 274,100 were due to the addition of international flights to Frankfurt, London, Shanghai and Vancouver. The first three destinations are served by wide-body jets.

Nonstop service additions included flights to Frankfurt on Lufthansa, London Heathrow on British Airways, Shanghai on Air China, Vancouver on Air Canada, Baltimore/Washington, DC on Southwest and seasonal service on American. Additional flights or larger aircraft were put on existing routes to Atlanta, Dallas/Fort Worth, Las Vegas, Los Angeles, Orange County, Salt Lake City and San Diego.

“This growth has resulted in hundreds of millions of dollars in local economic impact and has created new jobs at the airport and within our community,” says Kim Becker, the city's aviation director.

Up the freeway in Palo Alto, another hotel received financing. Highland Realty Capital arranged an $83 million permanent loan for The Westin Palo Alto, a 184-key hotel in downtown.

Working on behalf of a longstanding client, Highland placed the loan with a conduit lender. The proceeds were used to refinance existing debt and provide significant capital for reinvestment into the asset and for other sponsor investment activities. The financing request generated strong interest from a wide variety of lenders, including life companies, CMBS providers and pension funds.

“Given the superb location, being just across El Camino Real from Stanford University, the historical performance of the hotel and the impeccable track record of the sponsor, ultimately CMBS money was the most competitive,” says Jeff Eliason, principal of Highland. “In a very uncertain and volatile capital market environment, especially on the CMBS side, Highland was able to negotiate a low debt yield requirement, maximum proceeds, a cap on legal costs, and an extremely competitive rate and term structure.”

And, yet another hotel, the Aloft Silicon Valley in Newark, CA, received refinancing. Stockdale Capital Partners facilitated the refinancing, secured through the Phoenix office of Midlist Bank, an Oklahoma City-based portfolio lender. Terms of the financing were not disclosed.

The Aloft Silicon Valley is a 172-room full service, all-suite hotel acquired by an affiliate in December 2012. The owner completed a full renovation and conversion to the Aloft brand, reopening the hotel in March 2013. The hotel sits next to the 1.4 million-square-foot Pacific Research Center, a major life science and technology campus owned by Biomed Realty.

The property was “designed for entrepreneur-minded people,” says Benoit Racal, AC Hotel global brand director.

Up the freeway in Palo Alto, another hotel received financing. Highland Realty Capital arranged an $83 million permanent loan for The Westin Palo Alto, a 184-key hotel in downtown.

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