An investment group headed by Oakland A's owner and realty entrepreneur Lew Wolff has snapped up the Sainte Claire hotel, a purchase that signals rising confidence by investors in downtown San Jose.
"Cities like San Jose and Oakland are in the path of growth," said Wolff, a principal executive with Los Angeles-based Wolff Urban Development, in explaining some of the reasons behind the purchase. "San Jose has a fairly strong downtown."
The group paid in the range of $17 million to $18 million for the 171-room hotel, according to industry sources familiar with the deal. Wolff didn't discuss the purchase price. The six-story hotel was built in 1926 and is in the National Register of Historic Places.
"The Sainte Claire is in good shape," Wolff said. "The previous owners have left it well renovated."
The Wolff group bought the hotel from Larkspur Hotels & Restaurants in Marin County. The sale was due to be completed by Wednesday, Wolff said.
Wolff and his partners, who include his son, Keith Wolff, also own the Fairmont San Jose, just up the street. The two hotels combined have nearly 1,000 rooms. The Fairmont San Francisco, perched atop Nob Hill, also is owned by Wolff Urban Development, through an affiliate.
"The Sainte Claire is an excellent property, an irreplaceable property," said Alan Reay, president of Atlas Hospitality Group, which tracks the California lodging sector.
Plus, the city's once-moribund downtown district is deemed to be more robust these days.
"San Jose has added more residential units, and that has created more critical mass there," said Kent Despain, a partner with Retail West, a San Francisco-based commercial realty firm. "The downtown is becoming more viable."
The Sainte Claire is not the only hotel Larkspur has unloaded lately. On Dec. 16, Wyoming-based MetWest Terra Hospitality announced it bought two boutique hotels in the Bay Area from Larkspur: the 115-room Toll House in Los Gatos and the 102-room The Lodge at Tiburon in Marin County. Terms of those purchases weren't disclosed.
The latest purchase appears to be a good deal for the Wolff partnership, based on the reported price. At an estimated $18 million, the new owners paid about $105,000 a room. Reay reckons that the cost to build an identical boutique hotel today in downtown San Jose would be $250,000 a room, or $42 million.
Still, some challenges face the new owners, an analyst warned.
"One of the biggest hurdles is the Sainte Claire is independent," Reay said. "For this to work, I would guess that Lew Wolff will have to flag the hotel with a name brand."
Wolff indicated that he and his partners intend to do just that.
"The Sainte Claire is a historic, boutique kind of hotel," Wolff said. "We really think there is a trend where the smaller hotels have a national brand."
The new owners plan some upgrades to the Sainte Claire, but Wolff and his partners don't believe extensive work is needed.
Wolff hopes to move his baseball team to downtown San Jose and has been pushing for a new stadium there. The Sainte Claire investment has nothing to do with those efforts, he said, though some observers note that the Sainte Claire could become a viable base for visiting teams, much in the same way that Hotel Valencia in the Santana Row complex caters to NHL visiting teams.
The Wolff investment in the Sainte Claire comes at a time the Silicon Valley hotel market is improving.
Over the first 11 months of this year, revenue per available room, a key metric for the health of any hotel sector, jumped 11.1 percent in the San Jose-Campbell hotel market over the same period of 2010.
The San Jose-area upswing was just shy of the 11.2 percent gain in California overall, and ahead of an 8.2 percent increase nationwide, according to Smith Travel Research.
"The San Jose hotel market is coming back pretty strongly," Reay said.
Contact George Avalos at 925-977-8477. Follow him at Twitter.com/george_avalos.
Sainte Claire. The six-story, 171-room hotel is at the corner of South Market and East San Carlos streets in downtown San Jose. It was built in 1926.
Fairmont San Jose. The 17-story, 805-room hotel is on South Market Street near West San Fernando Street in downtown San Jose. It was built in 1987, with a 264-room annex added in 2000.
Fairmont San Francisco. The 24-story, 591-room hotel is on Nob Hill in San Francisco. It was built in 1907.
Sources: Wolff Urban Development, hotel information