The 72-room upscale hotel, whose owners filed for bankruptcy in 2011, is reportedly in contract to be bought by the IHA Hotel Group for $29.5 million. However, this is not the first time the property has been the subject of the purchase-and-sale agreement in the last four years and there are further questions about whether the hotel’s biggest lender will approve the sale.
The property’s location is on land that used to house a dry cleaner, and chemical residue has previously stalled two separate sale deals. Remedial work has apparently reduced the presence of polychlorinated biphenyls (PCBs) and the Regional Water Quality Control Board has already approved an interim plan, according to court filings.
The concerns now remain about whether the hotel’s largest secured creditor, LNR, would agree to the purchase price offered. Attorneys for the Los Gatos Hotel Corp. have been cited as claiming that the sale proceeds of roughly $410,000 per room would cover all of the hotel’s creditors in full with interest. LNR on the other hand is reportedly owed about $16.4 million and is asking that the property goes to auction to avoid any further delays in the sale process.
The deal could still fall through even with court approval. The sale is contingent on the buyer obtaining financing, which might prove problematic with any residual environmental questions or remedial work required.
Hotel Los Gatos is one of the best hotels in the area and a home to a Michelin-starred restaurant Dio Deko (not part of the bankruptcy filing or affected by this sale). The hotel is owned by Saratoga-based Pinn Bros. Fine Homes and members of the Ogilvie family—each owns a 50 percent stake. IHA Hotel Group owns San Francisco’s King George Hotel and is affiliated with Greystone Hospitality, with further nine hotels in its fold, two of which are in San Francisco.
The court hearing on this sale is scheduled for Wednesday, 22 July 2015.