By Meghan Hall
Multi-asset opportunity zone fund Urban Catalyst has been busy in San Jose over the past several years, simultaneously making way on a multitude of projects in the City. In recent weeks, another one of its projects has reached a development milestone. The City of San Jose released the environmental impact report (EIR) for Keystone @ Downtown West, a 175-key hotel, that upon completion will be walking distance to major tech employers and downtown attractions.
The development is located at 491 W. San Carlos Street. The 0.6-acre project site is currently developed with two commercial buildings, a tank house, a mixed-use building, a duplex and a single-family residence. The structures will be demolished in order to make way for the hotel, which will rise 8 stories. 117 parking spaces in an on-site parking garage are planned. A number of amenities, such as an outdoor courtyard, podium-level barbecue and recreation area, rooftop deck and onsite gym are planned. Guests will also have access to an onsite business center, laundry and dining room.
Upon completion, the hotel will be in one of the fastest expanding parts of downtown San Jose. Google’s Diridon Station project—if approved—will be within walking distance, as will be Adobe’s global headquarters. The hotel will also be close to the SAP Center, home of the San Jose Sharks, as well as public transit options, restaurants and other amenities. Currently, the property’s walk score sits at 86, meaning most errands can be accomplished on foot.
Given its location, Urban Catalyst intends to operate as an extended-stay business hotel. Project documents show that currently, Keystone @ Downtown West will be part of the Marriott TownePlace Suites brand. Marriott currently has 446 open properties under the TownePlace Suites umbrella, totaling 45,320 rooms. An additional 222 properties—including Urban Catalysts—are in the pipeline, according to Marriott’s website. As part of the brand, suites include spacious kitchens, free WiFi and free hot breakfast.
“Keystone is an extended stay business hotel. That means that the average guest stays for 15 days, and every unit has its own kitchen. In 2019 we signed a franchise agreement with Marriott,” said Urban Catalyst’s Founder Erik Hayden. “Our development team has built several of these types of hotels in Silicon Valley, and it is desperately needed in downtown San Jose. The driving vision for the project is to create a positive impact on the local community. Downtown San Jose needs a building to serve everyone from eight years old to eighty years old. This hotel will serve long term business travelers, and families that are relocating to the Bay Area and need some extra time to find a place to live.”
The hospitality sector has taken a hit in recent months due to the pandemic, leading some project teams and property owners to scrap their plans in favor of other product types. Urban Catalyst, however, is confident in its vision for Keystone @ Downtown West moving forward. The project’s completion is scheduled for mid-2023.
“Even when the pandemic started, and hotels were hit extremely hard, we were confident (and still are) that hotel would rebound,” Hayden remarked. “Also, extended stay business hotels did better than any other type of hotel in the market throughout the pandemic. And it wasn’t just Urban Catalyst that felt this way, many of the lenders that give senior debt construction loans to hotel developers continue to lend throughout the pandemic to projects that plan to deliver later than 2022.”
At the end of 2020, the number of hotels that had opened declined 28.2 percent. Santa Clara County, where San Jose is located, saw four hotels open last year, a 79 percent decrease over 2019. The 144-room Hampton in & Suites in the San Jose airport submarket was the largest to open in the county. Overall, the county has 16 hotels and 2,428 rooms under construction. And, while hotels that catered to leisure travelers struggled, extended stay hotels managed to maintain higher occupancy rates, given the amenities they provide and their access to more apartment-like accommodations. The data bodes well for Keystone @ Downtown West, as the hotel market continues to recover and downtown San Jose transforms into a transportation, employment and entertainment hub.