SAN JOSE — The owners of a San Jose hotel that has flopped into a loan default and faces foreclosure are also delinquent on the payment of a lodging tax that’s a crucial part of the city’s revenue stream, court records show.
Comfort Suites San Jose Airport faces foreclosure due to a delinquent loan totaling $5.4 million, documents filed in October 2022 with the Santa Clara County Recorder’s Office show.
But that wasn’t the only delinquency caused by the group that owns the Comfort Suites, according to county court documents.
The owners of the Comfort Suites San Jose Airport have failed to report and pay city taxes on what the city estimates to be $1.6 million in revenue from hotel guests staying in the lodging facility, the court records show.
In a lawsuit that was filed on Dec. 12, 2022, the city of San Jose named several defendants in the legal action, including individuals, real estate entities and financial firms.
Among the defendants, according to the litigation in Santa Clara County Court: Hospitality and real estate executives Hitesh Patel, Hansaben Patel, Bhavesh Patel and Jashvant Patel; and corporate entities Hitesh Investments, Golden State Hospitality, Redwood Credit Union, Satyam 1050 Orange Drive LLC, Silvergate Bank, and The Mortgage Capital Development Corp.
Hitesh Investments, the group that now owns the hotel property through multiple affiliates, is headed up by Hansaben Patel and Bhavesh Patel, whose primary business is in the lodging and real estate industries, according to county and state business records.
The property’s current owners bought the hotel in 2013, paying $6.6 million for the site, county documents show.
The loan that’s in default totals $5.4 million, according to county public records. The loan was provided in 2021.
A few months after the financing was provided, Hitesh Investments and the Patels began to stop making the required tax payments to the city of San Jose, court records show.
Two types of taxes aren’t being paid by the hotel’s owners, according to the legal filings. One is a transient occupancy tax. The other is a convention center facilities district tax.
Revenue for the tax payments is produced by the rent that lodging operators collect from their guests for staying in a hotel room. Both sets of taxes provide significant cash flow to the city.
The transient occupancy tax goes into the city’s general fund.
The convention center tax revenues are used primarily to “finance the expansion, construction, reconstruction, rehabilitation and upgrade” of the San Jose Convention Center in the city’s downtown.
The Comfort Suites hotel is part of the Choice Hotels chain, according to the website for the hotel. The hotel caters primarily to business travelers rather than leisure guests.
The outbreak of the coronavirus in 2020 brutalized the hotel and travel industries in the Bay Area and worldwide, an economic affliction that worsened after state and local government agencies imposed wide-ranging business shutdowns to combat the spread of the deadly bug.
Nearly three years after these shutdowns were imposed, experts say that many Bay Area hotels still suffer from subpar occupancy levels and room rates.