City completes sale of iconic Hayes Mansion
In February, 2019, the City of San José announced the successful completion of the sale of Hayes Mansion to JMA Ventures LLC, for $30 million. The City Council approved the sale on June 26, 2018, and escrow closed on January 5, 2019. The sale allows the City to eliminate all outstanding long-term bond debt against the Hayes Mansion, eliminates the City’s ongoing General Fund subsidy for debt service, and pays the outstanding Devcon loan of $1.2 million.
“Successfully transferring ownership and securing world-class management of the historic Hayes Mansion has been a City goal for many years,” said Nanci Klein, Director of Real Estate and Assistant Director of Economic Development for the City of San José. “We are delighted that the sale to JMA Ventures and assumption of operational management by Interstate Hotels & Resorts will give new life to this important part of San José’s history.”
The purchaser, JMA Ventures, LLC is a San Francisco based full-service investment and development firm focusing on real estate and leisure-lifestyle assets. The operations company, Interstate Hotels & Resorts operates branded full- and select-service hotels, resorts, convention centers, and independent hotels, including 530 properties in 12 countries.
In announcing its selection to manage Hayes Mansion, Interstate shared plans for an extensive multi-million-dollar remodel and repositioning that is anticipated to commence in late 2019, upgrading the landmark hotel by adding luxury design and amenities while maintaining its architectural character and charm.
“The Hayes Mansion is an iconic landmark hotel uniquely positioned to cater to the growing Silicon Valley market while having the third largest amount of meeting space of all hotels in San José,” said Kevin Morgan, Partner at JMA Ventures. “We would like to thank Mayor Sam Liccardo and the Office of Economic Development of the City of San José, as well as Councilmember Sergio Jimenez, for working with us through this complex transaction and for their confidence in JMA to be great stewards of this important asset.”
The Office of Economic Development’s information memo regarding the sale notes that the substantial benefits of completing this sale include:
- Eliminating all outstanding long-term bond debt against the Hayes Mansion
- Eliminating the ongoing General Fund annual subsidy for debt service, which ranged from $2 million to $6 million per year since 2003
- Paying the outstanding Devcon Loan of $1.2 million
- Avoiding additional expenditure and liability related to deferred maintenance
- Providing for a reputable private owner to continue operations of the Hayes Mansion as a destination hotel/conference center and community asset, and to invest substantial capital to improve the property
- Continuing to receive hotel-related taxes into the General Fund, the Transient Occupancy Tax Fund, and the Convention Center Facilities District Fund, in aggregate generally exceeding $1 million per year
In addition, after satisfying all the debt and other obligations, the sale resulted in positive net proceeds for the City.