SAN JOSE — The Signia by Hilton hotel, a downtown San Jose icon that was formerly the Fairmont, is up for sale in a move that will provide clues about the Bay Area lodging market’s health in the wake of the coronavirus pandemic.

The sale efforts involve the 541-room hotel tower at 170 South Market Street, which is the one-time north tower of the former two-tower hotel complex near the Plaza de Cesar Chavez.

A few weeks ago, the 264-unit former south tower of the hotel was bought by a Bay Area real estate firm that intends to convert the facility to housing for San Jose State University students.

Mill Valley-based Throckmorton Partners, acting through an affiliate, paid $73.1 million to buy the south tower. That purchase price is part of an overall package valued at $113 million that includes wide-ranging upgrades and construction efforts to convert the tower to SJSU residences. Students could begin moving in ahead of the fall semester this year.

Now, the stage is set for both towers to land new owners.

The lodging unit of CBRE, a commercial real estate firm, is circulating a sales brochure provided to this news organization.

“CBRE Hotels is pleased to offer, on an exclusive basis, the opportunity to acquire the landmark hotel property for downtown San Jose and Silicon Valley, the Signia by Hilton San Jose,” the marketing packet states.

A potential offering price for the hotel wasn’t immediately available. Sam Hirbod, a Bay Area business executive, is the principal owner of a group that bought the hotel in 2018.

“The hotel benefits from its proximity to the market’s primary demand generators,” the brochure states, including the McEnery Convention Center, SJSU, the SAP Center and museums.

In addition to the guest rooms, the tower contains a renovated lobby, along with a revamped pool and cabana section.

The hotel also features four food and beverage outlets and 55,000 square feet of meeting spaces.

In 2018, the Hirbod-led group paid $223.5 million for what was then a two-tower, 805-room hotel.

“This is a trophy asset,” said Alan Reay, president of Atlas Hospitality Group, which tracks the California lodging market.

It’s possible that the hotel might not actually be sold. The current owners want to refinance the existing loan on the hotel and find a new lender to replace the current lender for the property, Brightspire Capital, according to sources familiar with the situation.

The situation is complex, according to Bob Staedler, a principal executive with Silicon Valley Synergy, a land-use consultancy.

“The offering doesn’t show all of the moving pieces behind the scenes,” he said. “You have the current owner’s aspirations, Hilton’s desire for a solid operator, the debt holder wanting to be made whole and the City of San Jose needing the assessed value to not be dropped. I predict that Hilton will be the driving force in who ultimately becomes the new owner of the Signia Hotel.”

Like many other lodging facilities in the nine-county Bay Area, the hotel enjoyed robust occupancy levels and business conditions in 2018 and 2019.

But the arrival of the coronavirus in 2020 prompted state and local government agencies to impose wide-ranging business shutdowns that chased away hotel guests as global travel markets nosedived.

The hotel’s financial woes turned brutal and, in 2021, the hotel tumbled into bankruptcy and closed its doors.

In 2022, Signia by Hilton took over and the hotel resumed operations after it emerged from bankruptcy.

By some measures, the Signia Hilton is turning in a better financial performance than it produced in 2019, the final full year before the pandemic.

“2023 banquet and catering revenues will surpass 2019 levels by almost 10%,” the CBRE marketing package states. “Food and beverage profit margin has moved from 9% in 2019 to over 40% in 2023.”

The affiliation with Hilton and the hotel’s renovation are among the major factors that have fueled the upswing in the hotel’s financial fortunes.

The hotel’s ownership group has spent $58 million on a massive upgrade and repositioning of the property, according to information provided previously to this news organization by the owners.

The hotel, which has an occupancy level of 50%, is showing steady improvement in revenue per available room when compared with the property’s competitors in the Bay Area.

The CBRE brokers also believe multiple opportunities exist to improve the hotel’s operations.

“The property’s ground floor can be repositioned to leverage its place as the focal point of downtown San Jose, including activating underutilized spaces such as the restaurant on South First Street, the ground floor spa area, retail spaces and Club Regent,” the marketing package states.

If the hotel is sold, the price is likely to be well below what it would take to replace the lodging complex with an identical hotel built from scratch, in Reay’s view.

“Large full-service business-oriented hotels have continued to struggle and we are seeing examples of that in San Francisco,” Reay said.

In San Francisco, the Hyatt Regency Downtown SOMA hotel’s owner missed a balloon payment on a $250 million loan in recent days. In June, the owner of the Hilton Union Square hotel and the Parc 55 hotel ceased making loan payments and gave the keys to the properties back to the lender.

External factors have to improve before business-oriented hotels like the Signia by Hilton San Jose are likely to see brighter prospects. The office market, along with the meetings and conventions business, must improve at least a little, experts say.

But “if someone wants a trophy asset and can stick it out through these hard times,” Staedler said, “this is the time to do that.”