The Toll House Hotel in downtown Los Gatos has quietly landed in its lender's hands after the owner fell behind on a multimillion-dollar loan, according to county filings. An affiliate of the lender took over the 115-room boutique property through a deed in lieu of foreclosure and paid no more than $30 million, well below the $43.5 million the hotel sold for in 2019. The deal is the latest sign of stress in Bay Area lodging as higher borrowing costs and shifting demand squeeze smaller properties.
Documents recorded with the Santa Clara County Recorder show the transfer was recorded yesterday and list roughly $30 million in unpaid debt, as reported by The Mercury News. The filings indicate an affiliate of KSL Capital Partners took title via a deed in lieu.
Peregrine Hospitality, meanwhile, issued a press release on Monday stating it had acquired the Toll House Hotel as part of a Northern California expansion, without disclosing terms. That announcement, posted on PR Newswire, landed days before the county recording and leaves key questions open about who ultimately paid what for the property.
Price Gap And Market Pressure
Based on county filings and prior sale records, the hotel's apparent market value has dropped at least 31 percent from the roughly $43.5 million that Procaccianti Cos. paid in 2019. That gap tracks with the pandemic-era hit to urban lodging and a tougher capital market for regional hotels, trends highlighted in local reporting and industry coverage of recent lender takebacks around the Bay Area. As noted by The Mercury News, the deed transfer shows how quickly values can reset when financing stress collides with softer demand.
How A Deed In Lieu Works
A deed in lieu of foreclosure allows a property owner to voluntarily hand over title to a lender to resolve a defaulted loan and avoid a drawn-out foreclosure sale. The Consumer Financial Protection Bureau notes that this approach can speed up resolution but may not erase other liens or potential deficiency claims, and that lenders typically agree to it only when it makes more financial sense than pursuing a formal foreclosure.
Local Impact And What Comes Next
For downtown merchants and event planners who count on hotel traffic, the immediate result is uncertainty. The Toll House's reservation and dining pages are still active on the Toll House Hotel website even as the ownership paperwork shifts behind the scenes. Peregrine's announcement suggested ongoing operational interest yet revealed no purchase price, while county recordings remain the most concrete public record of who holds title. Future recorder entries and any subsequent sale filings will show whether the property is retained, repositioned, or put on the market again.
This story will be updated as additional filings or company statements surface and the new owner's plans come into focus. County records and public notices are likely to provide the earliest clues about the hotel's next chapter.
