The Morgan Hill City Council approved expanded plans for the Granada Hotel that include adding a fifth floor and 13 more guest rooms to the project’s original design.
The new design will raise the overall height of the downtown boutique hotel project to 65 feet, and bring the total number of proposed guest rooms to 73 rooms. Developer Frank Leal told the council Nov. 16 that if promised new investment funds come through for the project, he can resume construction on the hotel—now proposed as Hotel MOHI—by next summer.
“I really want this opportunity. I want to show everyone that I can finish the project,” Leal said.
The downtown hotel project is located on Monterey Road between First and Second streets, next to the Granada Theater.
Originally proposed in 2016, Leal and his crews built two floors of foundation construction and underground utility work before the Covid-19 pandemic began in 2020.
Construction stopped during the pandemic, which killed the hotel industry with travel and gathering restrictions and created supply chain disruptions that impacted building materials and costs. As a result, the cost to build the original 60-room hotel project proposed by Leal on the site has more than doubled, and the expanded 73-room proposal is now valued at $40 million, Leal said.
Also after the pandemic started, Leal temporarily pivoted the uncompleted structure into the existing MOHI Social pop-up restaurant, which will close when construction resumes on the hotel plans.
Leal has sought to expand the boutique hotel plans in order to gain new needed financing, as potential investors in the current market prefer a bigger project that is more likely to quickly return profits. He told the council Nov. 16 that the only thing delaying the project is the lack of financing, but he recently secured a “letter of intent” from an investor for a short-term loan that will allow him to resume construction now that the expanded plans are approved.
The updated Hotel MOHI plans include a fifth floor with 11 more guest rooms, and the conversion of a previously planned gym on the fourth floor to two guest rooms. The fifth floor is designed to be set back from the edge of the fourth floor on those sides of the building that have public street frontage, according to plans presented by city staff.
The plans retain original proposal elements that include a pool with outdoor living and lounge area, market hall, bars and restaurants, valet parking and a banquet hall with meeting rooms.
The entrance to the market hall portion of the project will be on Monterey Road. The main hotel lobby entrance will be on the rear of the building, which will be accessed from Second Street, according to the project plans.
The total height of the project will increase from 55 feet to 65 feet.
All five city council members said they are eager to see construction resume and finish on the Granada Hotel project, which is seen by city officials and downtown business owners as a likely cash cow that will bring a reliable stream of visitors with spending money to the neighborhood.
However, Council members Rene Spring and Yvonne Martinez Beltran wanted more assurances from Leal that that would happen. The council voted unanimously Nov. 16 to approve the project’s new design permit. Spring and Martinez Beltran voted against a motion by Council member John McKay to adopt the staff recommended zoning amendment, which passed on a 3-2 vote.
The updated zoning amendment includes a list of “performance standards” that Leal is required to meet—including obtaining a building permit by May 2023 and resuming construction by August 2023.
A previous motion by Martinez Beltran to add more council oversight and potentially shorten an optional future extension to the zoning amendment did not receive a council vote because McKay’s substitute motion passed with majority approval.