We stayed at Sao Paulo and enjoyed it.

Incorrect distances:
The home page of "Arpartementos Sao Paulo e Alegria" falsely states that the two hotels are located 30 m apart. If Googlemaps is given the addresses: Sao Paulo, Rua Pimenta Aguiar 2, and Alegria, Rua da Alegria 1, the result given for auto is 700 m (which is probably nearly correct), however the result given for walking from Sao Paulo to Alegria is 140 m, which is false too, because Googlemaps points at a false address, namely Rua Pimenta Aguiar 6. Somewhere on the internet you may even find the distance from Sao Paulo to Alegria as 120 m. All false.

Correct facts:
The walking distance from Sao Paulo to Alegria is 100 m from door to door.
A bird might fly 45-50 m from Sao Paulo to Alegria.
The first part of Rua da Alegria (from Rua da Carreira to Rua Major Reis Gomes) is 32 m alongside a tall garden wall to the SE.
The walking distance from Sao Paulo downhill to the supermarket "Pingo Doce" in the bottom of the underground 3-storey shopping center "Dolce Vita" is 250 m. From Alegria you walk downhill 190 m.
By the way: "Alegria" meaning "joy" does not indicate a whorehouse, but means joy in a biblical sense.

Each of the two hotels are corner buildings.
The free corner of Sao Paulo (Rua Pimenta Aguiar 2/Rua da Carreira) points to SW.
The free corner of Alegria (Rua da Alegria/Rua Major Reis Gomes) points to NNW.

Sao Paulo boasts of a roof terrace. The problem with elevated viewpoints is, that you are looking down into people's back yards and at the back side of houses.
Most of the streets in mid-town Funchal are quite narrow, so don't expect other views from your windows than the wall and windows of the house opposite.

Well, with these facts in place, Sao Paulo is a nice, clean and well-maintained hotel, built in the early 1940'ies, and renovated with white thermos windows opening inwards, and green plastic venetian blinds opening outwards.
Having been repeatedly varnished over the years, the parquet floors of the hotels have obtained a delightful Japanese lacquer finish.

Sao Paulo and Alegria are indeed mid-town hotels, located in narrow one-way streets, where the traffic would hardly be able to pass a parked car. The sidewalks are narrow too, 0,5 m in many places. On the other hand, one-way streets have less traffic noise.
The traffic (from left to right, as seen from Sao Paulo) in Rua da Carreira, does not bother Sao Paulo very much, since the majority of cars (many taxies) turn down Rua da Alegria to the boulevard Rua Dr. Brito Câmara, or down Rua Major Reis Gomes, alongside Dolce Vita, where taxies are waiting in queue for customers.

Our room was comparatively big. At the end of the bed we had 2 m space, and in the kitchen area there was ample space for a small dining table.
The furniture is not elegant, but sturdy.