Owner to give up two of S.F.'s largest hotels as city's 'path to recovery remains clouded'

The owner of two of San Francisco’s biggest hotels — Hilton San Francisco 
Union Square and Parc 55 — has stopped mortgage payments and plans to give 
up the two properties, in another sign of disinvestment in hard-hit 
downtown.

Park Hotels & Resorts said Monday that it stopped making payments on a 
$725 million loan due in November and expects the “ultimate removal of 
these hotels” from its portfolio. The company said it would “work in good 
faith with the loan’s servicers to determine the most effective path 
forward.”

The 1,921-room Hilton is the city’s largest hotel and the 1,024-room Parc 
55 is the fourth-largest, and together they account for around 9% of the 
city’s hotel stock. The hotels could potentially be taken over by lenders 
or sold to a new group as part of the foreclosure process.

“After much thought and consideration, we believe it is in the best 
interest for Park’s stockholders to materially reduce our current exposure 
to the San Francisco market. Now more than ever, we believe San 
Francisco’s path to recovery remains clouded and elongated by major 
challenges — both old and new,” said Thomas Baltimore Jr., CEO of Park 
Hotels, in a statement.

Those challenges include a record high office vacancy of around 30%, 
concerns over street conditions, a lower rate of return to office compared 
with other cities and “a weaker than expected citywide convention calendar 
through 2027 that will negatively impact business and leisure demand,” he 
said.

Park Hotels said San Francisco’s convention-driven demand is expected to 
be 40% lower between 2023 and 2027 compared with the pre-pandemic average.

San Francisco Travel, the city’s convention bureau, expects Moscone Center 
conventions to account for over 670,000 hotel room nights this year, 
higher than 2018’s 660,868 room nights but far below 2019’s record-high 
967,956. And weaker convention attendance is projected for each following 
year through 2030.

Tourism spending more than doubled in 2022 to $7.4 billion compared with 
the previous year. A full recovery isn’t expected until 2024 or 2025.

The company expects to save over $200 million in capital expenditures over 
the next five years after giving up the hotels, and to issue a special 
dividend to shareholders of $150 million to $175 million. The company’s 
exposure will shift away from San Francisco toward the higher-growth 
Hawaii market.

Parc 55 is a block from Westfield San Francisco Centre, the mall where 
Nordstrom is departing, and the block where Banko Brown, an alleged 
shoplifter, was killed in a shooting outside a Walgreens in April. Nearby 
blocks are also full of empty storefronts, as tourist and local foot 
traffic hasn’t fully recovered.

Other hotels have faced financial distress. Atop Nob Hill, the historic 
Huntington Hotel was sold earlier this year after a mortgage default.

Reach Roland Li: [email protected]; Twitter: @rolandlisf

https://www.sfchronicle.com/sf/article/two-s-f-s-largest-hotels-given-
owner-18136504.php

Embrace it San Francisco.  You voted for it.  You demanded it.  You got 
it.  Now live with it.