A billionaire company that owned two major hotels in San Francisco announced June 5 that it was defaulting on its loan and removing the hotels from its portfolio.
Hilton San Francisco Union Square and Parc 55, two towering downtown San Francisco hotels a block apart, appear to be looking for a new owner after a Virginia-based real estate investment trust foreclosed on the properties, saying “best interest.” ‘ for its shareholders.
Park Hotels & Resorts announced it will immediately halt payments on a $725 million loan maturing in November 2023. The non-recourse commercial mortgage-backed securities loan is owned by Wells Fargo and was originally acquired by JP Morgan Chase in 2016. according to Real Deal.
A Hilton spokesman told SFGATE that the two hotels remain open, operational and managed by Hilton Hotels & Resorts.
“Hilton has no plans to stop operating the hotels,” the spokesman wrote in an email. “We remain fully committed to welcoming our guests with the quality service and hospitality they enjoy.”
The 1,921-room Hilton San Francisco Union Square is the largest hotel in San Francisco by the number of hotel rooms, and Parc 55 is not far behind with 1,024 rooms.
In a statement announcing the default, Thomas J. Baltimore Jr., CEO and chairman of Park Hotels & Resorts, wrote that it is a “very difficult but necessary decision” to stop making payments on the loan because it is causing a drain on the family their operating results have become balance sheets.
Baltimore flagged old and new issues that were “tarnishing and prolonging” San Francisco’s path to post-pandemic recovery: “Concerns about road conditions; lower return to office than comparison cities; and a weaker than expected citywide convention calendar through 2027.”
The status of the $725 million loan has been on the radar for industry regulators since 2020. The San Francisco Business Times reported last year that Park Hotels & Resorts began speculating publicly about the future of the hotel’s ownership during a earnings call.
The Hilton Union Square and Parc 55 are open for business and remain open during the summer tourist peak season.
“It’s not uncommon for hotel owners to change,” said Alex Bastian, president and CEO of the Hotel Council of San Francisco. “Even if the timing for this does not seem ideal, we definitely assume that a new owner will emerge.”