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

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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: rola...@sfchronicle.com; Twitter: @rolandlisf

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

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