Owner of San Francisco's largest hotel, the Hilton Union Square, has opted to cease payments on a $725 million loan, thus SF losing 2900 hotel rooms.
San Francisco's downtown area has suffered another setback as a major investor in one of its largest hotels announced it would cease loan payments.
Park Hotels and Resorts, the investment company that owns the Hilton San Francisco Union Square and Parc 55 hotels, declared on Monday that it has stopped payments on a $725 million loan as it aims to scale back its operations in the city. The two hotels together offer nearly 3,000 rooms.
The company's CEO, Thomas Baltimore, Jr., stated that San Francisco's recovery trajectory is obscured and extended due to significant challenges. These include office vacancies resulting from remote work policies, a weaker-than-anticipated citywide convention schedule through 2027, and concerns about street conditions.
Baltimore concluded that the ongoing strain on the company's operating results and balance sheet is too substantial to justify maintaining ownership of these assets. The hotels will be returned to the lender.
A presentation from Park disclosed that San Francisco represented 16% of its business in 2019, a figure that plummeted to a mere 3% over the past year due to the pandemic. Park still owns the JW Marriott Union Square and the Hyatt Centric Fisherman’s Wharf, but it has divested two other hotels in recent years, as reported by the San Francisco Standard.
Park intends to continue collaborating with the loan servicers but will ultimately aim to divest the hotels from its portfolio.
The hotels are projected to stay operational. The San Francisco Hotel Council informed CNN affiliate KGO-TV that changes in hotel ownership are not unusual, and it anticipates that new owners will be found for the hotels. The potential buyers for the two hotels are not immediately known.
The retail and hospitality sectors in downtown San Francisco have been severely impacted. Last month, Nordstrom announced the closure of its two stores in the area, attributing the decision to the changing "dynamics" of the region. Prior to that, a Whole Foods store that had been open for a year temporarily shut down due to worker safety concerns. The San Francisco Standard has reported at least 20 major store closures since 2020, including Anthropologie, Office Depot, and CB2.
Property crimes in San Francisco have drawn national attention due to several high-profile videos of thieves in action. Although still below the levels seen in 2017, the city experienced a 23% rise in property crimes between 2020 and 2022, with burglary and theft being the primary contributors to this increase, according to data from the San Francisco Police Department.
Conversely, violent crime rates in San Francisco have remained relatively stable in recent years. Preliminary police data indicates 12 homicides in San Francisco this year, a 20% increase compared to the same period last year. In total, there were 56 homicides in San Francisco in 2022, matching the number recorded in 2021.