The owner of two of San Francisco’s largest hotels – the Hilton San Francisco Union Square and the Parc 55 – has suspended mortgage payments and plans to exit the two buildings, in another sign of a struggling city.
Park Hotels & Resorts said Monday it had canceled a $725 million loan that was due in November and was expecting a “final liquidation of these hotels” instead. The company said it will “work in good faith with the lenders to determine the best way 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 about 9% of the city’s hotel stock. The hotels may be taken over by creditors or sold to a third party as part of the closing process.
“After much thought and consideration, we believe that it is beneficial for the Park owners to reduce our exposure to the San Francisco market. Now more than ever, we believe that San Francisco’s road to recovery is still full of great challenges – old and new,” said Thomas Baltimore. Jr., CEO of Park Hotels, in his statement.
The problems include a shortage of about 30% of senior positions, concerns about roads, low returns to the office compared to other cities and “a calendar less than expected in the entire city until 2027 which will affect business and entertainment,” he said.
Park Hotels said demand driven by the San Francisco conference is expected to drop by 40% between 2023 and 2027 compared to pre-pandemic levels.
San Francisco Travel, the city’s convention bureau, expects that the Moscone Center’s major conventions will count for more than 670,000 hotels tonight, more than 2018’s 660,868 room nights but less than 2019’s 967,956.
Tourism spending will double in 2022 to $7.4 billion compared to the previous year. A full recovery is not expected until 2024 or 2025.
The company expects to save more than $200 million over the next five years after divesting the hotels, and will issue a special dividend to shareholders of $150 million to $175 million. The company’s presence will move from San Francisco to the fastest growing market in Hawaii.
Parc 55 is a block from the Westfield San Francisco Center, the shopping mall where Nordstrom is based, and where Banko Brown, a suspected shoplifter, was killed in a shooting outside a Walgreens in April. The neighborhood is also full of empty spaces, as tourist and local traffic is not well attended.
Some hotels have experienced financial difficulties. On Nob Hill, the historic Huntington Hotel was sold earlier this year after a foreclosure.
Contact Roland Li: roland.li@sfchronicle.com; Twitter: @rolandlisf
