More ugly news for SF’s hospitality industry, as the 3,000-room Hilton San Francisco Union Square and Parc 55 complex was just valued at only $550 million, after being valued at $1.6 billion eight years ago. And now the two hotels are just months from foreclosure.

The poster child case for the San Francisco “doom loop” narrative may be the Hilton San Francisco Union Square and Parc 55 complex, which has 2,900 very fancy hotel rooms, but is certainly on hard times. The complex was surrendered to its lender in June 2023, and placed into receivership last fall. Wells Fargo is now servicing the $725 million mortgage that the owners walked away from, but new developments make it pretty clear the place might not be worth a full payment on that $725 million.

The San Francisco Business Times reported Monday that the hotel complex has just been reappraised and is now valued at only $553.8 million. The very same complex had been valued at $1.56 billion in 2016, when then-owner Park Hotels & Resorts took out that giant mortgage. So yes, this represents a 65% loss in value from the previous appraisal.

This is largely because the bonds that backed that mortgage have been downgraded repeatedly. “In a report last week Moody's Investors Service downgraded each of the deal's bond classes,” the Business Times reports. “The original class A bonds — the highest possible rating — were downgraded two notches to Aa2 last year, and last week further lowered another five notches to Baa1.”

That may actually be good news for finding a buyer, because it certainly settles the matter of whether or not the asking price will be too terribly high. It will not, so someone playing the long game could make a killing once the local high-end hospitality market rebounds. But the clock is ticking, as the property will go into foreclosure if a buyer is not found by September 1 of this year.

Per the Business Times, the two hotels had an occupancy rate of 53% according to the most recent quarterly data. The complex has been losing money every year since 2020, though did manage to break about a $1 million in profit last year — that is, before making service payments on that $725 million mortgage, which wiped out any and all profits.

Related: Owner of SF's Largest Hotel, the Hilton Union Square, Is Walking Away, Surrendering It to Lender [SFist]

Image: Parc 55 San Francisco - a Hilton Hotel via Yelp

The tables may have turned in the China Live restaurant-landlord dispute, as now it's Wells Fargo suing the landlord who’d previously sued China Live over unpaid rent, and the bank is threatening to foreclose.

George Chen’s upscale food court China Live was supposed to reinvigorate Chinatown when it opened in 2017, and in many ways it did — up until the pandemic hit. But we learned about a year ago that the landlord Cypress Properties was suing Chen and China Live for $4.2 million in unpaid back rent. That lawsuit was settled this past January, but it sure seemed an odd power struggle was afoot between Chen and Cypress Properties, with more at stake than just back rent.

Indeed, there is more at stake. On Tuesday, the San Francisco Business Times reported that Cypress Properties’ lender Wells Fargo was suing Cypress Properties over a reportedly delinquent $21.2 million mortgage. Wells Fargo claims they are now owed $30.5 million with the interest that has accrued. The lawsuit claims that Cypress Properties’ affiliate 644 Broadway LLC has not made payments since November 2022.  

Significantly, China Live is responsible for about 75% of the building’s rent. And from a quote the Business Times pulls from the lawsuit, it sounds like Cypress Properties’ other investors may be spooked by, well, all the lawsuits that have been happening that involve the property.

The Business Times quotes the lawsuit as saying “Only recently (within the past few weeks), Borrower informed Plaintiff that Borrower’s investors will not invest additional capital, including to pay Borrower’s counsel for past due legal fees in the (Unlawful Detainer) Action and the Civil Action, and for future legal fees in the Civil Action, which is scheduled for trial in August, 2024."

Meanwhile, George Chen seems to be watching these developments from a safe distance. He told the Business Times that if the building is foreclosed, he’d be willing to step in and buy the property at a “fair market price,” while also indicating he could take his food hall concept elsewhere.

“We already have [letters of intent] out for new locations as I’m paying more than double market rent at Broadway and [it] doesn’t make sense for long term,” Chen told the Business Times.

The 644 Broadway building is also home to the Boxcar Theatre of The Speakeasy fame, six other retail tenants, and nine low-income residential apartment units.

Related: Chinatown Food Hall China Live Hit With Eviction Lawsuit, Allegedly Owes $4.2 Million In Back Rent [SFist]

Image: Janelle Q. via Yelp

The impending foreclosure on the mid-Market apartment building NEMA is apparently no longer impending, as the developer behind the luxury high-rise has struck a deal with its creditors.

Even those of us who cannot afford good Champagne were considering popping the Andre over this past October’s news that the 10th and Market Street luxury apartment complex NEMA was facing foreclosure proceedings. After all, what’s not to dislike about NEMA? The property was the poster child for the late 2010’s VC/tech boom, with its pool mermaid parties, attempts to whitewash San Francisco, and cringe-worthy promotional videos that even their tenants hated.

But lo, it appears there will be no foreclosure of NEMA. The Chronicle reports that NEMA’s owner Crescent Heights has struck a deal with its lenders to avoid foreclosure. There’s not much information about the terms of the deal, as the Chronicle simply says “The parties agreed to modifications in Crescent Heights’ loan agreement,” and that “details were not disclosed.”

And it seems like it was not a good thing, as the Chronicle also notes in their report, that Wells Fargo sued Crescent Heights last week over the building's mortgage debt. But Crescent Heights is spinning that lawsuit as a positive development, describing it as a mere “servicing procedure” that they say will help them out of this mess.

“Crescent Heights is pleased to confirm it has agreed in principle to a loan modification with its lenders, and that this filing is a servicing procedure while loan documentation is finalized,” a Crescent Heights spokesperson said in a Tuesday statement to the Chronicle. “We are grateful to our lenders and the servicer for working with us to put in place a long term plan that ensures NEMA San Francisco will continue to maintain its position as one of the city’s preeminent residential rental buildings.”

That, too, may be spin. Crescent Heights refinanced the building with a $384 million CMBS (commercial mortgage-backed security) loan in 2019, which was right before the pandemic, and the place has reportedly lost half of its value since. And as of summer 2021, the building was looking to convert 150-200 units to short-term corporate housing which indicates they were maybe having vacancy issues.

The Chronicle reports that NEMA currently claims a 90% occupancy rate. “Occupancy-wise we are running fine,” a Crescent Heights spokesperson told the Chronicle. “But the prices are way off from before COVID-19.”

Related: Mid-Market Luxury Apartment Tower NEMA, a Symbol of Last Tech Boom, Faces Foreclosure [SFist]

Image: RentNEMA

There have been four new laws proposed this year that would make it harder for landlords to raise rents and evict tenants. Three of the laws would increase the rights of rent-controlled tenants by allowing them to add roommates and by suspending or limiting rent increases that are a hardship. The fourth law would give eviction protection to tenants in non-rent-controlled units, specifically homes that are being foreclosed.

As noted in SF Gate's comments, the irony is that if it weren't for rent control and the strict eviction laws already in place, landlords often wouldn't have to foreclose. They have to pay their bills too. Additionally, there's still no protection for master tenants who end up with deadbeat roommates, who can't be lawfully evicted. Personally, we've always had awesome and sympathetic landlords, who were willing to work with us when needed. It pays to be a good judge of character from the get-go. How about you, readers, what's your input on this hot issue?