Two enormous hotels in downtown SF, the Hilton San Francisco Union Square and the Parc 55, will likely be bought up by a new owner or owners within a year, and they are now set to go into receivership shortly.
One of this spring's biggest news stories contributing to "doom loop" narratives was about two Union Square hotels that were being surrendered to a lender, representing almost 3,000 of the city's existing hotel rooms. The owner of the Hilton San Francisco Union Square and the Parc 55, Virginia-based REIT Park Hotels & Resorts, cited "weaker than expected citywide convention calendar through 2027" and "concerns over street conditions" in SF as reasons for it to walk away from its $725 million mortgage for the properties.
Now, as the SF Business Times reports, Park Hotels & Resorts has announced a timeline for the future of the two hotels, and saying that a court-appointed receiver should be in place within days.
That receiver will then have until September 1, 2024, to sell off the hotels, with a 60-day window for settling such a contract.
The Hilton is one of the largest hotels in the country outside of Las Vegas, with 1,921 total rooms, and the Parc 55 has another 1,024 rooms. While a patient buyer may be able to snap up the properties for a steal, and in the long run they may recoup much or all of their pre-pandemic value, the Business Times notes that selling them could still pose a challenge, given high interest rates and the prospect of renovation costs.
The court-appointed receiver will be maintaining the hotel staffs as-is, and will be tasked with maximizing value for any potential buyer — and that may include some short-term improvements.
As we recently saw with the appointment of a receiver to handle the disposition of the former Westfield mall complex, any receiver will likely take steps to make the properties as attractive as possible to a buyer — which may include efforts to book more rooms, and improve security.
The two hotels had a combined valuation of $1.56 billion in 2016, which was when Park Hotels & Resorts took out that $725 million loan.
Geared toward protecting their own bottom line and their shareholders, Park Hotels put out a press release, with a quote from CEO Thomas J. Baltimore calling the latest filing a "positive step forward. "As the San Francisco market continues to face an elongated recovery, we believe the transfer of control and ultimate transfer of title to the hotels is in the best interest of our shareholders," Baltimore said. "While final resolution of the Loan may not occur until sometime next year, be it through sale or foreclosure, today’s filing will allow Park to move forward without enduring the economic impact of these assets and the Loan."
There is, elsewhere, turnaround news and some optimism in the hotel scene locally. As the Business Times reported in August, a couple of SoMa hotels, the former Good Hotel and the former Americania Best Western, which sit across the street from each other near Seventh and Mission streets, are both getting renovations and rebranding at the hands of Chicago-based Oxford Hotels & Resorts. Oxford is also planning to reopen Nob Hill's 110-room Hotel Vertigo, at 940 Sutter Street, as the Hotel Julian.