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