SF’s Westin St. Francis seeks 90-percent property tax cut

The Westin St. Francis Hotel in Union Square wants everyone to value it highly except the city of San Francisco.

The hotel owner, an affiliate of China-based Dajia Insurance, has filed an appeal with the city to lower this year’s assessment value from $1.04 billion to $101 million, the San Francisco Business Times reported.

The appeal joins those of at least eight other San Francisco landlords with properties assessed at more than $100 million that want their property tax bills cut by half.

Or in the case of the Westin St. Francis at 335 Powell St., by 90 percent.

The Board of Supervisors hasn’t approved the property tax rate for fiscal 2022-2023. But based on the previous year’s rate, it would save $10.8 million in taxes under the lowered value, according to the Business Times.

Assessors hired by Dajia valued the Westin St. Francis parcels at $760 million in March 2022, according to a CMBS loan refinancing.

A Moody’s analysis of a different CMBS loan proposal involving the Westin from earlier this year pegged the hotel’s value at $298.8 million — or 39 percent of Dajia’s assessor estimate and 29 percent of the city’s valuation.

Strategic Hotels & Resorts, the Chicago-based real estate investment trust that owns the Westin St. Francis and is wholly-owned by Dajia, has appealed the city’s assessed valuation of its two parcels for the past three years. All three appeals are pending, according to the city assessor’s office.

Last year, the owner of the hotel argued for a $256-million valuation compared with the city’s $1.02 billion. In 2020, it sought a $243-million valuation instead of the city’s $1 billion estimate.

In 2019, it argued the hotel’s real estate and personal property — which would include furniture and fixtures — was worth $409 million rather than the city’s estimated $996.3 million.

The city’s Assessment Appeals Board, a three-person body that decides assessment disputes between the city and property owners, has not ruled on real property appeals across the city likely generated by the pandemic.

If approved, the reduced pandemic-impacted findings could mean a large drop in city tax revenue from commercial properties since the pandemic began in 2020.

Last month, eight San Francisco landlords with properties assessed at more than $100 million filed appeals to get their property tax bills cut in half. The appeals, filed by such companies as Tishman Speyer, based in New York, and Hines, based in Houston, rest on the economic impact of the value of each property.

Such landlords could point to tenants unable to pay their rent, reducing the profitability of the building. Or they could make the case that declining demand for office or retail space harmed the value of their properties. Remote work has caused many companies to downsize.

The 1,195-room Westin St. Francis, whose oldest wings date to 1904, turned a corner this year after being in the black for the 12-months ending in June, according to CMBS industry reports. Last year, it lost $14.8 million; in 2020 it lost $14.9 million.

In 2019, the year before the coronavirus pandemic, The Westin St. Francis had a positive cash flow of $31 million.

— Dana Bartholomew

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