Westbrook to Lose Four Seasons San Francisco in Loan Sale

Waterfall Asset Management is selling a $72.5 million mortgage loan on the Four Seasons San Francisco at Embarcadero after Westbrook Partners quit making payments.

The New York-based lender seeks a buyer for the debt, which could provide a discounted route toward acquiring the 155-room luxury hotel at 222 Sansome Street, in the Financial District, the San Francisco Business Times reported.

Westbrook Partners bought the hotel, once known as the Mandarin Oriental San Francisco, in 2019 for $126.6 million, or $816,000 per room. Three years later, the Florida-based investment firm led by Paul Kazilionis sank $32.1 million more in renovations.

The hotel was slated to re-open in spring 2020, when the pandemic struck, but delayed until October 2020 before closing soon afterward. It reopened in June 2021.

The loan to Westbrook came from HSBC Bank, which sold it in 2022 to Waterfall Asset Management. It was set to mature June 1.

In December, Westbrook stopped making payments on the loan, according to JLL, which has the listing. In early March, Waterfall served Westbrook Partners with a notice of default.

JLL pitches the offering as an opportunity to acquire the loan at a “favorable basis, significantly below replacement cost” and provides historical sales comps.

The buyer of the troubled loan could choose to foreclose on the hotel. Foreclosure proceedings have already been initiated, according to JLL. A deadline on its call for offers is June 11.

A similar deal in March last year allowed San Francisco-based Flynn Properties and Texas-based Highgate to acquire the historic Huntington Hotel on Nob Hill.

The decision by Westbrook to default on the loan suggests that it “by definition doesn’t see the asset being worth more than $72 million,” Irvine-based Atlas Hospitality Group President Alan Reay said at the time of the March default notice.

With the loan representing 57 percent of the purchase price, that would mean a drop in value of 43 percent.

The hotel’s 12-month occupancy as of December was 58.4 percent, with the average room rate at $630, according to JLL.

The hotel, which occupies the top 11 floors of the 48-story office building at 345 California Street, has sweeping views of the Bay.

Four Seasons San Francisco at Embarcadero has more than 5,000 square feet of meeting rooms and amenities, including a business center, luxury spa, fitness facility, sky deck, restaurant and lounge. An underground parking garage serves 180 cars.

— Dana Bartholomew