The receiver and a lender for the troubled Hilton San Francisco Union Square and Parc 55 hotels have eight more months to snag a buyer.
Superior Court Judge Charles Haines has moved the deadline to March 31,2025, from Sept. 1, for the sale of two of the city’s largest hotels at 333 O’Farrell Street and 55 Cyril Magnin Street, the San Francisco Business Times reported.
The approval also pushes out the deadline for the lender to foreclose on the property if a sale isn’t completed to July 15, 2025.
Last summer, Virginia-based Park Hotels & Resorts defaulted on a $725 million loan tied to the 1,921-room Hilton and the 1,024-room Parc 55.
In October, a court-appointed receiver, Michelle Russo, CEO of Hotel Asset Value Enhancement, took control of both hotels, with plans to sell them in less than a year.
Russo and the lender, JPMorgan Chase, had asked the court to extend the sale deadline.
The reason for the extension was not disclosed in legal filings by the loan trustee, Wilmington Trust. Eastdil Secured holds the listing for both hotel properties.
This month, Kroll Bond Rating Agency put the combined value of both hotels at $553.8 million, 65 percent less than their appraised value in 2016 of $1.56 billion.
Despite their estimated plunge in value, the pool of would-be buyers is likely small.
The hotel portfolio has not made money since 2020, though it managed a net cash flow of nearly $1 million last year before mortgage payments, according to bondholder reports.
For the 12-month period ending in March, both hotels had an occupancy of 52 percent. Their cash flow deficit was $15.7 million.
In walking away from the hotels, Park Hotels & Resorts cited record office vacancy; street conditions; lower return-to-office statistics than other cities; and a weaker-than-expected convention calendar through 2027, each affecting business and leisure demand, according to the Business Times.
“Unfortunately, the continued burden on our operating results and balance sheet is too significant to warrant continuing to subsidize and own these assets,” Park Hotels CEO Thomas Baltimore said in June last year.
The biggest strike against the hotels is their reliance on Moscone Center conventions, slow to rebound after the pandemic.
Industry analysts don’t see San Francisco’s hospitality market recovering before 2030, so a prospective buyer would need to suspend profit expectations for several years on top of paying for pricey upgrades to thousands of rooms.
One hotel expert estimated it could cost between $50,000 to $100,000 per room, putting a total revamp in the realm of between about $150 million and $300 million.
The Hilton Union Square is the biggest hotel in the city. It closed at the dawn of the pandemic and reopened 14 months later in May 2021. The Parc 55 is the city’s fourth largest hotel. It closed for two years, reopening in May 2022.
— Dana Bartholomew
Read more
Commercial
San Francisco
Two of SF’s largest hotels plunge $1B in value in eight years
Commercial
San Francisco
Receiver to take reins at SF’s Parc 55 and Hilton Union Square hotels
Commercial
San Francisco
Park Hotels & Resorts could lose SF hotels after not paying $725M loan