Westbrook Partners is poised to lose the Four Seasons San Francisco at Embarcadero hotel at a foreclosure auction.
The auction comes six months after the Florida-based investor led by Paul Kazilionis defaulted on a $72.5 million loan tied to the 155-room luxury hotel at 222 Sansome Street, the San Francisco Chronicle reported. The auction begins Oct. 10.
In May, lender Waterfall Asset Management of New York listed the delinquent loan, seeking an opportunity buyer of the hotel.
Westbrook Partners bought the hotel, once known as the Mandarin Oriental San Francisco, in 2019 for $126.6 million, or $816,774 per room. Three years later, the investment firm sank $32.1 million more in renovations.
To finance the deal, Westbrook borrowed $72.5 million from HSBC Bank USA. In 2022, the debt was sold to Waterfall.
The hotel, which takes up the top 11 floors of the 48-story office building at 345 California Street, has sweeping views of the Bay. But it faces additional financial pressures.
Late last week, the landlord of the 345 California complex affiliated with Chicago-based Metropolis Investment Holdings, sued Westbrook for allegedly failing to pay nearly $400,000 in rent and fees. Westbrook declined to comment on the complaint.
The investment firm is still negotiating with its lender to try to settle its debt with an unidentified partner, according to stakeholders with knowledge of the talks.
The upcoming auction, however, suggests that Waterfall Asset Management is unwilling to extend the terms of the loan agreement, market stakeholders told the Chronicle.
The lender will likely seek to recoup the value of the debt owed by Westbrook. But given that property values in San Francisco have plunged, the credit bid could ultimately be set below the value of the loan, according to the Chronicle.
The auction could also be postponed indefinitely until market conditions and values improve, the unidentified stakeholders told the newspaper.
Westbrook, which has likely seen its equity in the hotel wiped out, could potentially come to terms with its lender regarding acquiring the loan at a discount, then continue to own the property debt-free.
The beleaguered company, which has lost several of its Bay Area-based directors in recent years, has struggled with other San Francisco properties.
In May, Westbrook listed the 227-room Four Seasons San Francisco hotel at 757 Market Street, in South of Market. The asking price was not disclosed, but an unidentified source told the San Francisco Business Times its owner seeks $181.6 million, or $800,000 per room.
Westbrook also owns the troubled Four Seasons Private Residences, a 146-unit condo tower at 706 Mission Street.
When the building opened in 2021, it was among the city’s buzziest Downtown luxury high-rises, with interest from Stephen and Ayesha Curry. This month, only 17 of its 146 condominiums had sold, while a ground-floor space set aside for a Mexican Museum sits vacant.
— Dana Bartholomew
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