Hotel Union Square tries to sell its $78.4 million debt

Just in time for Halloween, JLL is selling a $78.4 million debt that appears to be tied to Hotel Union Square, which often appears on lists of the “most haunted” hotels in San Francisco.

JLL’s Capital Markets team declined to comment on whether or not the sale of the non-performing loan on an unnamed Union Square hospitality property was in fact Hotel Union Square, which was owned and managed by a partnership of Rockpoint and Highgate Hotels before going into default last year, according to loan documents.

The outstanding loan amount, 131-key room count, 1908 vintage and “non operational” status noted on the offering all match the recently closed hotel at 114 Powell Street, a prominent corner location one block from the Powell Street cable car terminus with a Swatch store as its corner retail tenant.

“The non-performing loan provides investors the ability to potentially step into the ownership position on a historic property, at a significant discount to the borrower’s acquisition basis in 2015,” according to the listing notes, which also say Trigild has been appointed by the bankruptcy court to serve as receiver.

The six-story, 53,000-square-foot hotel was purchased in May 2015 for about $109 million, according to public records, and the owner is 100-120 Powell LP. It has the same Dallas address as Rockpoint, a real estate private equity firm with $14 billion in assets under management, according to the company’s website. It is based in Boston, but also has offices in Dallas, San Francisco, London, Dubai and Seoul.

Singapore-based lender United Overseas Bank Limited originated a $122.5 million loan in May 2015 for two hotels, the one in Union Square and another at 28 Lombard Street called Hotel Diva, which shut its doors in December 2020. It sold to the city for about $50 million in 2021 using Project Homekey funds and is now an SRO run by Episcopal Community Services of San Francisco.

The Union Square Hotel’s other co-owner, Dallas-based Highgate Hotels, was managing partner for both hotels. Highgate missed a balloon payment on the Hyatt Regency Downtown SOMA earlier this year. The SOMA loan was extended to a new maturity date of December 2024, according to David Putro at Morningstar. Last year, Highgate walked away from the $108 million debt on the Stanford Court Hotel on Nob Hill, while at the same time investing in the neighboring Huntington Hotel in a partnership with Flynn Properties.

Highgate did not reply to a request for comment and the Union Square Alliance declined to comment on the impact of the Hotel Union Square closure on the neighborhood, which has tried to win back both tourists and retailers since the pandemic.

The original loan covered both Hotel Union Square and Hotel Diva, according to the foreclosure filing, and was intended to be syndicated but the offering never took place. After the sale of Hotel Diva, the borrower repaid a little over $44 million on the overall loan to pay off that hotel’s debt entirely. The maturity date on the remainder of the loan on the Hotel Union Square was extended “several times” to May 11, 2023. In June, the loan went into default, with $78.4 million of unpaid principal balance and nearly $5 million in missed interest payments and fees.

There appears to be interest in buying debt on San Francisco hotels. JLL also listed the $73.9 million non-performing loan of the Four Seasons Embarcadero earlier this year, with an auction that began on Oct. 10. That debt is now in contract, according to the listing site.

Hotel Union Square made headlines in 2022 and 2023 when it was one of several to sue the city for damages caused while it was used as a shelter in place site to house the homeless during the early days of the pandemic. It received $5.36 million out of a total $26 million the city planned to pay out in late 2022 to several hotels making similar claims. That budget was blown when the city agreed to a $19.5 million settlement with the Hotel Whitcomb in Mid-Market in June of 2023.

Long before the pandemic, the hotel was a spot for specter seekers. The ghostly reports focused on Room 207, which had been renamed the Dashiell Hammett suite and “stylized to reflect the era and history of the early 1900’s” according to the hotel’s website. The story goes that the “Maltese Falcon” detective writer stayed there often while having an affair with fellow writer Lillian Hellman. Her spirit is said to be among those haunting its now-empty halls.