Owner of Two of San Francisco’s Largest Hotels Halt Mortgage Payments, Abandons City Due to Crime
The Democrats have destroyed this once jewel of a city. And the chief villain in the California debacle, Governor Gavin Newsom, is the Democrat party’s golden boy with the White House in their sights.
Owner of Two of San Francisco’s Largest Hotels Pulling Out of City: ‘Path to Recovery Remains Clouded’
By RYAN MILLS
The owner of two of San Francisco’s largest downtown hotels is stopping mortgage payments and going into foreclosure on the properties, stating that the city faces “major challenges” and that reducing exposure to the market is in the best interest of investors.
Park Hotels & Resorts said Monday that it was stopping payment on a $725 million loan secured by the two hotels, the 1,921-room Hilton San Francisco Union Square and 1,024-room Parc 55.
The Hilton is San Francisco’s largest hotel, and Parc 55 is the fourth largest.
Thomas J. Baltimore Jr., CEO of the Virginia-based company, called the decision “very difficult, but necessary,” noting record-high downtown office vacancy, “concerns over street conditions,” and reduced convention business.
“After much thought and consideration, we believe it is in the best interest for Park’s stockholders to materially reduce our current exposure to the San Francisco market,” Baltimore said in a prepared statement. “Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges – both old and new.”
The announcement comes less than a week after the San Francisco Travel Association launched a $6 million ad campaign – it’s biggest ever – to lure tourists back to the troubled California city.
Park Hotels & Resorts Inc. Announces Cessation of Payment on $725 Million Non-Recourse CMBS Loan Secured By Two of Its San Francisco Hotels
TYSONS, Va., June 05, 2023 (GLOBE NEWSWIRE) — Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE:PK) today announced that, starting in June, it ceased making payments toward the $725 million non-recourse CMBS loan which is scheduled to mature in November 2023, and is secured by two of its San Francisco hotels—the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco. The Company intends to work in good faith with the loan’s servicers to determine the most effective path forward, which is expected to result in ultimate removal of these hotels from its portfolio.
“This past week we made the very difficult, but necessary decision to stop debt service payments on our San Francisco CMBS loan,” commented Thomas J. Baltimore, Jr., Chairman and Chief Executive Officer of Park. “After much thought and consideration, we believe it is in the best interest for Park’s stockholders to materially reduce our current exposure to the San Francisco market. Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges – both old and new: record high office vacancy; concerns over street conditions; lower return to office than peer cities; and a weaker than expected citywide convention calendar through 2027 that will negatively impact business and leisure demand and will likely significantly reduce compression in the city for the foreseeable future. Unfortunately, the continued burden on our operating results and balance sheet is too significant to warrant continuing to subsidize and own these assets.
Ultimately removing the loan and the hotels will substantially improve our balance sheet and operating metrics, as net leverage is reduced by nearly a full turn, while 2022 Comparable RevPAR and Comparable Hotel Adjusted EBITDA Margin as compared to 2019 would improve approximately 800 basis points and 230 basis points, respectively. In addition, reducing the negative overhang from San Francisco will allow Park to continue to focus on our key priorities to reshape our portfolio by selling non-core assets, and recycling capital to reduce leverage, invest in strategic ROI projects, and opportunistically repurchase stock and/or acquire assets.”
For further information, please review Park’s most recent investor deck on our website, which includes the illustrative impact on certain operating metrics when both hotels are removed from its portfolio. Also included in the deck is Park’s full-year 2023 guidance that was originally provided by the Company on May 1, 2023. That guidance does not take into account financial impacts, if any, from the cessation of payment toward the San Francisco CMBS Loan as any such impacts are uncertain at this time. The Company expects to update full-year 2023 guidance as necessary once those impacts and the path forward are certain.
AUTHOR
Pamela Geller
EDITORS NOTE: This Geller Report is republished with permission. ©All rights reserved.
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