Real estate firm defaults on loan, loses SF’s largest hotel


A billion dollar company that owned two substantial San Francisco hotels announced June 5 that it’s defaulting on its loan and releasing the hotels from its portfolio. 

Hilton San Francisco Union Square and Parc 55, two towering hotels in downtown San Francisco located a block from one another, look bound for new ownership after a Virginia-based real estate investment trust forfeited the properties, citing “best interest” for its stockholders.

Park Hotels & Resorts announced that it will immediately stop making payments toward a $725 million loan, slated to mature November 2023. The non-recourse, commercial mortgage-backed security loan is with Wells Fargo and was originally underwritten by JP Morgan Chase in 2016, according to the Real Deal.

A Hilton spokesperson told SFGATE that the two hotels will remain open, operational and under the management of Hilton Hotels & Resorts.

“Hilton has no plans to discontinue operating the hotels,” the spokesperson wrote in an email. “We remain fully committed to welcoming guests with the quality service and hospitality experience they have come to enjoy.”

The 1,921-room Hilton San Francisco Union Square is the largest hotel in San Francisco, in terms of hotel rooms, and Parc 55 is not far behind with 1,024 rooms. 

In a statement announcing the default, Park Hotels & Resorts CEO and chairman Thomas J. Baltimore Jr. wrote that it was a “very difficult, but necessary decision” to cease payments on the loan because it had become a burden on their operating results and balance sheet.

Baltimore pointed to issues both old and new that “clouded and elongated” San Francisco’s path to recovery following the pandemic: “Concerns over street conditions; lower return to office than peer cities; and a weaker than expected citywide convention calendar through 2027.”

The status of the $725 million loan has been on the radar for industry watchdogs since 2020. The San Francisco Business Times reported last year that Park Hotels & Resorts began publicly speculating over the future of the hotel’s ownership during an earnings call. 

The Hilton Union Square and the Parc 55 are open for business and will remain open during the summer high tourist season. 

“It is not uncommon for hotel ownership to change,” said Alex Bastian, president and CEO of the Hotel Council of San Francisco. “While the timing of this may appear less than ideal, we fully expect new ownership to come forth.”