The owner of the Hilton San Francisco Union Square and Parc 55 hotels in has chosen to stop making payments on $725 million in debt and turn the keys over to their lender, J.P. Morgan Chase.
Park Hotels and Resorts says San Francisco is too much of a mess and won’t be turned around any time soon. According to the ownership group’s CEO,
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.
The Hilton San Francisco Union Square is the city’s largest hotel with 1,921 rooms, and Parc 55 has 1,024 rooms. In 2016 the hotels were appraised for a combined $1.56 billion. The owner is turning over the keys even though they owe less than half that, showing just how far the value of San Francisco properties has fallen. They couldn’t sell the hotels, and couldn’t make the economics work even with the smaller debt load.
The properties remain open for business, but the decision underscores the struggles that San Francisco is going through. In some ways it’s been poorly governed for a century, though many of its problems are far newer. The pandemic made it vulnerable to these problems – people left (whether for LA or other states), and the reason to stay in San Francisco was because of the other people who there there. Work from home and work from anywhere increasingly meant being in San Francisco was no longer the exclusive path to success in tech and adjacent industries. Park Hotels had made a big bet on the city, and now they’re walking away too.
Will this be a wakeup call?
(HT: @DSvor)
Whatever. Cry me a river over the investment group that made a bad bet.
Lived in and around the City since the 1980s, and still spend a lot of time there. It is one of my top three cities anywhere on the planet, and I have been to much of it and lived on three continents. The ‘problems’ that are outlined here are overblown….big time.
Yes, there is a part of town that is pretty bad (but not near as bad as Skid Row in LA) with people living in the streets and doing drugs, and yes, the huge tech boom of the last two decades created a large amount of commercial space that is now underutilized, but these problems are happening to some degree in most cities around the country, and crime is actually not as bad as in most other big cities in the country. Yes, it is not the same as it was, but what place is? In some ways, its better and others worse.
But the core of the City – it’s geographic setting, unique neighborhoods and incredible sports, arts and entertainment – remain. Fewer tech bros and clueless tourists just makes it nicer for those of us that appreciate what it offers. You couldn’t pay me enough to live most places in the country, but I may just end up retiring in SF.
And for those of you who want to make it a partisan issue, its not because of politics; sanctimonious politicians of all stripes annoy me.
Most of the commenters need to turn off Fox News. I doubt even a fraction of the people lamenting California as a “socialist state” have ever visited, or if they have, only for a week.
I live in SF, and there are issues, no doubt. But using right wing talking points to describe a public health situation is idiotic. Fentanyl and opioids have taken hold of America, and SF is certainly not immune. We (California) also has some of the most expensive housing in the US, making matters worse.
Interesting that such a shit hole state is so expensive. It’s almost like people want to live here.
didn’t the city use the Hilton as a COVID homeless shelter in 2020?
now the city can simply eminent domain the properties for a fraction of the assessed value and use them to house the junkies and mentally ill zombies that are roaming downtown. turn them into SRO properties and watch them disintegrate in real time. the addicts tends to OD with regularity so there will always be a vacancy for newcomers. Rinse and repeat.
The U.S. is in trouble. Not because of the left or the right, but because of its citizens’ obsession with left vs right.
Can’t be a wake-up call; they’re already woke.
No Al LeFeusch: it’s because of the left.
All you cheerleaders: please stay there. Don’t infect my state.
We used to take a vacation to SF for 2 nights every year before driving up to Napa/Sonoma for 3 nights (we live out east). The aggressive homeless people on the street and unsightly smells on the street were enough that we have not been back since 2017 after about 25 straight years of spending 2 nights at various Hilton or Marriott full service properties, enjoying a wonderful breakfast at Buena Vista, great lunches in North Beach and wonderful dinners recently at Kokkari in the financial district. No more.
We now conveniently fly into Sacramento and take the easy, stress free drive over to Napa. Saving money and reducing risk exposure on the streets of SF.
I feel bad for the businesses that always did the right thing and are now struggling or moving out. But, for those businesses that have supported to wackos of the city and state government, you got what you deserve. Free markets at work
@Andrew “We (California) also has some of the most expensive housing in the US, making matters worse.”
Local policies have kept people out and unable to afford housing, I’ve been impressed by recent state-level policies to address this. But expensive housing isn’t a given, it’s the result of restrictions on creating housing.
@Eric “So, two days ago Hilton was the worst hotel brand of all (in your blog) and now they are brilliant strategists because they abandon their billon dollar obligations”
* Honors worst loyalty program among the major 4 for elite benefits
* One hotel owner, not a brilliant strategist (they bet wrong in the first place)!
@ SOBE ER DOC
Please enlighten me as to which Red cities have declined to this degree.
Commercial property of the office building variety and hotels catering to the office building and convention crowd are struggling elsewhere in the country and the world too.Add in higher interest rates and other difficulty getting financed, and it would be a surprise if this kind of thing didn’t happen anywhere.
You didnt even bother to state how dirty and crime-ridden SF is as a reason why good hotels can’t thrive? The p@ndemic was a reason why the business did poorly a few years ago, and not. a reason why the owner would rather bail now.
First this stuff about how great the United’s pr1de promotion is and you can’t even bring up the real reasons why the owner sold. Hilarious
And those of you in SF that love SF – don’t infect other cities.. please.
Señor Leff,
Developers make more bang per acquired square yard of land by building higher end high density housing and expensive single family homes than to make affordable housing. And trying to build more dense affordable housing where there tends to be bigger plots of land in urban and suburban areas that could involve building up more into the sky? That hits a lot of NIMBY attitude. And NIMBYs who are financially more well-off tend to get their way more than the lower middle class, working poor and others on the financially struggling side of the economic spectrum..
@Mindwrencher
Try to wrench you mind to read between the lines:
“concerns over street conditions” = crime/homelessness
“lower return to office than peer cities” = mismanagement/policy ineptitude stemming from the ridiculous clinging to lockdowns far past peer cities.
“ weaker than expected citywide convention calendar through 2027” = a consequence of the two above.
Don’t get me wrong! I love San Francisco, I’m there once every few months, but if you are unable to admit it’s troubles are a direct result of bad policy you are ideological brainwashed. SF could change all of this in 6 months if they wanted, it’s just a question of admitting they took some bad policies led by ideology over reality too far and reversing direction, but I guess more pain is required of the voters to learn.
For all who is saying how great Kalifornia is, especially San Francisco….please oh please, continue to live there. Please stay there. Like one poster put it, don’t come and pollute my state with your politics, we all see how well that’s working for you in Kalifornia.
Another piece of info, it’s kinda funny a couple insurance companies have pulled out of your ‘wonderful socialist state’.
The power of perception
Cities that have the perception (or reality) that travelers aren’t safe because of defunding of police, rampant criminal behavior that is unchecked by local government, drug use, homelessness and overall lawlessness can’t also be extraordinarily expensive to visit. That’s a bad combo.
Cancun has a perception but that perception is countered by how cheap their all inclusives are to attract customers.
San Francisco is a city I visited for business 4x a year for over a decade for business. Hotels are some of the most expensive in the world. At that price point tourist safety should be paramount over rights of drug addled mentally ill homeless people and criminals
Get tough on crime and homelessness and tourists and business will return in droves
Conferences are down until 2027
That dovetails into my comment about costs. A nice hotel in San Francisco in can come in at 800+ dollars a night in high season (pun intended).
A 3-4 night stay is $3,200 plus taxes, airfare, food and car from airport. That’s a $5,000+ trip.
That’s why conferences are in Chicago (geographically convenient and cheaper premium hotels), Arizona (cheaper hotels, not perceived as a boondoggle location, good weather and golf) or places like Boca or Miami.
SF priced itself out of the convention market and at the same time has concerns about safety. Like I said…bad combination
@GUWonder – greater supply of premium housing pushes down the price of premium housing, which frees up and pushes down the price of less premium housing.
Poorly written article with some grammatical errors, it’s obvious the writer here didn’t do well in his journalism 101 class.
Billy Bob is proving my.point.
Must be nice to be able to just walk away from 1/2 $B debt. I lived in Seattle for 14 years. Before Amazon moved to Lake Union and after. Seattle used to be a reasonable place to live (cost of living), extremely safe and clean. But when you have a company like Amazon move downtown and start paying people high six-figure salaries (And these people are about 23 years old and not from the US), It creates an income disparity which pushes out the middle class. Seattle created the same problem as San Francisco. You are either rich and live downtown or you are homeless and live downtown. cities like New York figured it out, these cities have not.
UC Berkeley grad and big fan of the bay area of california here. Things always change and the pendulum will swing back in SF favor one day in the near future. For now the city is not anywhere near as compelling as it use to be. I use to always vacation plan and SF/Napa were on the short list. Just like the previous person said, nowadays flying into Sacramento seems like a better choice.
I agree with many here that San Francisco is a great city and for the large part the people there are interesting and the central cali vibe has always been interesting to me. Southern Cali is just like Miami but San fran is like the new york of the west coast to me. It seems inevitable that SF will rise out of these issues unless the city is flattened by an earthquake. Even then, I wouldnt bet against the city.
@sosueme
I live in miami and the red state of florida has far worse insurance problems than san francisco. My windstorm ins was 9k last year and that was before my insurance company went under (along with 5 other companies). Now everyone is with the state run Citizens andCitizens is trying their damnest to kick people through incredibly nit picking on inspections. Right now im struggling to get insured and if Citizens drops me the next choice is Forced placement insurance where its $27,000 for windstorm with another 4k for homeowners.
Those on the right and left who make claims like you just did are both extremists when the reality is insurance is an issue in certain areas of the USA because there are too many claims and the insurance companies have been unable to price risk accurately and are facing huge losses which leads to them withdrawing from the market and its creating huge chaos in those areas for homeowners.
Hilton “Union Square” is just a flat-out fabrication. The hotel was built in the ghetto and the neighborhood has only gotten worse. Last time I tried to walk somewhere in that area … in broad daylight … I turned around and got back on BART. I’m not ‘scared’ of all those people loitering everywhere, I just don’t want to have an encounter with them. SF is paying the price for it’s nutso politics. What an incredible waste of a glorious city. I wonder when it will end.
Given how narrowly Chavez advisor and all round terrorist liver was recalled there is no hope for SF residents. They should
Move either down into the peninsula or into Marin. We stopped going to the city even by Uber/Lyft as the politicians are militantly in favor of legalizing all crime
You know things are bad in a city when people have to leave their cars unlocked and their doors open and then can’t believe you don’t have to do that in your city. Many residents just think this is normal. The smart ones are getting out.
Baffled commentators claim that issues are restricted to a narrow area around Skid Row. My wife was mugged twice within a 100 yards of the second phase of the four seasons residences! And 30000 fecal incidents are spread all over the city. And whole Foods closing and retail in Union Square suggests it’s not restricted to a small area
I think Prince Harry should do a blood test and that is the only way to know for sure who his real father is
I can only relate my last visit to San Francisco last summer. When I arrived at my hotel a few blocks off Union Square, the lobby door was locked! In the afternoon. The check-in clerk told me to be careful in the city, “…there are lots of crazy people around”. I’ve been going to SFO for 40 years, but this time the vibe was different. There was a whole block with tents in the street so that no traffic could pass. I didn’t really enjoy my visit; I have no plans to go back anytime soon. When I visit my brother near Sonoma, I’m flying into STS.
Had to stay at these hotels two years in a row for conferences and the poor street conditions were very true. It’s just not pleasant to be there, especially at night after dark when I tried to walk around to find some food, etc.
I don’t go to San Francisco any longer with reason. Too many places in both the US and California where one isn’t confronted daily by the miseries, injustices and ignorance of humanity. And having a beauty natural setting amidst mountains and bays isn’t enough for me to take my eyes and mind off the “nastiness” of San Francisco. I have to make one more trip to San Francisco in the near future but anticipate it will be my last visit.
Democrats have destroyed SF, which is now a failed city like Democrat-run Portland. The comments here are typical cognitive dissonance – “it’s not so bad”. It’s not just bad it’s catastrophically terrible. It looks like someone unlocked the gates of an insane asylum and everyone wandered out into the streets. Open air drug abuse and dirty tents and makeshift shelters blocking public sidewalks and businesses. Aggressive panhandling, shoplifting and burglaries. Shootings, stabbings and clubbings. Defecating on the sidewalk. The most absurd thing? Absolutely no political willpower to protect law abiding, tax paying citizens from these feral zombies. Democrats would rather destroy their cities than hold anyone personally accountable for their actions. There are many clever ways to rid SF of this public nightmare, but it requires Democrats to develop a spine and remember who is paying the bills. Wasting energy and resources on the least productive, most self destructive members of society, and attempting to excuse their behavior and negative impact on economic activity is self defeating and just plain crazy. But you do you. Continue pretending you don’t see businesses and people fleeing your incompetent governance. Continue wringing your hands so you won’t risk offend anybody. Your leftist policies wreak misery and destruction every time! Look at every Democrat city where Democrats have had unchallenged power for a decade or more – they all look like criminal anarchy. Forward!
I love hearing these libs screeching as they try to convince others (and themselves) that San Francisco is just fine and to ignore the rampant crime, literal feces in the streets, the open air drug markets, the exodus of retail and employers from downtown, thousands of zombie, drug-addicted homeless wandering the streets when not shooting up again in one of the absolutely squalid “camps,” failing schools, failing services, violence-ravaged public transportation, and much more misery than can be cited here.
And now owners of what just a few years ago were a combined >billion dollar properties are just taking their $725 million in losses and walking away.
Sorry libs… this is what your policies accomplish. Only years of Democrat rule could take one of the world’s most beautiful cities and turn it into a cesspool, both literally and figuratively.
Own it.
@Al LeFeusch it’s because of the relatively new obsession of the US with the left.
When the conversation with clueless socialist wannabes in the US gets to a dead end.. I, as a Venezuelan who flee from socialism, give my final line: As much as I try to tell you how bad the sh.** tastes, you insist to try it by your own. CA is (literately) getting the early taste of the process that went back in Venezuela.
@Joseph Exactly! tech bro daddy already dumping CA for FL.
@SoSueMe – if you want to use the loss of insurance companies as a yardstick…take a look at the great red state of Florida, and what the wonderful Republican legislature and Governors have [not] done over the last 25 years.
Can’t get homeowners insurance for less than $20K a year…but thank God “The Hill We Climb” was removed from Miami elementary school libraries.
San Francisco is not perfect, but there are so many great things about it that it’s worth it to visit. Love this city, always will. Golden Gate Park and Bridge, Palace of Fine Arts, Pier 39, North Beach Italian, China Town, cable car rides, buena vista Irish coffees, and so much more. Big cities have crime, but please don’t base your judgement on just that. Come to SF, there’s so much more than what a headline tells you.
Funny how commentators such as Johnny Boy and Andrew have no clue what is actually happening in their city. Take off your rose colored glasses and try to understand why tourism and corporate travel is down. News organizations across the board regularly report on the demise of the downtown corridor. Only blind loyalists such as yourselves cannot see this. It is not a safe or clean city and remains very expensive! Why go there when there are so many good alternatives? Until this mindset of everything is fine stops, the city will continue to decline.
I am a California native and have lived in San Francisco for 38 years. I’m an ex-Democrat, having left the party after 35 years. The City is a hollow shell of what it once was, and I lay the blame squarely at the feet of the far-left and clueless liberals who will automatically vote for any candidate with a “D” after their name. The handling of the pandemic and the George Floyd riots by the City and California as a whole was atrocious, and led directly to businesses and citizens fleeing. The Dems’ soft-on-crime, anti-police, and anti-business policies are bringing about their natural result. But at least recreational pot is legal, right?
All these fools talking about how it’s just fine these are “fox news talking g points”, sure it’s got issues like anywhere else are just frantically popping cope rocks into their glass copium pipes. Have fun “retiring” in s.f. because you will be devoured by the fiends. I lived there for 20 yrs most of them in the deepTenderloin..the entire city has turned into a dystopian nightmare. I’m 6 foot 3 heavily tatted, most of my friends are goons and I’m telling you it is no bueno. Nothing about it is remotely “ok” anymore. Got my family tf on out of there.
Born and raised in San Francisco. The stories the media insist on writing about the City are so extreme. Tourists tend to go downtown and other highlights. We have so many lovely districts that make the City special. Please don’t make headlines that cater to extreme views.
Donald Trump was the first president in the world and the USA to point out how dangerous San Francisco can be. Trump predicted that San Francisco would have a homeless and drug problem. Companies are now leaving California. Put Trump back in power and he will sell San Francisco to Canada and make California great again
The sheep continue to “baaaa” at how wonderful their failing city is.
Oklahoma City, very much a Red city, has neighborhoods overrun with the homeless and struggles with drug addicts laying in the streets and trespassing in industrial lots.
If only this were an exclusively SF problem. But all American cities are facing a serious decline right now. A deadly combination of poverty, drugs, immigration, and inept leaders in government.
The solution? Get people in homes. Connect them to family or friends that are willing to look out for and be that person’s advocate. Squash our wealth gap so that a full-time job is enough to house and feed a family, no more CEOs making 10,000x the janitor at the same company. End the manufacturer and importation of highly addictive drugs, and make sure anyone who is ready to quit can get treatment regardless of income. Make sure there is a legal way for people to enter the country for work, and start enforcing work visa laws at farms and construction sites. And finally, the tough one. Make sure every high school graduate understands what government is, why we have it, and how ours functions. Informed voters would be a big problem to a lot of the special interests and a lot of the inept politicians that slide in through charisma and populism alone.
I ❤️ SF! And want to propose that first class residential mental health care (think Bellevue Hospital) be available on ALCATRAZ Island. Drug dealers not welcome.
JOhnny boy it is all about politics===esp LEFT WING!!Red,White and BLue-I agree
Hooray for Hilton! If more businesses would just dump San Fransisco…heck…”woke-a-fornia”, maybe…just maybe (but I doubt it) the voters would toss out the whole lot…city, county, state politicians and get some real people to run the government. It ain’t (sic) gonna get better until people WAKE UP…not WOKE UP.
Hilton didn’t leave SF. They just quit paying their mortgage. In short they are threatening to leave unless the bank or city can somehow offer a profitable alternative.
Let the liberals and urban thugs keep the major cities, they’ve destroyed them all anyways.