Westbrook Defaults on Loan Backed by Four Seasons San Francisco

Florida-based developer Westbrook Partners has been served a notice of default for a $72.5M loan backed by 222 Sansome Street, home of the Four Seasons San Francisco at the Embarcadero.

The hotel occupies the top 11 stories of a 48-story tower at 345 California Street, but is considered a separate property and uses the Sansome address.

Westbrook has not made its monthly payment on the loan since December and is behind nearly $3.2M in payments, according to the notice of default, which gives the borrower 90 days to become current, according to a report in the San Francisco Business Times.

Westbrook acquired the 155-key hotel in 2019 for close to $127M, which translates into about $816 per room. Waterfall Asset Management acquired the $72.5M loan on the property in 2022 from the original lender, HSBC Bank.

Loews Hotels sold 222 Sansome to Westbrook for $20M less than what Loews paid for the property, when it was known as the Mandarin Oriental San Francisco, in 2015.

Westbrook invested in extensive renovations at the hotel, work that was completed in 2022. According to the report, Eastdil Secured marketed the hotel property for sale in 2021, followed by Waterfall’s purchase of Westbrook’s loan.

In 2021, Westbrook told the San Francisco Assessment Appeals Board that the value of the parcel containing the hotel was not the assessed level of $125M, but $82M.

CoStar reported last year that there are 22 active CMBS loans backed by hotels in San Francisco that will be maturing by the end of next year, and 17 of these loans are on CoStar’s watch list, according to a report in SF Gate.

Last June, Park Hotels & Resorts announced it had stopped making payments on a $725M CMBS loan backed by two of the largest hotels in San Francisco in order to pave the way for a divestiture of the properties.

The sister hotels, which sit side-by-side on O’Farrell Street, are the 1,921-room Hilton San Francisco Union Square—the city’s largest hotel, also the largest Hilton on the West Coast—and its neighbor, Parc 55, which with 1,024 rooms is the fourth-largest lodging in the city.

The two hotels were valued at a combined $1.56B when the CMBS packaged for them was issued in 2016 by JPMorgan Chase. In February 2023, Park said it was “confident” it could work out a refinancing plan with JPMorgan on the $725M debt.

In June, Park CEO Thomas Baltimore said that the company had determined that the prospects for a recovery in San Francisco do not look bright and the company had decided to divest the two properties.

In October, a receiver was appointed to take control of the two hotels after Wilmington Trust, a trustee representing the lender, filed a lawsuit. The court gave the receiver until Sept. 1, 2024 to find a buyer.