Non-Performing Loan for Four Seasons San Francisco for Sale

One of the highest-profile luxury hotels in San Francisco could soon be available at a steep discount.

The lenders behind a non-performing loan backed by the Four Seasons San Francisco at Embarcadero are seeking a buyer for the debt, which offers a potential ownership of the downtown luxury hotel in a foreclosure sale.

JLL has been tapped to arrange the sale of a $72.5M loan that was originated by HSBC and sold in 2022 to Waterfall Asset Management in 2022. JLL is marketing the loan at a “favorable basis, significantly below replacement cost” and historical full-service luxury sales comps, according to a report in the San Francisco Business Times.

The next owner of the hotel could choose to foreclose on the full-service, 155-room luxury hotel, the report said.

In March, Florida-based developer Westbrook Partners was served a notice of default for a $72.5M loan backed by 222 Sansome Street. The Four Seasons San Francisco at the Embarcadero 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 had not made its monthly payment on the loan since December and was behind nearly $3.2M in payments, according to the notice of default, which gives the borrower 90 days to become current.

Westbrook acquired the 155-key hotel in 2019 for close to $127M, which translates into about $816 per room. 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. 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 2024, 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.