Sale of Largest San Francisco Hotels Pushed Back to 2025

At the request of a court-appointed receiver and a trustee for a lender, a Superior Court judge has extended the deadline for the sale of two of the largest hotels in San Francisco.

Superior Court Judge Charles Haines agreed to move the deadline for the sale of the 1,919-room Hilton San Francisco Union Square and the 1,024-room Hilton Parc 55 from Sept. 1, 2024, to March 31, 2025.

Haines also agreed to extend a December 2 deadline for the lender to foreclose on the adjacent hotels if a sale isn’t consummated, moving that date to July 15, 2025, the San Francisco Business Times reported.

Park Hotels & Resorts, former owner of the Hilton Union Square and Parc 55—the largest and fourth-largest hotels in the city, respectively—handed the property back to the lender last year as the maturity approached on a $725M CMBS loan from JPMorgan Chase backed by the hotels.

Since October 2023 the hotels, which still are open for business under Hilton, have been in the hands of court-appointed receiver Michelle Russo, CEO of Hotel Asset Value Enhancement. Earlier this year, special servicer Wells Fargo tapped real estate agency, Eastdil Secured, to market the listing for the property.

In a legal filing, the loan’s trustee, Wilmington Trust, said it was in agreement with the receiver on the request for the deadline extension, the report said.

While no reason was cited for the deadline extension request, the seller is likely hoping market conditions in the beleaguered Union Square neighborhood will improve to narrow the gap between the debt on the property and its plunging valuation.

The value of the Hilton Union Square and Parc 55 hotel complex was assessed at $1.56B when the mortgage originated in 2016. An appraisal last month by Kroll Bond Rating Agency pared that down to $553.8M, a drop of 65%, Trepp reported.

In June 2023, Park Hotels & Resorts announced it had stopped making payments on the $725M CMBS loan for the sister hotels, which sit side-by-side on O’Farrell Street. Three months earlier, the company had declared it was confident it could work out a refinancing deal with JPMorgan on the debt, which came due in November of last year.

However, in the June 2023 announcement, Park CEO Thomas Baltimore said the company had determined that the prospects for a recovery in San Francisco did not look bright.

“Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges: 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,” Baltimore said, in a statement.

“Unfortunately, the continued burden on our operating results and balance sheet is too significant to warrant continuing to subsidize and own these assets,” the Park CEO said. “Removing the loan and the hotels will substantially improve our operating balance sheet and operating metrics.”