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A hotelier announced this week that it was giving up on San Francisco and said it would stop making debt payments on two hotels with nearly 3,000 rooms.
Park Hotels & Resorts, which owns four total hotels in the city, pointed to a mix of challenges facing San Francisco when the trust announced it would cease payment on a $725 million loan secured by two prominent hotels.
The loans on the Hilton Union Square and Parc 55 were due in November, but the company’s CEO said it would be better off giving up on the hotels and working with creditors to settle the debt.
“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,” said Thomas Baltimore, CEO of Park Hotels & Resorts. “Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges.”
Park Hotels & Resorts owns dozens of other properties across the U.S., including in California.
San Francisco has the highest office vacancy rate in the U.S., driven by remote and hybrid work policies brought on by the coronavirus pandemic, and employees are returning to the office at a slower rate than other cities. High office vacancy rates are expected to continue to weigh on downtowns across the country unless they’re converted, updated or demolished, experts have told Inman.
Park Hotels & Resorts also has concerns about city-specific problems, including unspecified concerns over “street conditions” and a weak lineup of conventions that draw visitors to hotels like Parc 55 and Hilton Union Square.
“Unfortunately, the continued burden on our operating results and balance sheet is too significant to warrant continuing to subsidize and own these assets,” Baltimore said in his statement.
The New York Times reported that there are fears other companies will follow suit and move on from San Francisco. The annual conference put on by Bay Area tech company VMWare, which is one of the largest conferences in the city, is moving its conference to Las Vegas this August.
Other companies are also already reassessing their business outlook in California.
In late May, State Farm announced it would stop accepting new applications for homeowners’ insurance, saying a barrage of risks made it too challenging to operate in the state.
This month, Pac-12 also moved its college sports’ office and events’ headquarters out of San Francisco.
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