Another Downtown Hotel Goes Back to Lender in San Francisco
A 686-room hotel across the street from San Francisco’s convention center is going back to its lender, joining a parade of high-profile venues with former owners that have thrown in the towel and bet against a quick recovery of the city’s struggling downtown.
In a deed-in-lieu of foreclosure transaction, Highgate is giving up the Hyatt Regency San Francisco Downtown SoMa to lender Blackstone Mortgage Trust.
Earlier this year, New York-based Highgate missed a balloon payment on a $250M interest-only loan backed by the property, the sixth-largest hotel in the city. The cost of the debt at the time of this month’s deed-in-lieu filing totaled more than $290M, the San Francisco Business Times reported.
Highgate acquired the 36-story hotel for $315M in 2018, when it was known as the Park Central, and invested more than $50M in a renovation and rebranding as a Hyatt Regency that was completed in 2022. The convention and group-oriented venue is located at 50 3rd Street, across the street from the Moscone Center.
Remote work hollowed out downtown offices in San Francisco during the pandemic, followed by an exodus of high-profile retail outlets last year and the cancellation of numerous events at the Moscone Center.
In July, at the request of a court-appointed receiver and a trustee for a lender, a Superior Court judge extended until March 2025 the deadline for the sale of two of the city’s largest hotels, the 1,919-room Hilton San Francisco Union Square and the adjacent 1,023-room Hilton Parc 55. Park Hotel & Resorts handed the hotels back to the lender last year as the maturity approached on a $725M CMBS loan from JPMorgan Chase backed by the property.
The value of the Hilton Union Square and Parc 55 hotel complex was appraised in June at $553.8M by KBRA, a drop of more than $1B from the $1.56B value when the mortgage originated in 2016, Trepp reported.
In May, JLL was tapped to market a non-performing loan backed by the Four Seasons San Francisco at Embarcadero. Westbrook Partners, which acquired the luxury hotel in 2019 for $127M, stopped making payments on the loan and was served a notice of default in March.
Hotel bookings linked to events at the Moscone Center have plummeted from nearly 800,000 room nights before the pandemic to about 400,000 this year.
The San Francisco Travel Association is expressing confidence that convention bookings in the city will experience a significant recovery in 2025, with 30 events confirmed at Moscone Center expected to generate 659K of hotel room nights.
SF Travel, the official sales agent for Moscone bookings, announced last month that Microsoft Ignite, a tech conference expected to generate 61K room nights, will be held in San Francisco for the first time in November 2025.
In September, the board of San Francisco’s Tourism Improvement District (TID) announced what it called an “emergency” increase of its assessment on nightly hotel rates in the city in a bid to boost tourism and help attract conventions. The increase of the hotel fee to 2.25%, which became effective on Nov. 1, will generate an estimated $15M in revenue, most of which will be used to fund SF Travel.
Source: GlobeSt/ALM