Will tourism to this city die thanks to President Biden and other Democrat leaders? Probably.
One of the biggest traded real estate investment trusts in the United States has announced its intention to close two prominent downtown hotels in San Francisco. Park Hotels & Resorts Inc. has expressed concerns about the city’s safety and doubts regarding its ability to recover.
According to Fox, the company recently revealed that it has ceased making payments on a $725 million loan that was secured by the Hilton San Francisco Union Square and Parc 55 San Francisco properties. It expects to remove these hotels from its portfolio, citing several significant challenges in the California city.
Park Hotels CEO Thomas J. Baltimore Jr. explained in a statement, “After careful consideration, we have made the difficult decision to discontinue debt service payments on our San Francisco CMBS loan. We believe it is in the best interest of Park’s stockholders to substantially reduce our current exposure to the San Francisco market.”
Baltimore further added, “We are increasingly convinced that San Francisco’s path to recovery is hindered by major challenges, both longstanding and recent. These challenges include record high office vacancy rates, concerns regarding street conditions, lower rates of office return compared to peer cities, and a weaker-than-expected citywide convention calendar through 2027. These factors will have a negative impact on business and leisure demand and are likely to significantly limit growth in the city for the foreseeable future.”
During its investor presentation in June, Park Hotels mentioned “ongoing concerns over safety and security” as part of the rationale behind abandoning the two high-profile San Francisco hotels. The company estimates that this move will result in savings of $30 million per year in interest payments and approximately $200 million in maintenance expenses over the next five years.
Park Hotels currently manages 46 hotels and resorts, primarily located in city centers and resort destinations. These include notable properties such as the New York Hilton Midtown, the Hyatt Regency in Boston, the Hilton Hawaiian Village Waikiki Beach Resort in Honolulu, and the Orlando Waldorf Astoria in Florida.
Park’s decision to exit the San Francisco market aligns with a larger trend of retailers vacating downtown San Francisco due to various factors. The city has been grappling with issues like retail theft, homelessness, and a severe drug crisis.