Major San Francisco hotel STOPS mortgage payments amid soaring crime

On Monday, Park Hotels and Resorts CEO Thomas Baltimore Jr. announced the company stopped making mortgage payments on its $725 million loan due in November for two San Fransisco locations. 

On its website, the company said they intend to work with loan servicers "to determine the most effective path forward, which is expected to result in the ultimate removal of these hotels from its portfolio." 

“This past week we made the very difficult, but necessary decision to stop debt service payments on our San Francisco CMBS loan," Baltimore Jr. said. "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. 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." He continued, "a weaker than expected citywide convention calendar through 2027 that will negatively impact business and leisure demand and will likely significantly reduce compression in the city for the foreseeable future." 

"Unfortunately, the continued burden on our operating results and balance sheet is too significant to warrant continuing to subsidize and own these assets," The CEO concluded. 

According to the Daily Mail, The Hilton San Fransisco Union Square location is the largest hotel in the city, and the Parc 55 location is the fourth largest. 

The move comes as businesses around the city close their doors due to rising crime. Companies like Old Navy, Nordstrom, Whole Foods, and T-Mobile, among others, have all announced they're leaving citing rampant retail theft, violence from homeless vagrants, and loss of foot traffic. One store owner claimed the city is worse than his home country of Afghanistan last week. 

San Fransisco has been the slowest city in the country to recover its foot traffic since the COVID-19 pandemic, a Willamette Week survey of cellphone data in August showed. The city had only recovered 31% of its activity. 

Park Hotels expects to save over $200 million in capital expenditures over five years by letting the properties foreclose.