The largest US hotel outside of Las Vegas, the Hilton Union Square in San Francisco, California has been abandoned by its owner at a cost of $750 million, here’s why.
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Abandoning The Property, Relinquishing Ownership
The owner of the largest hotel in the US outside of Las Vegas is abandoning the property. It has stopped paying its mortgage to Chase Bank, relinquishing ownership to its lender, Chase Bank.
“Park Hotels & Resorts has opted to cease payments on a $725 million loan, as the SF Business Times reports today, essentially surrendering over 2,900 hotel rooms and hospitality facilities to its lender. This includes the 1,921-room Hilton San Francisco Union Square, which is San Francisco’s largest hotel, occupying an entire city block, and one of the country’s largest hotels outside of Las Vegas.” – SFist
Chase will likely bring in a management company to operate the property until new ownership can be secured.
Why Did They Let It Go?
Citing reasons that included abandoned office buildings, a lower return-to-office rate than peers, fewer conventions through 2027, and poor street conditions, Park Hotels’ management decided it would be better to take a loss than continue to operate the hotel.
Looking at those in order, abandoned office buildings will plague this country following the pandemic and a return-to-office that fails will expedite the process. I have two businesses and both are run remotely. We had an office overseas and shut it down. We have an office the two businesses now share but it’s much smaller than a traditional setting might have been. I can’t foresee an environment where we’d expand to a bigger space Ben with double the staff; other businesses might see the same conclusion.
The next two concerns are specific to the San Francisco market. The convention business as a whole is not problematic, it’s plenty busy. In fact, many are sold out and more seem to be cropping up – just not in San Francisco. It’s likely because of the second reason as well, the maintenance of the streets. It’s no surprise that a city that needs a human fecal matter map – not so that the city can clean it up but so that residents can avoid it – has soured a desire to visit.
Some businesses like Target have taken to extreme measures to protect their inventory.
“A TikTok video has gone viral showing the health and beauty aisle of a Target in San Francisco almost fully encased in glass, as a countermeasure to prevent shoplifting.
The locked display cases run the length of the aisle on both sides, with doors extending from the bottom shelves to the top.” – Business Insider
While Parks hasn’t elaborated on what “street conditions” might mean, it seems unlikely the firm abandoned three quarters of a billion dollars over potholes.
What Will The Future Hold For The Hilton Union Square, And San Francisco?
There’s no question another operator will take over what will be assuredly an advantageous deal for the massive property. Chase will sell it cheap to get a new client in the door (I am sure they are already speaking with some who qualify) and get someone new to pay the mortgage.
That said, the brand will not necessarily be Hilton and my suspicions are that the operator will either be a foreign competitor looking for a landmark property in the States, or a small chain looking for a big splash. Why won’t it remain a Hilton or become a Marriott, for example? The new owner will have some of the same fears about occupancy as the last, adding costs (even though those chains have a huge network of loyal guests) extending the payback period and adding an onerous royalty to the financials.
Additionally, brands may be leery to jump into the San Francisco market as tech firms head elsewhere and more continue to work from home.
Conclusion
The owners of the largest hotel outside of Las Vegas, the Hilton Union Square in San Francisco have stopped making its mortgage payment to Chase Bank citing current and future concerns. The owners are doubtful that the convention market the hotel relies on will return and the city, in general, has fewer workers in the city and an undesirable street condition. The move will forfeit ownership of the estimated $1.5 bn property with about half that remaining on the note.
What do you think? Will we see other large real estate owners make similar moves? Is this concern central to San Francisco, California, or large cities across the country?
I wonder what Chase expect to get for the building. Current valuation maybe closer to a quarter of 1.5 billion. San Francisco will be a mess for a while.
This happened many times in 2007 the building owners got horrible loans just like those people got for their houses. Now that interest rates have went up so I have them mortgages and they can’t afford it.
Articles about the demise of San Francisco are constantly written and I really don’t get it. Outside of the Tenderloin, which has always been a mess, San Francisco seems as nice as ever to me. I was there less than a month ago, I even stated in Union Square, and the streets seemed just fine. This is certainly a financial decision masquerading on an inaccurate public perception of SF.
My wife & I go to Union Square as tourists to watch the Smash & Grab criminals that terrorize the high-end shopping stores there ! No arrest or no bail !
You need to visit San Francisco more than once in a blue moon and stay for a while to smell the stench. It was once a nice place where I used to recommend it to friends when visiting but not anymore and in fact I tell them instead to avoid the city any way possible. I mean what kind of city that has a job position for pickup human crap. I blame the city politicians and their nonchalant approached to crime. It’s a real shame of what they turned this once beautiful city into a dump. Tony Bennett would be disheartened.
Left wing politics is why and the perpetual failures that go along with them.
If only the left cared about the average person as much as they do about enabling child grooming.
You are a true worthless human being, and one of the main reasons this blog has been taken down to the gutter. Pathetic.
Left wing politics is why and the perpetual failures that go along with them.
If only the left cared about the average person as much as they do about enabling child grooming.
Right wing areas don’t have hotels like this to begin with because nobody has a reason to visit them
Aren’t you always crying about desantis and Florida?
You know the largest tourist destination in the US.
Many blue state retards like yourself are begging to live in red states.
Wish we could ban you to your blue state hellholes.
Because Florida has disneyworld… you know the tourist magnet that DeSantis is trying to battle to further his career. The only blue state “retards” that are begging to live in red states vote red anyway. Who needs em? They can all consolidate into the Nazi haven of Florida,
You don’t need to “ban” me to my blue state hellhole, I avoid all red states already… and guess what? I’m not missing anything. If I want to take my kids to Disney, there’s Disneyland. If I want to go on a beach vacation I go to Hawaii
lol once again your talking points are debunked and you play the wahtaboutism and try and deflect.
You are so predictable because you people all read off the same script. You don’t have an independent thought in your mind.
You kind is dying out. Everyone is leaving your dying blue states.
What talking points? I directly addressed what you said. The only people leaving blue states are boomers that are all going to be dead in 20 years anyway
Red states are death traps. Enjoy the shorter lives suckas!
https://fortune.com/2023/05/25/american-dream-migration-south-life-expectancy-blue-red-state/amp/
The republicans dropped a virus and vaccine on purpose on the whole world, screwing up the economy everywhere for years to come. Now, Trump is the gasoline taking down the republican party in flames, laughing all the way. How did the republicans let Trump sabotage America? Because they’re dumb white trash like he is. Somebody should look for a 666 birth mark under the yellow fluff on his head, lol.
100% correct!
I find it perplexing that there are numerous articles consistently portraying the downfall of San Francisco, as I fail to comprehend such viewpoints. With the exception of the long-standing issues in the Tenderloin area, San Francisco appears to be just as pleasant as ever, at least from my recent experience. I visited less than a month ago and stayed in Union Square, where the streets seemed perfectly fine to me. It appears that the notion of San Francisco’s decline is predominantly driven by a misinformed public perception, disguising the underlying financial motives behind these narratives.
@Ritu Chaudhary – Maybe you’re right, I haven’t been in years. But this particular story was widely reported and there’s no question that vacant real estate and a lack of conventions is hurting the city. Before I wrote this, I had no idea the trouble the Moscone center was in, but it makes sense.
Is thete an echo in here?
It’s not the largest non-Vegas hotel in the US, if you’re measuring by rooms. The Hyatt Regency Chicago has over 2K.
Such a weird claim– largest hotel outside of Vegas in the US?
I don’t even see how it’s in the running for this title.
Disney in Orlando has 6 hotels with more rooms than this hotel.
Opryland in Nashville- has nearly 2900 rooms and >5x the conference space, and much larger footprint, and often bills itself as the largest hotel without a casino– I don’t know if the claim is based on rooms or footprint, but I don’t think much of Opryland is over 4 stories tall with a lot of indoor gardens, an indoor river with boats, waterpark, etc… so I suspect it’s based on footprint.
This isn’t even the biggest US Hilton outside of Vegas– The Hilton Hawaiian Village lists 3400 rooms.
Elections have consequences.
When I attended the 1996 Macworld conference in San Francisco I was shocked by how dirty and rundown the city looked. At the time I was living in Southern California so it wasn’t like I had traveled from too far. Nothing much had changed when I went back again in 2000. Sure wouldn’t want to see it now.
Quick Homeless solution – put them up at the Hilton – cleans up the streets. But get a Non-profit to manage it as a half-way house alternative…….what could be worse ?
I can’t tell if you’re just joking with this comment…
If you aren’t joking… many cities have tried housing the homeless in hotels with vacancy issues. I suspect some still do. Housing the homeless in hotels has pros and cons, but it is by no means a quick solution to the problem of homelessness, which does not have quick solutions.
The homeless problem of Frisco has always been and will always be a problem, The ownership of the building is more of a business matter rather than a social matter. And the problem of traffic gridlock crowds does not reflect the abandonment of San Francisco. In other words, it’s still crowded with people and tourists.
The Hilton’s location is a little too west. The neighborhood gets bad very quickly. If I went to a conference or convention in San Francisco, I would not stay there.
Misleading first statement on several levels. They did not abandon the Hilton “at a cost of $750 million”. They intentionally defaulted on a loan with that principal balance, and it was secured by the Union Square SF AND the Parc 55, which is another huge upscale hotel two blocks away with over 1000 rooms. The walked away because the loan was a non-recourse note that, with the entire principal coming due in November.
No big deal really, as such investment firms change their portfolios all the time and hotels also change hands frequently, although less so through foreclosure. This investment firm bet big on a crowded hotel market and their bet went south with the pandemic recession and subsequent shrinking of this round of the tech boom. Downtown San Francisco was hit particularly hard by both of those.
And for all of you who want to make this political, whatever. San Francisco is, and will continue to be, one of the world’s greatest cities. Yes, there is crime in parts of downtown, but overall the crime rate is lower than in other big cities. That said, the Hilton is the closest to the bad parts of downtown of any major hotel, as others have noted, and that did not help.
Just got back from SF and had a great time. Contrary to the drumbeat in the press, it is still full of people with lots of things to do and see – music, museums, sporting events (go Giants) – great hotels and restaurants and incomparable geography (and cold fog).
I’ve been to San Francisco a few times decades ago. I was never impressed.
I wonder if they tried negotiating with Park Hotels to reduce the mortgage in accordance with its current valuation?
Sure, the pandemic and remote working have had a major effect, but last year when I was in SF, it was noticeably dirtier with more homeless. I did not feel safe. That is hurting tourism, and to say it isn’t is sticking your head in the sand.
Hawaii is part of the USA and the Hilton Hawaiian Village has more than 3,000 rooms – so Hilton SFO is not even the biggest Hilton outside Vegas.
So tired of hearing SF’s crime being compared to other major cities. Such a cop out. The leadership in the city need to own the fact that the city is swirling down a toilet. To say it’s ok because so is Chicago and other major cities is not comforting to those residents paying property taxes to live in the city. FIX IT You were elected to run and manage a clean safe city. Figure it out.
1. Build great cities.
2. Destroy them.
Having lived in SF from 89-99, the rot had started a long time ago. Camp Agnos by City Hall comes to mind. Yes, SF is a beautiful city, but it has been mismanaged by progressive Democrats for over 2 decades The Tenderloin and MidMarket have been problematic for decades, but South of Market, Union Square, and the tourist areas have really taken a dump (literally) in the last few years. Auto burgs have been bad for decades, but now they are an epidemic along with shoplifting across the City