Walking Away San Francisco Style
Abandon Ship
Please note the Owner of SF’s Largest Hotel, the Hilton Union Square, Is Walking Away, Surrendering It to Lender
Virginia-based REIT 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.
Park Hotels & Resorts is also giving up on the 1,024-room Parc 55, citing the continued debt burden of the two hotels on its portfolio, and multiple factors that have made the SF market less desirable for their business.
“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 Park Hotels CEO Thomas J. Baltimore in a statement. “Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges, both old and new: record high office vacancy; concerns over street conditions; lower return to office than peer cities; and a weaker than expected citywide convention calendar through 2027 that will negatively impact business and leisure demand.”
The two hotels, as appraised in 2016 for the current loan, were worth a combined $1.56 billion. So it’s a significant move that Park Hotels would walk away from debt that is less than half that amount — and as one analyst tells the Business Times, “it says that they are not optimistic that the business travel or convention and meetings business is going to return soon to downtown San Francisco.”
Walking Away from 50% Equity?!
Not really. What this means is the appraised value is Bullsheet.
Q: And if the appraised value of one of the biggest hotels outside of Las Vegas is Bullsheet, what does that say about the value of every building in downtown San Francisco?
A: It’s all Bullsheet
Property Tax Q&A
Q: What are property taxes in San Francisco?
A: Secured property taxes are calculated based on real property’s assessed value as determined annually by the Office of the Assessor-Recorder. The secured property tax rate for Fiscal Year 2022-23 is 1.17973782%.
I do not know what the Union Square building or the 1,024-room Parc 55 building were assessed at.
But I am willing to guess the whole darn town is assessed at valuations that nobody in their right mind would pay.
Other Examples
Q: Mish do you have any other examples to make such a claim?
A: Of course, or I would not have asked.
Second San Francisco Office Tower Sells for 70% Off Original Listing Price
Wolf Richter reported just today that Second San Francisco Office Tower Sells for 70% Off Original Listing Price
The burning question arose over the past two years what these largely empty older office towers in San Francisco are worth.
The market had frozen over. There were no transactions because no one knew what anything was worth as San Francisco’s office market has morphed in just a few years from being one of the hottest office markets in the US with a vacancy rate of 7% in 2019 and some of the highest rents in the US, to being put on ice by working-from-home. About 33% of all office space is now on the market for lease – worse even than Houston, which was for years the worst office market in the US.
So now there’s the second deal in about a month — though the sale hasn’t closed yet. Wells Fargo found a buyer for one of its office towers in San Francisco, the 13-story 355,000-square-foot 1960s-era tower at 550 California, across the street and around the corner from its headquarters tower on Montgomery.
Wells Fargo had purchased the tower in 2005 for $108 million. It is vacating the building. Last year, it listed it for $160 million, but then pulled the listing after receiving bids reportedly below $40 million. Earlier this year, it engaged real estate investment bank Eastdil Secured to relist the tower.
And it has now made a deal – the name of the buyer has not been disclosed – for about $42.6 million to $46 million ($120 to $130 per square foot), according to sources cited by the San Francisco Business Times. That would be 71% below the original asking price and nearly 60% below the purchase price in 2005.
Reappraisals Needed
Every property owner in San Francisco ought to be pressing for property tax adjustments.
And guess what happens to the city if there are honest appraisals.
San Francisco Board Unanimously Supports $5 Million Per Person Reparation Payments
In case you forgot (or didn’t know), please note San Francisco Board Unanimously Supports $5 Million Per Person Reparation Payments
People who never owned slaves would make payments to people who never were slaves in a state that never had slaves.
Stanford University’s Hoover Institution calculated that the proposal would cost non-Black families in the city at least $600,000.
Get the hell out.
This post originated on MishTalk.Com.
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Mish
San Francisco seems to be the Poster Child city for Progressives deliberately allowing chaos to rain Supreme. Is it absolute incompetence by Progressive “woke” politicians or is it carefully planned strategy to take down America?
The elephant in the room.