Park Hotels & Resorts, owner of the Hilton San Francisco Union Square and the Parc 55 San Francisco, has ceased making debt payments on the properties and expects the ultimate removal of the hotels from its portfolio.
The convention hotels are two of the largest in San Francisco. The Hilton has 1,921 guestrooms and the Parc 55 has 1,024. The convention business has been slow to recover from the pandemic, which is one reason why Park is walking away from the hotels.
CEO Thomas J. Baltimore Jr. said, "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 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."
Related: San Francisco's travel industry is recovering slowly
Park said that starting in June it stopped making payments toward a $725 million loan that is secured by the two San Francisco hotels. The loan is scheduled to mature in November.
"Ultimately removing the loan and the hotels will substantially improve our balance sheet and operating metrics," Park said.
Park Hotels & Resorts is a publicly traded real estate investment trust (REIT). Its portfolio currently consists of 46 hotels and resorts in city center and resort locations.