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Westbrook Partners, the current owners of the Four Seasons San Francisco at Embarcadero was served a notice of default recently. It has been reported that they have not paid on their loan since December and are currently more than $3 million behind.
The investors will have 90 days to bring the loan current before the property faces foreclosure. Downtown San Francisco has still not recovered from the pandemic. Hotel room rates are depressed (I could not believe how inexpensive my last stay was) and interest rates remain high at their pre-2020 levels. Negative press about crime, homelessness, and the general atmosphere of the city have hurt its tourism and office workers are still not back in anywhere the numbers they once were according to The Real Deal.
Westbrook Partners purchased the property for $126.6 million in 2019 with a $72.5 million loan. It opened as a Four Seasons with the hotel taking up the top 11 floors of the 48-story building (it has 155 rooms and suites). When the pandemic started, it closed until 2021. The space has long been a luxury hotel with it first being a Mandarin Oriental (when it opened in 1986) and then later the Lowes Regency San Francisco (in 2015).
Occupancy has been low and the hotel’s loan interest rate went from 4% to around 8%. This increase combined with low revenue has put the hotel in its current position.
Alex Bastian, President and CEO of the Hotel Council of San Francisco, told SFGATE:
Regarding the landscape of the hotel community in San Francisco, the short term is a challenging situation due to high interest rates, fewer guests compared to pre-pandemic and the relatively high costs attached with doing business here.”
This is not the first time that a hotel operator has stopped paying a loan in San Francisco. Last year, Park Hotels and Resorts, a Virginia-based real estate investment firm, stopped paying its $725 million loan on the Hilton San Francisco Union Square and the Parc 55 San Francisco. These are two huge hotels with 2,945 rooms between them. Together, they make up around 9% of the city’s total rooms according to The San Francisco Standard.
Park Hotels and Resorts sold off other San Francisco properties during the pandemic including the Le Méridien in the Financial District (for $221.5 million) and the Hotel Adagio (for $82 million) in 2021. The hotels remain open for business and the guest experience has not changed. The properties’ future ownership still remains in flux.
Anthony’s Take: It’s crazy how a perfect storm of bad image, poor pandemic recovery, less business travel and tourism, and soaring interest rates have taken such a toll on the lodging in San Francisco. I love the city. It’s one that I have spent countless nights in (I was there every other week for six years), but it needs solutions to address its very real problems.
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1 comment
Bad image? Are you kidding? Have you been to downtown San Francisco? It’s not just image. It’s very much a reality. The place is an absolute shit show. It’s apocalyptic. And the blame rests solidly on the government and the far left policies that destroyed the city. There is no one else to blame. This is not an image problem and WTF did you even throw that in there?