Two major San Francisco hotels, Parc 55 and Hilton Union Square, have been acquired by The Witkoff Group, Newbond Holdings, and Conversant Capital. This purchase comes two years after the properties defaulted on a $725 million loan. The exact sale price has not been disclosed but is considered one of the largest hotel transactions in San Francisco this year.
The acquisition depends on the buyers modifying, extending, and assuming the distressed $725 million commercial mortgage-backed securities loan. They are also required to provide additional funding to address cash flow issues and renovations at both hotels.
The Parc 55 and Hilton Union Square were placed into receivership after Park Hotels & Resorts defaulted on its loan in 2023. Michelle Russo of Hotel Asset Value Enhancement was appointed as receiver to find a buyer for Wilmington Trust, which acted as trustee for Wells Fargo’s special servicer. After nearly two years of searching and multiple deadline extensions, foreclosure was avoided when investors agreed to purchase the properties.
According to court filings cited by local media, the buyers paid two deposits of $10 million each earlier this summer. A bondholder report from July valued both hotels between $450 million and $500 million combined—a significant drop from their nearly $1.6 billion appraisal in 2016.
Hilton Union Square is San Francisco’s largest hotel with 1,921 rooms; Parc 55 is among the city’s top five with 1,024 rooms.
Other Bay Area hotels have faced similar distress recently, with several properties in Oakland, Berkeley, and San Jose entering foreclosure over the past two years.
Despite these challenges in the hospitality sector, projections indicate that tourism may improve. Visitor numbers to San Francisco are expected to reach 23.5 million this year with spending approaching $9.4 billion—an increase from last year’s figures of 23.3 million visitors and almost $9.3 billion spent (https://www.sfchronicle.com/sf/article/san-francisco-tourism-numbers-19485894.php).
“After two years in distress, buyers have swooped in on two of San Francisco’s biggest hotels.”
“The price of the transaction was redacted in court filings, though it’s estimated to be one of the biggest sales in the city this year.”
“The buyers were required to put down two deposits of $10 million each earlier this summer,” according to the Chronicle.
“A bondholder report in July placed their current combined appraised value between $450 million to $500 million.”
“In 2023, former owner Park Hotels & Resorts…defaulted on its $725 million loan on the properties.”
“They were turned over to receiver Michelle Russo…who looked for a buyer for nearly two years on behalf of Wilmington Trust…Foreclosure appeared imminent and sales deadlines were extended numerous times before investors stepped in.”
