Troubling. Once does not hear of this sort of thing very often.
I am 56, have lived through many recessions and I seriously do not recall hearing of this sort of thing before, now it seems rather common.
The investment firm that owns Hilton San Francisco Union Square and Parc 55 hotels is walking away from its debt and surrendering them to its lender.
Park Hotels & Resorts has opted to cease payments on a $725 million loan, according to a press release.
The 1,921-room Hilton San Francisco Union Square is the city’s largest hotel, occupying an entire city block. Parc 55 has 1,024 rooms.
snip
Their key concerns are record levels of office vacancy (which are at 30 percent right now), fewer employees returning to offices, a “weaker than expected” convention calendar through 2027 and on-going concerns over safety and security. . . .
. . . San Francisco Mayor London Breed released a statement on Monday, confirming these businesses will continue to operate and no jobs will be lost at this time:
“These kinds of ownerships changes do happen, but these hotels will remain open and operating and the workers will continue to be employed. Still, we know there is a lot of work ahead of us and we will continue to focus on our economic recovery. That starts with fully funding my budget . . .”
One website I visited counts 80 or so 4-star hotels in San Francisco, another only 50-60.
Either way, the article indicates the San Fran mayor is involved and wants to be sure the hotels stay open and in continuous operation.
What a shame. Given that these two hotels totally and completely failed the other 4-star hotels there must be in dire need of business. Yet the government seems determined to keep breathing air into the dead horse so . . . I guess other hotels will fail too.
CEO Thomas Baltimore said it is in the shareholders’ best interest that the REIT materially reduce its exposure to San Francisco. “We believe San Francisco’s path to recovery remains clouded by 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.”
What we have here is a window into the current world of mortgage-backed securities that are based on commercial real estate. Real Estate Investment Trusts {REITs} fall into this category of securities. This doesn’t look good for the near future in these types of assets.
Yes,
Very few REITs focus on residential housing.
Rather, one focuses on retail space, another on golf courses, a third on hotels etc…
Statements in the article suggest that a VERY large portion of downtown hotel occupancy is due to business travellers and that given the popularity of “work from home” business travel is down.
Makes sense.
I cannot imagine a guy saying “well you ar eat home. I flew into town so I can Zoom-meet with you from your town instead of from my town.”
Add to that loss of tourism and convention bookings due to safety perception. On the bright side, they can always triple charge the government for the use of the hotels as homeless shelters.
Well the free market would, (in a long drawn-out way) say “What do we have a shortage of?” (ex. housing for millennials?) and convert it to that over the years.
Josef Stalin, Mao Tse-tung etc. would say “I like hotels. Let’s keep it open as a hotel. If the 86 competing hotels don’t have enough guests we’ll just spend money to keep them open too.”
I don’t know if the SF Mayor (London Breed) is actually spending money to keep it open but he has made it clear he thinks that way, and said passing his budget is the way to do it.
I am not a fan of any government city, state or federal propping up private businesses.
I do not believe in too big too fail. The vacuum they leave will be filled soon enough. May be some short term pain but taxpayer money should not go to private business in this way.
Funny how when a big business fails the CEOs and the rest of the C suite seem to do just okay and move on. If I â– â– â– â– up in my job I get fired with $0, when they fail they are sent off with a nice bonus and a pat on the back. Yeah I know I have gone off topic now.
Yeah, kind of off topic but it is related and it does happen.
If a private contract calls for a bonus then the bonus must be paid, but it is positively stupid that so many private contracts provide bonuses for CEOs who run their businesses into the ground.
It remains stupid that the mayor of San Fran has taken a position on whether this failed business should stay open (competing with other businesses) and that his budget is somehow linked to that.
Liberals and the fools that listen to them think that the way to solve homelessness is mental health programs and free food.
The mental health programs are then run by connected dems who get rich off them, and therefore have no incentive to fix anything or risk losing their gravy train, and they don’t work anyway. The free food just attracts more homeless. Thus more failure and then the liberals say " We need more mental health programs and free food. …Rinse repeat. Homelessness explodes…
Do they ever look at places that don’t have homeless to find out how?.. No they don’t. Because it’s about the gravy train!
