Two New York companies are set to buy two of San Francisco’s largest hotels, putting an end to two years in which the downtown properties languished without ownership.
San Francisco Superior Court Judge Charles Haines late last week greenlighted the sale of the Hilton San Francisco Union Square and the Parc 55 San Francisco to Newbond Holdings and Conversant Capital. The deal is the latest positive sign for the recovery of one of the hardest-hit hospitality markets in the country following the COVID-19 pandemic.
The two downtown properties — which together total nearly 3,000 rooms — have been overseen by a court-appointed receiver since their owner, Virginia-based Park Hotels and Resorts, stopped making payments on its loans in 2023 at a low point for the city’s hotel market.
Receiver Michelle Russo of Hotel Asset Value Enhancement has been seeking to sell the hotels for nearly two years on behalf of Wilmington Trust, a trustee for special servicer Wells Fargo. Russo selected a preferred buyer back in March, but the closing of the deal was delayed repeatedly due to the large size of the properties and the complexity of the deal, according to court filings.
Both hotels are managed by Hilton until at least 2040, with options to extend the contract, and the company still has to sign off on the deal before it closes. The sale price is undisclosed, but the value of the hotels has dwindled substantially in the past few years. Credit reports from bond rating firms last year estimated the value of the hotels at less than $600 million — around $1 billion less than their appraised value of $1.56 billion in 2016.
Newbond declined to comment on the deal, while Conversant Capital did not respond to requests for comment.
Better times
The sale of two of the largest buildings in the city is the latest sign that downtown San Francisco is emerging from its pandemic-inflicted season of sparse tourism and little foot traffic. San Francisco remains the least recovered market in the country in terms of hotel demand, although that appears to be changing thanks to leases from artificial intelligence startups and rapidly rising rents.
"Investors and occupiers have stepped up their interest in San Francisco," said CoStar Senior Director of Market Analytics Nigel Hughes. "Office leasing has increased more than in any other city, apartment rents are rising at the fastest rate in the nation, and retailers and restaurants are planning to open new locations."
Looking ahead, full-year revenue per available room, or RevPAR, is projected to grow by approximately 6% in 2025 and 2026, driven largely by high-profile events in the Bay Area such as FIFA World Cup matches and the 2026 Super Bowl.
The San Francisco Planning Commission has approved a proposal for a 29-story hotel downtown with 211 rooms at 570 Market St., with officials saying the establishment would be well timed to serve a revived hospitality market in the city. The new Financial District hotel was first proposed back in 2019, when the city had a decade of steadily growing year-on-year tourism numbers.
Persistent negative national media coverage has since tarnished the city’s tourism image, and international visitors trickled back to the city only gradually after a long lull. However, San Francisco's hospitality market has enjoyed a noticeable rebound this year, and the city’s downtown hotels still command some of the highest rates in California, according to a CoStar analysis. Those rates remain shy of 2019 levels as the area “is still reeling in the wake of downsizing by anchor tenants such as Salesforce, Meta and Visa, contributing to historic office vacancies and sluggish business travel,” the analysis said.
Park Hotels & Resorts stopped making payments in 2023 on the $725 million loan for the 1,921-room Hilton Union Square and the 1,024-room Parc 55. The properties — the first and third largest hotels in the city — suffered yet another hit last year with a citywide hotel worker strike that began in late September, causing numerous cancellations and ultimately prompting Moody’s Ratings to downgrade the loan.
The Four Seasons Hotel San Francisco at Embarcadero also faced the auction block in October 2024, after its owner, Westbrook Partners, fell behind on payments on a $72.5 million loan.