Two major downtown hotels owned by Park Hotels & Resorts Inc., the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco, are both expected to be removed from the trust's portfolio due to "major challenges" in the California city.
Because many of San Francisco's streets are now too unsafe to walk, Park Hotels & Resorts no longer wants the liability of having these two properties in its portfolio.
"This past week we made the very difficult but necessary decision to stop debt service payments on our San Francisco CMBS loan," announced Park Hotels & Resorts CEO Thomas J. Biltmore Jr. in a statement.
"After much thought and consideration, we believe it is in the best interest for Park's stockholders to materially reduce our current exposure to the San Francisco market."
"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."
(Related: Rampant homelessness, curbside drug use, and shoplifting have all been driving businesses out of San Francisco for years.)
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Will San Francisco survive the retail and now hospitality exodus?
At its June investor presentation, Park Hotels emphasized the "ongoing concerns over safety and security" that continue to plague the city of San Francisco. By divesting these two properties from its portfolio, the trust can save $30 million a year in interest payments, as well as about $200 million in maintenance expenses over the next five years.
Right now, the company operates 46 hotels and resorts, most of which are located in city centers and resort locations, including the New York Hilton Midtown, the Hyatt Regency in Boston, the Hilton Hawaiian Village Waikiki Beach Resort in Honolulu, and the Orlando Waldorf Astoria in Orlando, Fla.
Park Hotels is hardly the only company pulling its assets out of San Francisco. Many, many different retailers are fleeing the city due to ongoing problems with theft, homelessness, and what Fox Business described as "a raging drug crisis."
If businesses continue to leave San Francisco as has been the trend over the past several years, business tax revenues will only continue to decline. As this happens, there will be increasingly more empty and abandoned buildings littering the city, which in turn will attract more vagrants and other anti-business presence, further driving the city into oblivion.
"Laid-off employees no longer pay income tax but instead sign up for unemployment benefits, welfare, food stamps, etc. which the city / state then has to pay out of less and less tax revenues," one commenter wrote about how the whole situation is likely to continue spiraling in San Francisco.
"So now who are they going to raise taxes on to pay for their grandiose giveaway programs? When no one is left but the unemployed and / or homeless, you collect nothing. This is the only way these cities will ever learn to reverse their anti-police, anti-business, woke policies – by hitting them in the wallet."
Another asked how San Francisco's guaranteed minimum income entitlement is working out these days in light of all the businesses fleeing the city.
"San Francisco is an example of what happens when cities pander to the debit side of the budget instead of the credit side," this person added.
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