March 10, 2025 By Kate Snyder

San Francisco’s hospitality landscape is bracing for a significant shift as two of its largest hotels. The 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco are slated to soon have a new owner with the recent selection of a buyer for more than half a billion dollars in debt connected to the properties. According to reports from Trepp, offers for the properties’ $725 million mortgage have been reviewed and a non-binding term sheet has been executed and a draft purchase and sale agreement is in circulation. The deal is anticipated to close around the end of March 2025.

The Hilton San Francisco Union Square is located at 333 O’Farrell St., and Parc 55 is situated at 55 Cyril Magnin St. Both hotels are close to the Powell Street cable car turnaround, the San Francisco Museum of Modern Art and the Moscone Convention Center. 

The hotels, boasting a combined 2,945 rooms, have been grappling with declining performance, mirroring the broader economic challenges facing San Francisco. Despite generating nearly $1 million in net cash flow in 2023, the portfolio experienced a cash flow deficit of $15.7 million for the 12 months ending March 2024, with occupancy rates hovering around 50 percent.

“The 1,919-room Hilton Union Square and the 1,024-room Parc 55 have seen their value decline by almost $1 billion,” said Atlas Hospitality Group President Alan Reay. “The hotels were appraised for $1.56 billion in 2016 and the most recent appraisal put the value at $553.8 million , a 65 percent decline…. The most recent appraisal pegs the value at $188,175 per room, which is a fraction of the replacement cost. A patient investor could realize a huge return on investment over the long term.”

The lenders of the $725 million mortgage on the two San Francisco hotel properties sued to place the assets into receivership in the fourth quarter of 2023, according to earlier reporting by The Registry. Wilmington Trust, representing the lenders, filed the lawsuit against Park Hotels & Resorts, the former owner of the Hilton San Francisco Union Square and Parc 55 San Francisco. Park Hotels & Resorts had ceased payments on the loan in 2023, citing the need to reduce exposure to the San Francisco market due to high office vacancy rates, poor street conditions, and a weaker-than-expected convention calendar impacting business and leisure demand.

This is a developing story and will be updated as more details become available.