Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

San Francisco’s Four Seasons Hotel Faces Foreclosure Threat as Investors Fall $3 Million Behind on Loan Payments

Westbrook Partners, the new owners of the luxury Four Seasons hotel in San Francisco, have received a notice of default. This action comes after their failure to meet the monthly loan payments starting from December, leading to a debt exceeding $3 million, as reported by the San Francisco Business Times.

The property, located at 345 California Center, was acquired by Westbrook in 2019. They now have a 90-day period to settle their dues with the lender to avoid foreclosure.

Downtown San Francisco’s hotel investors are facing tough times. High interest rates, surpassing those before the pandemic, and a decline in local tourism due to the city’s challenges with drugs, crime, and homelessness have exacerbated the situation, according to SF Gate. These issues have contributed to a negative perception of the city.

Last summer, the Hilton Union Square and Parc 55 hotels in San Francisco experienced a significant financial setback when their owner defaulted on the loan. This event has led industry experts to predict more such defaults among investors during these challenging times. A report from a visitor impact summit in August highlighted that San Francisco has 22 commercial mortgage-backed securities loans for hotels nearing maturity within two years. Seventeen of these loans are considered high-risk for default, as noted by a senior director of hospitality analytics at the CoStar Group.

The Four Seasons San Francisco at Embarcadero, which occupies the top 11 floors of an iconic skyscraper, reopened in the summer of 2021 after a period of slow renovations. The hotel has 155 rooms.

Alex Bastian, President and CEO of the Hotel Council of San Francisco, commented on the current difficulties faced by the hotel industry in the city. High interest rates, a decrease in the number of guests compared to pre-pandemic levels, and the high costs of doing business in San Francisco are significant challenges.

In January, the Hilton Financial District at 750 Kearny St., owned by Portsmouth Square’s affiliate Justice Operating Company, defaulted on a $97 million loan taken out in 2013. The company is seeking a loan modification agreement, currently under review by LNR Partners.

Last year, Park Hotels & Resorts relinquished ownership of two properties, Parc 55 and Hilton Union Square. These properties were transferred to a receiver for management.

The Hilton Financial District reported a revenue of $11.1 million in the third quarter of 2023, a decrease from $12.3 million in the same quarter of the previous year. The hotel experienced a net operating loss and a drop in occupancy rates compared to 2022.

San Francisco’s convention calendar for 2024 is less crowded than the previous year, partly because key events have moved to more affordable and safer locations like Las Vegas.