Post-pandemic, we’ve seen quite an uneven recovery in the hotel industry. Leisure oriented properties have largely been doing incredibly well, with record rates and occupancy, while many business oriented properties have struggled.
San Francisco is probably the major US city that has been in the toughest position, given how heavily reliant the city was on convention business before the pandemic, but that hasn’t fully returned. In 2023, we saw the owners of San Francisco’s biggest hotel default on their loan. Now the owner of one of San Francisco’s best hotels appears to be doing the same, as flagged by View from the Wing.
San Francisco Four Seasons owner stops making loan payments
It’s being reported that the owner of the 155-room Four Seasons San Francisco at Embarcadero has stopped making debt payments on the property. In 2019, Florida-based real estate investment firm Westbrook Partners purchased the property for $126.6 million, and turned it into a Four Seasons.
The company took out a $72.5 million loan on the property, which it has now defaulted on. Payments haven’t been made since December 2023, and they’re now $3.15 million behind on their payments, according to a March 3 notice of default.
This notice of default gives the owners another 90 days to pay up, or else the property could be foreclosed on. Now, it’s possible that this is some sort of a negotiating tactic, and that the owners come to an agreement with lenders. Then again, this would hardly be the first San Francisco hotel that’s foreclosed on.
Just for some background, the Four Seasons Embarcadero is located within the 48-story 345 California Center building, and the hotel takes up the top several floors of the building. The hotel opened as a Four Seasons in 2019, then closed at the start of the pandemic, and then reopened again in 2021.
The property had quite a history even prior to that. It first opened in 1986 as a Mandarin Oriental. Then in 2015 it was sold, and became the Lowes Regency San Francisco. Then it was sold again, leading to the Four Seasons branding.
The Four Seasons Embarcadero is a great hotel with excellent service and breathtaking views, so I’m sad to see what’s happening there.
San Francisco hotels are in a tough spot
San Francisco has no doubt had some major struggles in recent years, with several factors at play. San Francisco has long been the place for tech people to be, and the pricing for everything reflected that. Add in that the city was popular with conventions, and it was a very lucrative market for hotel owners.
Unfortunately for San Francisco, a lot has changed. With more people working from home, some companies having left the Bay Area, business travel being down, and convention traffic not having returned to pre-pandemic levels, the demand for hotels in San Francisco continues to be greatly depressed, with no signs of that changing.
For hotel owners, that presents a real challenge. They can’t charge the rates they used to charge, and even with lower rates, occupancy is way down. Many hotel investors seemingly thought that prices in San Francisco would only keep going up, and many bought at the height of the market. In the case of the Four Seasons, buying a property in 2019 in San Francisco is possibly the worst timing imaginable.
Bottom line
The Four Seasons San Francisco at Embarcadero is facing a foreclosure. The hotel was purchased in 2019 for $126.6 million, and the owner is now several months behind on a $72.5 million. Within a few months we should learn what the future holds for this property. It’s really sad what has become of the San Francisco hotel market…
What do you make of the situation at the Four Seasons San Francisco at Embarcadero?
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