Developer Defaults on Loan Against Luxury SF Hotel, Signaling a New Blow to Downtown

The Four Seasons Hotel in downtown San Francisco in June 2021. Google Maps/Screenshot via California Insider

Westbrook Partners has reportedly defaulted on a loan against its luxury Four Seasons Hotel in downtown San Francisco, signaling it might be the latest hotelier to walk away from the city.

The San Francisco Business Times reported March 14 that the New York-based national real estate investment management firm received a notice of default for the more than $70 million loan against the 155-room hotel at Sansome and California streets.

The company hasn’t made loan payments since December but has 90 days to bring its account current or face foreclosure, according to the article.

Westbrook Partners could not be reached for comment Monday.

The company purchased the Four Seasons Hotel property in San Francisco’s financial district from Loews Hotels & Co. in 2019. The hotel took up the top 11 floors of a 48-story building known for a pair of spires.

The hotel’s 155 rooms and suites offered views of the Coit Tower, Transamerica Building, and the San Francisco Bay. Renovations were finished and the hotel opened in 2021.

The possible departure would add to a growing list of hotels and retail outlets leaving the downtown area. Virginia-based REIT Park Hotels & Resorts, owners of the Hilton San Francisco Union Square and Park 55 hotels, announced in June 2023 a decision to stop payments on a $725 million loan and surrender a combined 2,900 hotel rooms and facilities to its lender.

The Hilton was the city’s largest hotel, and one of the country’s largest hotels outside of Las Vegas.

“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,” said Park Hotels CEO Thomas J. Baltimore in a statement.

The San Francisco market, according to Mr. Baltimore, faced a clouded and long recovery path because of record-high office vacancy, concerns over street conditions, lower return-to-office rates, and a weak citywide convention calendar.

An analyst told SFGate, a San Francisco-based online news site, that there were 22 active commercial mortgage-backed securities loans for hotels in the city that would mature in the next two years. Of those hotel loans, 17 were on a “watchlist,” as they were at a higher risk of default.

The situation is challenging for hotels in San Francisco, according to Alex Bastian, president and CEO of the Hotel Council of San Francisco.

“Regarding the landscape of the hotel community in San Francisco, the short term is a challenging situation due to high interest rates, fewer guests compared to pre-pandemic and the relatively high costs attached with doing business here,” Mr. Bastian told SF Gate.

Macy’s has signaled it may close its Union Square flagship store, and The North Face and Burberry retailers have announced planned departures from Union Square properties.

Several other retailers, including Nordstrom, have abandoned longtime outlets in downtown San Francisco in the past year, citing crime, drug use, and homelessness.