Amid rising crime rates, a spike in open-air drug dens and images of homelessness reminiscent of a third-world country, two major hotels are cutting their losses and fleeing the city of San Francisco.
Park Hotels & Resorts Inc., the owner of the Hilton San Francisco Union Square and Parc 55, is willingly undergoing foreclosure, announcing it has stopped making mortgage payments on a $725 million loan secured by the two properties, expecting the “removal of these hotels from its portfolio” in a bid to improve the company’s balance sheet and operating metrics.
“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,” Thomas J. Baltimore, Jr., Chairman and CEO of Park said in a statement informing investors of the company’s divestment from 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,” he explained. “Unfortunately, the continued burden on our operating results and balance sheet is too significant to warrant continuing to subsidize and own these assets.”
The 1,921-room Hilton is the city’s largest hotel, while the 1,024-room Parc 55 is the fourth largest, together accounting for roughly nine percent of the city’s hotel stock, the San Francisco Chronicle reported.
San Francisco’s tourism board launched a $6M ad campaign to overcome the city’s global reputation as a drug and crime-ridden hell hole. Six days later, the owner of two of the city’s biggest hotels announced it was abandoning them because it lost faith that the city can recover. pic.twitter.com/uaZRXWpD3R
— Michael Shellenberger (@shellenberger) June 6, 2023
Currently, San Francisco is facing its worst office vacancy crisis in history, with roughly a third of space available for lease or sublease. The city has more than 18 million square feet of real estate available, which the Chronicle says is enough to house 92,000 employees.
Compared to last year, homicides have increased five percent, robberies have increased by more than 16 percent, motor vehicle theft has risen 5.7 percent, and arson has climbed five percent, according to the latest crime data from the San Francisco Police Department.
Other data shows that San Francisco residents have a roughly 1-in-16 chance of being a victim of property or violent crime, making the city more dangerous than 98 percent of U.S. cities. Even Compton, home of the notorious gang wars between the Crips and Bloods, is statistically almost twice as safe as San Francisco, research from the Hoover Institution shows.
As of last month, nearly 7,800 people are homeless in San Francisco, higher than at any other time since 2005.
Recent changes to the city’s drug policies have decriminalized drug use, leading to a drug crisis so severe that San Francisco Mayor London Breed is opening a command center near the Civic Center where city and state agencies will attempt to disrupt open-air drug markets. A city drug dealer who spoke with the Chronicle laughed at the plan by city officials, saying “Ain’t gonna happen,” in comments made during an interview conducted while he was selling fentanyl and crack on Sixth Street.
“There’s too much going on out here, and unless they bring in the Army, Navy and Marines, that’s not going to change,” the dealer added.
“Open drug use has been normalized to the point there are blocks where the entire sidewalk is filled with people passed out or getting high,” Kevin Lee, a San Francisco resident who is in recovery, told the New York Post.
In 2022, nine Big Tech companies fled the city for other areas.
Last month, Nordstrom joined the growing list of companies leaving San Francisco.
