Buyers named for two big SF assets

Editor's note: Witkoff Group was initially confirmed as a buyer in this deal, but has since told Hotel Investment Today the filings are not consistent with executed agreements and that they are not among the buyers.

SAN FRANCISCO – Two hotels in San Francisco with nearly 3,000 rooms previously given back to the lenders by Park Hotels & Resorts have buyers. Property receiver hotelAVE has confirmed that Newbond Holdings and Conversant Capital from New York were selected to buy the 1,023-room Hilton Parc 55 and 1,919-key Hilton Union Square in what is expected to be one of the city’s biggest transactions in years.

After multiple delays, receiver Michelle Russo of hotelAVE is seeking approval at a September 25 hearing to close the sale to NB Acquisitions LLC, an affiliate of the three buyers. The price has not been revealed but the buyers were reportedly required to make two deposits of $10 million each earlier this summer. Russo told Hotel Investment Today that court approval can take up to 30 days and if all goes according to plan, closing will occur in an October/ November timeframe.

A July bondholder report said the purchase was contingent on a buyer modifying, extending, and assuming the distressed $725 million commercial mortgage-backed securities loan.

The loan terms also require the buyers to alleviate the hotels’ cash flow challenges and pay for renovations to increase their value.

Michelle Russo of hotelAVE said that court approval [of the proposed acquisitions] can take up to 30 days and if all goes according to plan, closing will occur in an October/ November timeframe.

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In 2016, the two hotels had an appraised value of $1.56 billion. The bondholder report recently appraised their combined value at $450 million to $500 million.

According to court filings, the receiver selected a preferred buyer in March but had to delay the closing of the sale four times because of the properties’ large size and the complexity of the deal. Hilton continues to manage both properties.

Park Hotels purchased the Hilton Union Square in 2000 and Parc 55 in 2015. A year later, Park Hotels took out a $725 million loan to pay for planned renovations.

The news also comes as experts suggest values might be bottoming out in San Francisco as the city slowly starts to turn around its fortunes and performance.

“[For San Francisco] the good news is things are really looking up and turning around. The bad news is it’s not like a one- or two-year turnaround,” said Rob Stiles, founding principal and managing director of RobertDouglas. “This is going to take some time, but it’s exciting that the turn is happening and some people are going to make some really smart buys. But it’s going to be on a completely reset table on valuation.”

For Park Hotels, shedding non-core assets continues to be a primary focus with CEO Thomas Baltimore having set a goal of disposing of its remaining 18 non-core hotels as soon as it can. Last month, Baltimore said the company has now sold or disposed of 46 assets with proceeds now north of $3 billion.

Witkoff already developed a hotel at the High Line in New York City and has a stake in the Public Hotel in New York. Newbond bought the Renaissance New York Hotel Times Square, Aloft Tampa Downtown and Sheraton Riverwalk in the past three years. Conversant has a $2.38 billion real estate portfolio, according to a legal filing.

As part of the sale, Eastdil Secured would reportedly receive a $1.2 million fee and hotelAVE would receive $423,951.