Last week the Hoover Institution’s Lee Ohanian noted that residential homeowners in San Francisco lost $260 billion in value on their homes as home sales prices in “Detroit by the Sea” have fallen 17 percent, while nationwide home prices have fallen by only about 3 percent:
San Francisco’s housing price decline reflects the fact that the city has lost more than 65,000 residents, roughly 7.5% of its population. San Francisco’s population loss has been the largest among all major cities in recent years.
That rate of population loss is greater than Detroit ever experienced in any two year period during its long dismal decline.
Departing San Franciscans have on average represented households of very high income. Between 2019 and 2021, San Francisco lost nearly $15 billion of household income, even after accounting for those who moved into the city. Taxpayers who filed 2019 tax returns from San Francisco and 2021 returns from a new location reported an average annual adjusted gross income (AGI) to the IRS of nearly $196,000 per household.
Then yesterday came a bombshell:
Another bit of bad news for downtown San Francisco arrived Monday morning with the revelation that the investment firm that owns the Hilton San Francisco Union Square and Parc 55 hotels is walking away from its debts and giving up hope on a return of SF’s convention market.
Virginia-based REIT Park Hotels & Resorts has opted to cease payments on a $725 million loan, as the SF Business Times reports today, essentially surrendering over 2,900 hotel rooms and hospitality facilities to its lender. This includes the 1,921-room Hilton San Francisco Union Square, which is San Francisco’s largest hotel, occupying an entire city block, and one of the country’s largest hotels outside of Las Vegas.
Park Hotels & Resorts is also giving up on the 1,024-room Parc 55, citing the continued debt burden of the two hotels on its portfolio, and multiple factors that have made the SF market less desirable for their business.
“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. “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.”
The two hotels, as appraised in 2016 for the current loan, were worth a combined $1.56 billion. So it’s a significant move that Park Hotels would walk away from debt that is less than half that amount — and as one analyst tells the Business Times, “it says that they are not optimistic that the business travel or convention and meetings business is going to return soon to downtown San Francisco.”
Don’t expect San Francisco’s radical board of supervisors to get the hint that the city is circling the drain.
Exit question: How do you take one of the most beautiful cities in the world, with an unbeatable location, and run it so thoroughly into the ground? With enough Progressivism, anything is possible. (Cue the old joke about how if Communists took over Saudi Arabia, in 50 years there’d be a shortage of sand.)