Owner of SF's Largest Hotel Is Walking Away Surrendering It to Lender | Hacker News Reader

Owner of SF's Largest Hotel Is Walking Away Surrendering It to Lender

sfist.com

34 pointsjc_81121 comments

> 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."

$1.56B marked down to $275M (the value of the loan)... Things may be getting real bloody in commercial real estate.

I'm pretty sure that's not how it works. The lender will come in and try to sell the collateral to satisfy the debt, and any surplus left over after paying off the debt (plus costs of enforcement) will be to be returned to the borrower.

At least, that's how secured lending generally works. I don't know anything about this particular case.

If the property is worth much more than the $725M, and 100% of the surplus goes to the borrower, there's a principal-agent problem.

The lender has no incentive to maximize the realized value, as long as:

- they get at least $725M, and

- they show some good faith effort to get the best price (which presumably could be satisfied by a public auction)

Perhaps some extra marketing effort could achieve an extra $50M, but the entity that would need to arrange this isn't the entity that stands to benefit.

Is this an argument against what I have described (which is just a basic rule of secured lending)? What you say is true, but that doesn't mean it's not the law. As I understand it there is generally some basic principle that you need to make some effort to obtain a fair price (it will depend on the jurisdiction). But yeah, if you walk away from your loans you don't generally expect your lender to bend over backwards to maximise value for you. Fire sales do happen.

Not it's not an argument against your description of the law.

But it's an argument that, if what you say is true, then a rational borrower wouldn't surrender the building if they thought it to be worth much more than the value of the loan.

$725M, not $275M

Previous: https://news.ycombinator.com/item?id=36237319

“previously robust convention schedule, which meant lower vacancy rates throughout the year and higher-than-average room rates.”

They also mention changes in demand due to return to office arrangements, but I wonder how much of this is truly all covid-related. Have the recent slowdowns in Silicon Valley also affected SF? Could it also be that the hotel is a bit crummy?

Good questions, I wonder as well.

The article mentions SF had one of the highest hotel occupancy rates in the country back in 2015, at 84%. In 2022, it had recovered back up to 62%. I wasn't sure what is more normal/average. Looks like in January of this year, NYC's rate was 66%[0], and I would think that being comparable to NYC on a metric like this would be cause for some optimism.

So I'm assuming that they were forecasting worse occupancy for the rest of 2023 and beyond, as 62% doesn't sound that bad, at least for pandemic-exit times?

Regarding return-to-office, and SF resisting it more than most places, I suspect a significant-enough chunk of hotel bookings comes from employees visiting HQ from remote or satellite offices. If companies are reducing their office presence in SF, I would expect those sorts of visits to decline.

Not sure about the quality of the hotel itself; last time I was in there was for a work-related event back in 2015 or so, but I only saw conference rooms and common areas (which were a little dated, but clean and seemingly well-maintained), not the hotel rooms themselves.

[0] https://www.costar.com/article/1532005238/new-york-hotels-be...

January is probably among the 3 weakest months in NYC tourism though, if not the weakest.

I really liked that hotel and conference center too.

Interesting -- my company had a yearly conference at that hotel, and it was miserable. They finally moved it this year to the Marriott on Mission and it was much more comfortable (especially wandering around to nearby venues).

Easy solution. Start arresting people that steal, shoot it drugs in public, Etc.

Keep them in jail for a long time if they keep doing it.

If that solution is so simple, wouldn't the country with highest incarceration rate be the safest?

Most crime is committed by a very small percentage of the population and putting them into prisons works. El Salvador started throwing criminals in a prison mega complex and murder rate has dropped by 50%.

And to answer your question, no because there are other variables. Some populations simply have a larger share of criminals.

https://www.reuters.com/world/americas/el-salvador-murders-p...

Singapore is very thorough about law enforcement (to the extent of going beyond what would seem to most people to be fair and respecting rights) and as such has very little crime and is among the safest places in the world.

How you enforce laws effects the crime rate, having your jails full doesn’t mean you have effective law enforcement.

~80% of Singapore citizens live in subsidized government owned housing, with rent control, etc. They also require each neighborhood to meet quotas of the different ethnic groups to ensure there are no single race enclaves.

But yeah, keep pretending the solution to crime is hard-line policing, and not public policy.

https://en.m.wikipedia.org/wiki/Public_housing_in_Singapore

but sf is the opposite of hard-line policing. its also one of the most diverse cities in the land, with maybe only Bayview as the only major enclave. still the downtown looks like a warzone and is abandoned by businesses.

No because if you throw people in jail for some crimes but not others you're not solving anything.

Easier solution is to pay the organized crime leaders to not do crime

That's just crazy talk!

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