The San Francisco Retreat

Major retailers such as Gap, Saks Fifth Avenue and Whole Foods have been upping sticks in downtown San Francisco and the city’s office market is grappling with historically high office vacancy. Now add to San Fran’s woes skittishness about its hotel market. The owner of two hotels — including the city’s largest by room count — has stopped payments on debt tied to the properties. Also, an investment firm has raised $2.2 billion to go after higher-performing CRE assets (presumably not San Francisco retail, office or hotel).

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— Tom Acitelli, Co-Deputy Editor

Park Hotels & Resorts Halts Debt Payments on 2 San Francisco Hotels

Park Hotels & Resorts has terminated payments this month owed on a $725 million nonrecourse commercial mortgage-backed securities loan backing two San Francisco hotels as part of a plan to reduce exposure in the struggling city. The Tysons, Va.-based real estate investment trust has halted debt service for the CMBS loan scheduled to mature in November 2023 that secures the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco. The REIT said it "intends to work in good faith with the loan's servicers to determine the most effective path forward,” which is expected to result in “ultimate removal” of the assets. “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., the REIT’s CEO and chairman, said in a statement.

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Artemis Real Estate Partners Closes $2.2B Fundraising Round

And the supply of dry powder from private equity grows even larger. Artemis Real Estate Partners, a national real estate investment firm, announced Monday that its fourth value-add fund, Artemis Fund IV, closed with $2.2 billion in equity commitments. Together with the $1 billion the firm’s Healthcare Fund II raised in June 2022 and a $500 million core credit platform, Artemis now has roughly $3 billion on hand to invest in distressed real estate opportunities. Artemis Co-President Anar Chudgar told Commercial Observer that Fund IV exceeded the firm’s most recent equity fundraising round, Fund III, by more than $1 billion. She added that Artemis was able to leverage strong support from a diverse group of institutional investors that included public and corporate pension funds, endowments, foundations, family offices and — for the first time — a pair of sovereign wealth funds in the Middle East and Asia.

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