In a bold move that signals potential recovery for San Francisco’s hospitality sector, three New York-based investment firms are set to acquire two major downtown hotels that have been languishing without ownership.

Newbond Holdings, the Witkoff Group, and Conversant Capital are partnering to purchase the Parc 55 and Hilton Union Square, two properties with a combined total of nearly 3,000 rooms. These hotels, previously owned by Park Hotels & Resorts, have been in a precarious financial position since the company defaulted on its loans in 2023.

The acquisition comes after a complex legal process involving a court-appointed receiver who has been managing the properties. The sale is still pending court approval, highlighting the intricate nature of this real estateTransaction.

Originally appraised at $1.56 billion in 2016, the hotels’ value has dramatically decreased to an estimated $450-500 million. The new investors will need to navigate significant challenges, including modifying existing loan terms and addressing cash flow issues.

Each investment firm brings unique expertise to the table. Newbond Holdings has previously invested over $20 billion in hospitality properties, while the Witkoff Group is known for acquiring high-profile real estate. Conversant Capital, a newer player founded in 2020, specializes in flexible capital solutions for non-traditional assets.

Both hotels will continue to be managed by Hilton through 2040, with potential contract extensions available. This continuity provides some stability for the properties during this transitional period.

The acquisition represents a potentially optimistic moment for San Francisco’s struggling commercial real estate market, which has faced significant challenges in recent years. These investors seem willing to bet on the city’s long-term economic potential, despite current market uncertainties.

As San Francisco continues to navigate its post-pandemic economic landscape, this hotel purchase could signal a gradual return of investor confidence in the city’s commercial real estate sector.