San Francisco’s hospitality landscape is undergoing a fascinating transformation, with two major downtown hotels recently changing hands in a groundbreaking $408 million deal. The Hilton Union Square and Parc55, previously valued at a staggering $1.5 billion in 2016, have been purchased by NY-based luxury hotel operators Newbond Holdings and real estate lenders Conversant Capital.

The sale comes after a tumultuous period for the hotels, which saw their previous owners default on a $723 million mortgage and abandon the properties in mid-2023. For over two years, these massive hotels languished in receivership, creating uncertainty about their future in San Francisco’s evolving urban landscape.

The dramatic price reduction reflects the significant challenges facing San Francisco’s commercial real estate market. What was once a $1.5 billion asset has now been sold for less than a third of its previous value, highlighting the economic pressures impacting the city’s hospitality sector.

Despite the reduced sale price, the new owners remain optimistic. Newbond founding partner Vann Avedisian expressed confidence in San Francisco’s potential, specifically praising Mayor Daniel Lurie’s leadership and the city’s prospects as a global destination.

Significantly, the new owners have confirmed that both hotels will remain in their current use. This decision quells previous speculation about potential conversion to housing, providing some stability to the Union Square hospitality ecosystem.

The sale is part of a broader trend of strategic real estate investments in downtown San Francisco. Just last week, another major hotel transaction saw the Four Seasons at 757 Market Street sold for $130 million, suggesting a potential recovery in the city’s commercial real estate market.

As San Francisco continues to navigate post-pandemic economic challenges, this hotel deal represents more than just a property transaction. It symbolizes the city’s resilience and the ongoing transformation of its urban core, with investors still seeing potential in one of America’s most dynamic metropolitan areas.