Investors in luxury hotels are letting them go
By Sebra Leaves
The hospitality real estate market in San Francisco is taking a dive. Investors in the SF Four Seasons hotel at Embarcadero are joining a growing number of luxury hotels defaulting on loans.
San Francisco’s downtown doom loop stories are echoed in cities around the globe. The losses and economic downturn of the uptown billionaires, though alarming to investors and city governments who depend on property taxes, do not come close to generating the panic we saw in 2008 when homeowners defaulted, lost their homes, and ended up living in cars on the street.
In 2008 a housing market bubble and underwater mortgages were blamed. The government handled the problem by bailing out the banks. Now we hear we are in a housing shortage crisis. But whose crisis is it?
This time the bubble is bursting on the wealthy investors and governments depending on property taxes, not homeowners. Billionaires and investors who trusted the planners who claimed “if you build it they will come” took the bait. Ignoring miscalculations of the past, governments removed CEQA obstacles and whatever developers claimed was in their way of making a profit or pencilling out. Investors funded up-zoned offices, housing and hotels, and a few people came for a while, but, not in the numbers anticipated. And when they could leave they did. Now we have a lot of empty buildings that have no purpose, but, this time it is the billionaires who are losing and not the homeowners.
The dense housing with tiny units, closed windows, no parking, dangerous conditions on the streets and sidewalks, and rising crime are not appealing to people with means. They were the first to leave when the offices closed, along with families. Tech firms are laying off more people than they are hiring, making a return to the downtown even less likely.
What did we learn? Maybe it is better to let the rich do the gambling since they can afford to lose the money.
RELATED: Investors for iconic downtown SF Four Seasons hotel have stopped paying on its loan
