PK - Park Hotels stops payments for $725M CMBS loan plans to cut San Francisco exposure

2023-06-05 07:40:29 ET

Park Hotels & Resorts ( NYSE: PK ) said Monday it stopped making payments toward the $725M non-recourse CMBS loan starting this month, sending its stock 3.7% higher before the bell.

The loan, which is scheduled to mature in November, is secured by the Hilton San Francisco Union Square and Parc 55 San Francisco. Park Hotels ( PK ) expects these hotels will ultimately be removed from its portfolio.

CEO Thomas Baltimore said it is in the shareholders' best interest that the REIT materially reduce its exposure to San Francisco. "We believe San Francisco's path to recovery remains clouded by major challenges – record high office vacancy; concerns over street conditions; lower return to office than peer cities; and a weaker than expected citywide convention calendar through 2027 that will impact business and leisure demand."

Removing the loan and the hotels will substantially improve Park Hotels' ( PK ) balance sheet and operating metrics. Net leverage would be reduced by nearly a full turn, while 2022 comparable revPAR and comparable hotel adjusted EBITDA margin as compared to 2019 would improve ~800 bps and 230 bps, respectively.

More on Park Hotels & Resorts

• Park Hotels & Resorts: International Travel Recovery To Be Catalyst
• Park Hotels & Resorts: Strong Q1 Results, Undervaluation Remains

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