Park Hotels & Resorts Inc. said it would cease making payments toward a $725-million non-recourse CMBS loan which is scheduled to mature in November and is secured by two of its San Francisco hotels—the 1,921-key Hilton San Francisco Union Square and the 1,024-key Parc 55 San Francisco.

The Tysons, VA-based lodging 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 these hotels from its portfolio.  

“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,” said Thomas J. Baltimore, Jr., chairman and CEO of Park.

He continued, “Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges both old and new: 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.”

Removing the hotel and the loan, Baltimore added, “will substantially improve our balance sheet and operating metrics.”