Shares of Park Hotels & Resorts Inc.
PK,
fell 0.7% in premarket trading Monday after the lodging real estate investment trust (REIT) said it made the “very difficult, but necessary” decision to stop payments on its $725 million commercial mortgage-backed security (CMBS) loan secured by two of its San Francisco hotels. The REIT said it plans to work with the loan’s servicers to determine the best path, which is expected to be the eventual removal of the hotels from its portfolio. The hotels are the Hilton San Francisco Union Square and the Parc 55 San Francisco. “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 Chief Executive Officer Thomas Baltimore. Among the challenges that make recovery in the San Francisco market “cloudy” are record office vacancy, street-condition concerns and a weaker-than-expected citywide convention calendar. The stock has rallied 16.5% year to date through Friday, while the Real Estate Select Sector SPDR exchange-traded fund
XLRE,
has slipped 0.3% and the S&P 500
SPX,
has advanced 11.5%.
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