Park Hotels and Resorts has filed three lawsuits against the city of San Francisco alleging it must have paid improper taxes on 2019 real estate acquisitions, according to documents filed in San Francisco Superior Court.

In 2019, Park Hotel acquired Chesapeake Lodging TrustThese include the Le Méridien in the Financial District, the Adagio near Union Square and the Hyatt Centric Fisherman’s Wharf in San Francisco. Le Méridien and Hotel Adagio were sold in 2017 to KHP Capital Partners and affiliates of the Magna Hospitality group respectively. 2021.

When the Virginia-based real estate investment trust took over the properties, they valued them at $353 million and paid $10.6 million in transfer taxes on the three properties. The office of appraisal records came back months later and determined the properties had a fair market value of about $532 million, subject to higher transfer taxes, the lawsuit said.

In February, Park Hotels appealed the figures set by the assessment recorder. The Assessment Appeals Board set the new fair market value between the park and the City assessment at $484.3 million. The suit alleges that assessor recorders incorrectly determined higher taxes that included late fees and non-taxable assets such as personal property as part of the assessment.

“The 25 percent penalty and the 10 percent penalty are unreasonable, excessive, unlawful, and unconstitutional because they are punitive in nature and have no reasonable connection to Plaintiff’s alleged crime of underpayment of real property transfer taxes,” the lawsuit said. relation.”

Park Hotels is seeking a refund of approximately $8 million in transfer taxes, alleging a miscalculation, as well as interest on the refund and attorney’s fees. The Office of the Evaluation Recorder did not respond to a request for comment.

While Park Hotels is struggling to recover allegedly improper tax payments, it recently decided to bet on its main San Francisco property. It will stop paying $725 million in non-recourse CMBS loans on San Francisco’s Union Square Hilton and Parc 55 hotels. The hotels, the largest in the city, have loans due in November.

Parker isn’t the only investor struggling to pay off debts on the city’s hotel assets. According to a report by Trepp, 89 percent of CMBS-lodged lodging properties earn just enough income to pay the loan.

“The interest rate environment is significantly higher now than it was when these rates were removed,” said David Putrow, Morningstar’s director of commercial real estate analysis. You’re going to see a difference of a few hundred basis points in interest rates.”

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