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ortsmouth Square, a Los Angeles-based investor, has defaulted on $117 million in loans secured by the 544-room Hilton San Francisco Financial District hotel. The company was served a termination notice after failing to pay the loans linked to the 27-story hotel at 750 Kearny Street, which straddles Chinatown and the Financial District.

    Despite owing over $106 million on mortgage and mezzanine loans, Portsmouth Square is not ready to walk away from the property. In a regulatory filing, the company stated that it will "endeavor to refinance the aforementioned loans as soon as possible or seek alternative solutions" to resolve the situation.

    Portsmouth CEO David Gonzalez confirmed the second default and said his company will try to refinance and retain possession of the hotel. The company had hired Hart Advisors Group to help with loan modification negotiations and submitted proposals to the special servicer, LNR Partners.

    The lenders and special servicer negotiating on behalf of bondholders could accelerate the loans or foreclose on the property. However, Portsmouth Square cannot predict if or when the lender will exercise these rights and remedies. The company cited "obstacles beyond its control" as a reason for the difficulty in refinancing its hotel debt.

    Portsmouth Square joins other large Downtown hospitality properties that have struggled to pay off pre-pandemic loans. The San Francisco hotel market has not recovered since the pandemic, with fewer corporate events held in the city.