The San Francisco real estate market is a ‘disaster,’ expert says

The Golden City has been no stranger to the volatile housing market, but one New York City real estate powerhouse led by mother-daughter team Dolly and Jenny Lenz warns San Francisco is now a "disaster" for the industry.

The Golden City has been no stranger to the volatile housing market, but one New York City real estate powerhouse led by mother-daughter team Dolly and Jenny Lenz warns San Francisco is now a "disaster" for the industry.

"It was once the jewel and the crown. San Francisco was our personal favorite city, our clients' favorite city. The jewel and the crown is a disaster," Dolly Lenz Real Estate CEO Dolly Lenz said on "The Claman Countdown" Thursday.

"Several huge hoteliers have given back the keys to the lenders" Dolly added. "They just said, You know what, I give up. I paid a billion and a half. You gave me a $700 million loan. I can't afford to make the payments, and you're not going to refinance."

In June, Park Hotels & Resorts Inc. announced that it stopped making payments on a $725 million loan that secured both its 1,921-room Hilton San Francisco Union Square and 1,024-room Parc 55 San Francisco properties and expects to remove them from its portfolio, citing several "major challenges" in the California city.

In its June investor presentation, Park Hotels cited "ongoing concerns over safety and security" as part of its rationale for giving up on the two prominent San Francisco hotels, and said the move would save $30 million a year in interest payments and some $200 million in maintenance expenses over the next five years.

"The problem is we're scared that this is going to cause contagion," managing director Jenny Lenz said. "So if this is happening in one building, then another, then another hotel. And these banks can't afford to keep them on the balance sheets. They're going to have to take them back and sell them quickly. That's going to cause more supply which is going to cause prices to come down."

"San Francisco is a disaster both in commercial and in residential," she added.

Dolly claimed, in San Francisco, "residential is dead, commercial is deader."

The issues with commercial real estate extend beyond San Francisco, and according to the real estate expert, is "worse" than people think.

"It's worse because a lot of the news isn't out there yet," Dolly said. "They're trying to work with the owners of these properties to say, look, we'll give you a short-term extension, let's work this out. But the owners are saying, no, I can't afford this. So unless you give me half an interest rate like I had before or we do something else, very creative, I can't afford to keep this and continue to maintain it."