MILE MARKERS ON THE ROAD TO DETROIT: In San Francisco, Government Failure Erases Billions of Dollars of Commercial Real Estate Valuations.

San Francisco is proving to be ground zero in the nationwide commercial real estate collapse. While the values of offices and malls are tumbling in many US cities, the losses in San Francisco are more dramatic and, unlike elsewhere, have extended to hotels. City and state government mismanagement have played a major role in destroying billions of dollars in assessable real estate values, but the role of these policies is easily overlooked.

San Francisco’s plight was thrown into sharp relief on June 5, when the owner of two downtown hotels containing a combined 2,925 rooms announced that it would cease making payments on a $725 million mortgage backed by the properties. Commercial bond investors will now have to find a company willing to purchase the hotels at a small fraction of their estimated 2020 valuation of $1.561 billion.

Gooder and harder, San Fran.