Buyer Beware: AEW May Seek to Unload Hotel Frank Labor Dispute, According to UNITE HERE Local 2

SAN FRANCISCO--(BUSINESS WIRE)--An affiliate of AEW Capital Management may be seeking to unload the Hotel Frank in San Francisco, which for nearly two years has been mired in a labor dispute with the hotel workers’ union UNITE HERE Local 2. Prospective buyers are urged to conduct thorough due diligence on the overhanging costs of this dispute before acquiring the property.

AEW Partners Fund VI acquired the Hotel Frank in December 2010 with Provenance Hotels – a small hotel management group. At the time AEW bought the property, Provenance had already provoked a labor dispute with the hotel’s employees. That dispute has only escalated since AEW entered the picture, burdening the property legal problems and a consumer boycott that could materially affect the value of the asset.

These include:

• An order by an Administrative Law Judge at the National Labor Relations Board to reinstate an illegally fired worker with 15 months of back pay. The hotel has not yet complied with this order.
• Over $800,000 in outstanding health and retirement payments on behalf of hotel employees.
• An active consumer boycott of the property, in support of which workers and others continue to contact customers regularly, urging them not to patronize the Hotel Frank. Meanwhile, regular and noisy picketlines greet customers at the hotel’s front door.

In addition, the property has been subject to multiple violations of San Francisco building code, including one outstanding complaint of unpermitted construction on the hotel’s 2^nd, 3^rd, and 4^th floors (which remain unoccupied by hotel guests).

These problems could amount to millions of dollars in outstanding costs, potential losses of future business, and necessary construction work. UNITE HERE urges prospective buyers to examine this property thoroughly before any potential acquisition.