Westfield surrenders San Francisco Centre to its lender
The fate of San Francisco’s biggest mall now rests in the hands of its banker.
Unibail-Rodamco-Westfield has stopped making payments on its $558 million loan on Westfield San Francisco Centre and will transfer ownership to its lender, according to the San Francisco Chronicle.
In a statement, URW said it was forced to make the move due to “challenging operating conditions in downtown San Francisco, which have led to declines in sales, occupancy and foot traffic.”
It also reported that sales at San Francisco Centre plummeted from $455 million in 2019 to $298 million in 2022. In the same year, URW noted, Westfield Valley Fair in neighboring San Jose experienced a 66% increase in sales and the company’s California flagship center sales increased by 26%.
Foot traffic at San Francisco Centre fell from 9.7 million in 2019 to 5.6 million in 2022.
With its location on Market Street across from Union Square, the 800,000-sq.-ft. mall has long been one of the most popular shopping destinations in San Francisco. Its fortunes, however, turned downward during the pandemic as tens of thousands of residents left the city. San Francisco Centre’s occupancy rate fell below 60% and Nordstrom’s April announcement that it would be leaving the mall no doubt forced URW’s decision to surrender ownership.
More residents have fled San Francisco than any other major city in the United States in recent years. The real estate brokerage Redfin reported that 30,200 people left town in January, placing it ahead of Los Angeles, New York and Washington, D.C. More than 41,000 San Franciscans moved out in January 2022.
It is also one of America’s priciest cities. A 2019 assessment pegged the median rent in San Francisco at $4,500--nearly three times greater than the national average.
In 2022, Paris-based URW announced its intent to sell all 24 of its Westfield Malls in the U.S. by the end of 2024 and focus solely on its centers in Europe. Its acquisition of Westfield took place in 2017.
"We will strengthen our core business by completing our deleveraging plans to emerge as a focused European pure-play," said Jean-Marie Tritant, chief executive officer of URW, during an investor meeting in 2022. "Deleveraging remains the key to unlocking future value, and we are progressing in our clearly defined disposal plans.”
The Chronicle report noted fear of a “doom loop” in San Francisco in which increasingly empty offices and fewer tourists could result in “draining the lifeblood from a once-thriving urban ecosystem.”
The fate of the well-located San Francisco Centre is hardly sealed, however. In 2021, Brookfield Properties handed the deed of one of metro Atlanta’s most successful enclosed centers—the 1.2 million-sq.-ft. North Point Mall—back to its lender, the New York Life Insurance Company. It hired Trademark Property Company to remake the mall into walkable mixed-use village with greenspace for outdoor dining, a sustainable park that collects and redistributes storm water, and a 10,500-sq.-ft. event plaza able to accommodate 2,500-plus concertgoers.