San Francisco Centre’s Pit Of Distress

The barren San Francisco mall handed back to lenders by Unibail-Rodamco-Westfield and Brookfield Properties is still a bottomless pit of distress, now valued at less than $200 million — a discount of more than 80% compared to its pre-pandemic peak.

The former Westfield San Francisco Centre, which was rebranded as San Francisco Centre after its prior owners bailed, is now worth $195 million, according to Morningstar Credit. It was appraised at $1.2 billion in 2016.

The 1.5 million square foot mall at 865 Market Street is two, nine-story buildings that connect. It is the city’s largest shopping mall, and is now only 7 percent occupied after retailers such as Nordstrom, Bloomingdale’s, Zara, Steve Madden and Kate Space made exits. Bloomingdale’s was its last anchor tenant, occupying 340,000 square feet of space, and it closed shop earlier this year even though the company’s lease wasn’t set to expire until 2046, per Morningstar data.

Unibail-Rodamco-Westfield and Brookfield Properties stopped making payments on a $558 million note a couple years ago; total exposure is $626 million now. The latest servicer commentary notes that the lender is in negotiations with the ground lessor over a ground lease default — and that the lender intends to foreclose as soon as possible.

“Upon foreclosure, Lender will immediately market for disposition,” the special servicer commentary, via Morningstar, reads.

A notice of trustee’s sale was recorded in October last year.
The mall’s foreclosure auction has been delayed several times but now appears to be an “imminent outcome,” according to Morningstar. The property’s operating losses are continuing at about $4.6 million for the first six months of the year. The mall made about $57 million when its current loan was underwritten in 2016.