Westfield and Brookfield to Surrender San Francisco Mall

Westfield, faced with an exit by Nordstrom and a half-empty Westfield San Francisco Centre mall, has decided to surrender the property and hand its keys to the lenders.

The firm owned by Paris-based Unibail-Rodamco-Westfield and its partner, New York-based Brookfield Properties, will cease making payments on a $558 million loan and give up the nine-story mall at 865 Market Street, the San Francisco Chronicle reported.

The owners of the 35-year-old mall with 170 stores cited a plunge in shoppers and sales since the pandemic.

“For more than 20 years, Westfield has proudly and successfully operated San Francisco Centre, investing significantly over that time in the vitality of the property,” Westfield said in a statement. “Given the challenging operating conditions in Downtown San Francisco, which have led to declines in sales, occupancy and foot traffic, we have made the difficult decision to begin the process to transfer management of the shopping center to our lender to allow them to appoint a receiver to operate the property going forward.”

The mall’s commercial mortgage-backed securities loan has numerous lenders, who weren’t disclosed. Operations of the mall will be determined by a receiver. Retail properties going through foreclosure generally continue to stay open, according to the Chronicle.

Seattle-based Nordstrom, citing “the dynamics of the downtown San Francisco market,” said it would close its 312,000-square-foot store at the mall when its lease expires in August. It has been there since the mall opened in 1988.

Last month, Westfield blamed the Nordstrom exit on “unsafe conditions” and “lack of enforcement against rampant criminal activity.” A Banana Republic closed in May.

After Nordstrom pulls out, the 1.5 million-square-foot center will only be 55 percent leased. On average, U.S. Westfield malls are 93 percent leased.

The mall generated $455 million in sales in 2019 before the pandemic, according to Westfield.

Last year, it took in $298 million.

San Francisco foot traffic totaled 5.6 million visits last year, compared to 9.7 million visits in 2019, a more than 42 percent drop. Foot traffic across other Westfield-owned U.S. malls was down only 2 percent.

Last year, Unibail-Rodamco-Westfield said it plans to shift its focus to European properties and hoped to sell most of its U.S. holdings this year. It now has 18 U.S. properties.

Westfield’s pullout adds to the economic pain around Powell Street.

This month, Virginia-based Park Hotels & Resorts stopped payments on a $725 million loan tied to the nearby Hilton Union Square and Parc 55 hotels, two of the largest hospitality properties in the city. A surrender to the lenders is imminent.

Next to Westfield mall, Old Navy is also closing in a few weeks and the April fatal shooting of Banko Brown by a Walgreens security guard on the same block underscored the crime and public safety challenges in the area, according to the Chronicle.

— Dana Bartholomew