Lenders on more than $550 million in CMBS loans backed by San Francisco’s Westfield Centre have filed a suit to foreclose on the downtown mall, put it into receivership and then sell it.
According to the lawsuit, which was filed in the Superior Court of California on Sept. 29, several LLCs associated with Westfield America have not made payments since June and have not paid to maintain or secure the property since Sept. 12, moves which “severely and immediately threaten the integrity, well-being and value of the property, including security and tenant relations.”
Rather than simply foreclosing on the 1.45-million-square foot mall and office building, the lenders are asking the court to appoint a receiver to “manage, operate, protect, preserve and maintain the mortgaged property and collect all rents therefrom.”
The borrowers have written to the CMBS bondholders to tell them that they will “wait for the receiver to be appointed so the receiver can pay operating expenses,” the suit reads.
The suit also asks that after the foreclosure and receivership, the property be sold to pay down the debt. That includes the $558 million loan, first originated by Wells Fargo and then pooled into a CMBS deal, plus outstanding interest payments and associated fees totaling over $5.5 million, as well as attorney’s fees.
The suit was filed by lawyers with the Los Angeles office of Sheppard Mullin Richter & Hampton, who declined to comment. The suit only names Westfield, not partner Brookfield, even though both publicly stated this summer that they would give up the property after Nordstrom departed a multifloor location it had occupied since the late 1980s, leaving the mall half-empty. Brookfield became a partial owner in 2018 when it bought Forest City, which partnered with Westfield more than 20 years ago to redevelop the Emporium portion of the mall.
“Think big” moment
Since the June announcement of the impending default, city leaders have considered what Westfield Centre could become, with Mayor London Breed pitching a soccer stadium as one possibility. Architect Marc Asnis of the San Francisco office of Perkins & Will said that the foreclosure and subsequent sale of the mall is an opportunity for people to “think big.”
“This is a once-in-a-generation type of site, right in the heart of downtown, adjacent to the Financial District,” he said. “It’s this opportunity for larger urban design and transformative thinking about what the future of our downtown should look and feel and function like.”
Asnis consulted with the Association of Bay Area Governments on a recent study about how to transform underutilized malls and office parks into affordable housing, healthcare centers and community colleges. While most of those locations are in the sprawling suburbs, the lessons learned from the study are applicable to the Westfield site as well, he said.
The new use has to fit the context of its surroundings, in this case an urban infill development that could or could not maintain the building’s turn-of-the-century glass dome and sandstone facade.
“There are so many different options on how to approach this,” he said. “It’s about what makes the most sense as an anchor and who are the partners you want to bring on board to really see this have a tangible community benefit and rise up to the occasion of an incredible site.”
It’s also best to keep on “our future goggles” and think long-term, he said. It’s not uncommon for mall redevelopment projects to take decades.
“We always look at what a phase one catalyst needs to be to start what we think of as this node of vibrancy to really invite people in,” he said. “And then looking 10, 20 years into the future to understand what is the final product.”
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