Shopping mall giant Westfield is walking away from its namesake shopping center in San Francisco, in another blow to the city’s downtown core.
Thank you for reading this post, don't forget to subscribe!The San Francisco Chronicle reported Monday that Westfield has stopped making payments on the Westfield San Francisco Centre’s $558 million loan, and Westfield confirmed in an email that it is in the process of transferring ownership to its lender to allow them to appoint a receiver.
In a statement, Westfield blamed “the challenging operating conditions in downtown San Francisco, which have led to declines in sales, occupancy and foot traffic.” Westfield’s partner in the mall, Brookfield Properties, did not immediately reply when asked for comment late Monday.
San Francisco has been slow to recover from pandemic conditions that kept workers away from their offices, and some fear the city is locked in a “doom loop” where office space will remain empty and tourism will continue to lag, hurting retailers and restaurants and draining the lifeblood from a once-thriving urban ecosystem.
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Landlords on a number of office buildings in downtown San Francisco in recent months have defaulted on their property debt, or simply handed the keys back to lenders as billions worth of mortgage debt comes due in a backdrop of sagging property values and higher rates.
A 22-story office tower at 350 California Street, the heart of the city’s financial district, reportedly sold for about 70% less than its valuation in 2020 earlier in May.
The upscale Westfield mall in downtown San Francisco was renovated in 2006 and includes about 800,000 square feet of space, including about 240,000 square feet of office space, according to Trepp.
According to Westfield, occupancy at the San Francisco mall has dropped to about 55%, after anchor store Nordstrom announced in April it would not renew its lease, and it said foot traffic there has plunged 43% since 2019.
“We have seen a significant decrease in total sales at San Francisco Centre from $455 million in 2019 to $298 million in Dec 2022 YTD,” Westfield said, noting that Westfield Valley Fair in nearby San Jose experienced a 66% increase in sales over that time, while its U.S. flagship sales have increased by 23%.
Last year, Westfield’s parent company, Unibail-Rodamco-Westfield
URW,
said it intended to shed most of its U.S. properties by the end of 2023 — likely at a sizable loss — and focus on its European malls.
Paris-based Unibail bought Westfield Corp. in 2018 for about $15 billion.
