San Francisco mall proprietor defaults as actual property woes rise

Westfield San Francisco Center in 2022 in San Francisco. Justin Sullivan/Getty Images

Westfield San Francisco Center mall owners are giving up the land to lenders, adding to real estate woes in a city struggling to bring workers and tourists back in the wake of the pandemic.

The mall, jointly owned by Unibail-Rodamco-Westfield and Brookfield Corp., has $558 million in outstanding mortgage debt. Management is delegated to a bankruptcy trustee.

The move comes a month after Nordstrom Inc. announced it was closing its store at the site, citing a drop in customer traffic and the city’s changing dynamics. The mall is located in the heart of San Francisco’s Union Square neighborhood, one of downtown’s premier shopping and tourist districts.

“Given the difficult operating conditions in downtown San Francisco that have resulted in declines in revenue, occupancy and footfall, we have made the difficult decision to initiate the process of transferring management of the mall to our lender so they can appoint one” The trustee will operate the property going forward,” Molly Morse, a spokeswoman for Unibail-Rodamco-Westfield, said in the statement.

San Francisco has been among the hardest-hit cities since the pandemic as office vacancies soar, retail vacancies rise and security concerns deter visitors. Last week, Park Hotels & Resorts Inc. announced it was halting payments on loans to two downtown hotels with $725 million in outstanding debt.

Revenue at the Westfield San Francisco Center fell to $298 million last year from $455 million in 2019, while foot traffic fell 43%, Morse said. Traffic and sales at other Westfield properties increased during the same period.

The San Francisco Chronicle first reported on Westfield’s decision to default on his debts.

In a statement, San Francisco Mayor London Breed said the move “will take some time,” citing Unibail-Rodamco-Westfield’s plans to exit the US market entirely. The Paris-based company planned to “radically reduce our financial exposure to the US over the course of 2022 and 2023,” said CEO Jean-Marie Tritant.

“With new leadership, we have the opportunity to pursue a new vision for this space that focuses on the future of downtown San Francisco,” said Breed. “Whether it’s attracting new types of businesses or educational institutions, or creating a completely different experience, we need to be open to what’s possible.”