A receiver for the long-struggling San Francisco Centre has been appointed by a San Francisco judge—indicating that the saga of the long-struggling Downtown San Francisco mall, formerly co-owned by shopping conglomerate Westfield, is reaching its next chapter.
According to a filing made in San Francisco Superior Court Monday, Gregg Williams, with the Laguna Beach-based Trident Pacific Real Estate Group, was appointed the receiver of the San Francisco Centre. A receiver is a third-party individual in charge of managing a property during ongoing litigation.
The appointment of the receiver was made after a suit filed by Wilmington Trust and Wells Fargo Bank, alleging entities associated with Westfield had defaulted on their loan payments. Brookfield, who was a partial owner of the property with Westfield, was not named in the suit.
In this case, the conflict stems from a lawsuit filed on Sept. 29 by Wilmington Trust and Wells Fargo aiming to force foreclosure on the mall, put the property into receivership and sell it off. The plaintiffs are the lenders for a $558 million loan that was secured by nearly 800,000 square feet of space in the San Francisco Centre. News of the suit was first reported by The Real Deal.
The lawsuit claims that entities connected to Westfield have defaulted on $558 million in outstanding debt and have racked up $5.6 million in additional interest and fees since halting debt payments in June. The suit notes that the interest and fees are “still accruing until the Loan is repaid in full.” Attorneys for the lenders did not respond to a request for comment.
"Appointment of a receiver is an important first legal step to protect the cashflow and the physical asset. The receiver is an objective third party that has the authority to manage, reposition and sell the asset," said Brad Blake, managing partner of Blake Griggs Properties, who has served as a receiver on other properties.
The San Francisco Centre owners said in June that they would give the mall back to their lender, an event predicated by the decision of Nordstrom not to renew its lease, leaving a huge hole across five floors of the mall.
According to a court filing, Williams will be responsible for nearly every aspect of the mall’s operations—from changing the door locks and security codes, handling repairs and permitting issues, hiring security guards and other workers and possibly liquidating the property altogether.
Important to the plaintiffs, the receiver also has the responsibility to collect rents and revenues from the mall and disburse the funds to the lender after paying operating expenses. Williams did not respond to a request for comment.
Westfield made their plans to transfer management of the Downtown mall in June, adding that the transferral would allow them to “appoint a receiver to operate the property going forward.” Per the suit, the borrowers wrote to lenders “that they will wait for the receiver to be appointed so the receiver can pay operating expenses.”
The Westfield companies allegedly notified lenders about their non-payment of operating expenses on Sept. 12, according to the suit, which was an additional breach of the loan terms.
By failing to make payments for the loan—and for halting payment required to maintain the property, according to the suit, the borrowers “severely and immediately threaten the integrity, well-being and value of the property, including security and tenant relations.”
"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," a spokesperson for Unibail-Rodamco-Westfield, which owns the Westfield brand, said in a statement to The Standard.
"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. San Francisco Centre’s debt is non-recourse and this action has no impact on the rest of URW’s debt."