If the San Francisco Centre had been on life support since Nordstrom left in 2023, then the announcement that Bloomingdale’s, the sole remaining anchor, was exiting the mall with 20 years still on its lease marked the pulling of the plug.
Normally, a clean slate would represent an opportunity to reimagine the property. But in this case, a complicated web of lenders who are anxious to get their money back are keeping the mall frozen in place.
Banks often bundle mortgages into an asset known as a commercial mortgage-backed security (CMBS) that can be bought and sold on the market. This process may not sound consequential, but it’s actually a key factor holding up the sale of the mall.
At 800,000 square feet, it’s the city’s largest mall and was once a piece of prime real estate. But because the last refinancing, in 2016, involved a chunk of CMBS debt, multiple groups — not just the banks that initially loaned cash — have a say on the future of the property, and they’re pulling in different directions.
The distressed $566 million loan was supposed to be auctioned off late last year, but that process was delayed twice at the behest of lenders. According to the special servicer, Midland Loan Services of PNC Bank, an auction is now scheduled for February.
“It could be that [the lenders] don’t know what they want to do next,” said Brad Blake, managing partner of Blake Griggs Properties, which is not involved in the mall but has served as a receiver on other properties undergoing tumultuous ownership changes.
“It’s hard to get consensus when there are multiple people at the table,” Blake added. “Some might want to cut their losses for whatever they can get, while others might see the property’s future value differently and want to explore different options.”
An auction could also be postponed if a settlement is reached with the delinquent borrower or a new buyer emerges whom lenders prefer.
The saga started in 2023, when the mall’s previous owners, Unibail-Rodamco-Westfield and Brookfield Properties, defaulted on their loan obligations and walked away from the property.
This left it under the care of a court-appointed receiver, Trident Pacific, whose mandate is to preserve the value of the physical asset and existing cash flow, not redevelop it. The firm did not respond to requests for comment.
Any large-scale changes to the property would have to come out of the pockets of the lenders, Blake explained. So until new ownership comes in, the mall will likely remain as it is — gradually depleted of brand-name stores.
With the exit of Bloomingdale’s, which is owned by Macy’s, the largest retailer remaining at the mall is Zara, which occupies more than 27,000 square feet, according to loan reports.
“It’s going to take a long time to turn around a large ship like this,” said Alex Sagues of CBRE, a retail broker with listings in Union Square and Mission Bay.
“There are very few tenants right now that can take space of that size,” he added. “There are even fewer who are interested in an urban location.”
Similar to the city’s slow-recovering office sector, the demand for smaller floor plans in retail is robust, while the largest tenants are in the process of downsizing their real estate.
Real estate sources suggest that merging Bloomingdale’s with the Macy’s flagship in Union Square would make sense, as the latter owns the building it occupies at 170 O’Farrell St. and has said it wants to shrink its footprint.
What will become of the massive empty spaces at the San Francisco Centre? The next owner will face Herculean obstacles in redeveloping the mall, in part because preservation of historic components such as the rotunda will drag out any planning and approval process. Developers say it’s unlikely that investors would be patient enough to demolish structures around those historic parts without interrupting the property’s existing revenue streams. To complicate matters further, the San Francisco Unified School District owns a 75,675-square-foot lot beneath the mall — yet another stakeholder that would have to be at the table.
The closest parallel in scale can be found at the former Vallco Shopping Mall, down the street from Apple’s headquarters in Cupertino. The 1.2 million-square-foot shopping center was partially demolished in 2018 to make way for a mixed-use community that would have featured the city’s tallest residential towers and office space, connected by the world’s largest “green roof.”
But more than a decade since those plans were pitched, the project — spearheaded by the Bay Area-based Sand Hill Property Company, with backing from the Abu Dhabi Investment Authority — has been scaled back, and the site remains a patch of dirt.
“If a sovereign wealth fund couldn’t execute on that during a better economy, it’s going to take a miracle to do something of that scale in downtown San Francisco,” said a local developer who asked to remain anonymous to protect working relationships.
Therefore, repurposing the existing structures at the San Francisco Centre would make more sense, observers say. Blake sees the storefronts and abandoned movie theaters as natural fits for classrooms and auditoriums for a satellite college campus. Sagues suggested converting one of the anchor stores into a multi-level parking garage to service neighboring Union Square, where leasing activity is strong.
“The [Bloomingdale’s closure] was not positive news, but it wasn’t unexpected,” Sagues said. “It might seem far away now, but it’s not going to take that big of a spark to ignite the recovery of retail on that block.”