After languishing downtown with no owner for more than two years, the San Francisco Centre Mall has been foreclosed upon.
The 1.2 million-square-foot property, the largest mall in San Francisco, will be owned and operated by the banks that loaned nearly $600 million to previous owners Unibail-Rodamco-Westfield and Brookfield Properties, which defaulted on their debts in 2023.
The foreclosure unlocks the ability for the lenders to dictate the mall’s future.
Deutsche Bank AG and JPMorgan Chase Bank, acting through an affiliate, on Wednesday took control of the mall after submitting two bids totaling $133 million. Less than a decade ago, it was valued at more than $1.2 billion.
In foreclosures, this maneuver is known as a “credit bid,” which means the lenders used the debt owed to them, rather than cash, to bid on the property during the public auction, which had been continually delayed due to negotiations between various stakeholders.
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Lenders are traditionally loath to own and operate real estate. The Standard has learned that the banks have hired CBRE to market the property for sale by next year.
Once the mall is sold again, the new owners can make investments in the property, including executing long-term leases, or can put redevelopment plans in motion.
“San Francisco Centre & Emporium is uniquely positioned to anchor the next chapter in downtown San Francisco’s recovery,” said Kyle Kovac, executive vice president of CBRE’s Capital Markets Team, who along with Mike Taquino, will be leading the next sales process.
The foreclosure auction, which lasted more than an hour and involved 12 witnesses, was conducted in two parts because the San Francisco Unified School District owns a 75,675-square-foot lot beneath the mall.
A spokesperson said SFUSD is still in “productive negotiations” with the foreclosing lenders over the ground lease, which runs until 2043 and includes a 15-year option to renew.
For two years, the mall was under the control of a court-appointed receiver, whose only mandate was to preserve the physical structure and existing cash flow.
Since Westfield and Brookfield walked away from the property, the mall has lost more than 95% of its tenants, including anchor department stores Nordstrom and Bloomingdale’s, a movie theater, and a spa.