Westfield San Francisco Centre will be given up to its lender as the mall's owner pulls out from the Downtown San Francisco property that's been hit by a string of economic shocks.
Most recently, the mall was rocked by the announcement in May that Nordstrom would not renew its lease, leaving a huge hole across five floors of the mall. The mall's occupancy rate currently sits at 55% with the string of recent closures.
"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," Westfield said in a statement.
A number of nearby stores have also announced their closure, including Old Navy’s flagship location on Market Street and Nordstrom Rack, which sits across from the mall on Fifth Street. Just around the corner, on Fourth Street, the Metreon shopping and entertainment complex is bringing in art pop-ups to fill a number of its many vacant storefronts.
Westfield and its partner Brookfield has ceased payments on the $558 million loan on the property. Control of the 1.2 million-square-foot mall will be transferred to Westfield’s lender and a receiver will be appointed to operate the property going forward.
The situation is a marked difference from 2016 when the property was appraised at $1.2 billion. The mall was earning around $22 million in net operating income against $19.2 million in debt service costs, according to loan documentation.
As Lillian Philippe was having lunch in the Westfield mall food court on Monday, she told The Standard she was concerned about the end of the company’s lease at the shopping center.
"It's distressing to hear that, with so many stores closing," said Philippe, who is visiting family in San Francisco from her home in New York City.
Despite the mall's fate being uncertain, Philippe is hopeful it will survive.
"I think it'll be alright because there's nowhere to go but up," Philippe said. "This place is somewhere to get away from what's happening on the streets."
Westfield cited declines in sales from $455 million in 2019 to $298 million in December 2022, with visits decreasing from 9.7 million to 5.6 million during the same period. The company said nearby properties like Westfield Valley Fair in San Jose were experiencing relative increases in sales and foot traffic recovery.
The mall is also slated to see additional departures soon with Century Theaters’ 53,000-square-foot lease and H&M’s 25,000-square-foot lease due to expire in the next eight months, according to data from Trepp.
An analysis by The Standard found that approximately 46% of the major retailers operating in the mall before the pandemic have since closed. At the same time, 21 new retailers have opened in the last three years—many outlets that moved from street-level shops around Union Square.
The Downtown Westfield mall is co-owned by Brookfield Properties and French real estate company Unibail-Rodamco-Westfield. Brookfield did not respond to requests for comment by publication time.
In recognition of the changing market environment for malls, Unibail told investors last year it was moving forward with selling off its entire U.S. portfolio, including its stake in the San Francisco property.
"This has been something that has been coming for some time," Mayor London Breed said in a statement. "We’ve had numerous conversations with Westfield about the future of this site, and it’s been clear that they did not have a long-term commitment to San Francisco as they look to withdraw entirely from the United States market."
Over the past three years, Westfield has sold a number of properties, including the Westfield Brandon in Tampa, the Westfield North County in San Diego and the Westfield Santa Anita in Arcadia.
In 2021, as the company was hurting from the impacts of Covid on its business, the company handed the keys back to its lender for five other regional malls.
Breed said the mall would remain open for the time being under new management but underscored the changing nature of retail and the need to “adapt to diversify and better use spaces in our Downtown area.”
'Unsafe Conditions'
In the wake of Nordstrom’s announcement that it would close its store in the Westfield mall, the co-owner Unibail-Rodamco-Westfield said the planned closure “underscores the deteriorating situation in Downtown San Francisco.” Businesses are leaving Downtown due to unsafe conditions, the company said.
Law enforcement dispatch data shows police regularly patrolled the mall. Officers logged almost 560 “passing calls”—when officers patrol an area to demonstrate a police presence—at the mall from May 1, 2022, to May 1, 2023.
San Francisco’s emergency dispatchers also received reports of hundreds of potential crimes during the same time period. The data shows reports of 118 petty theft incidents, 64 fights, 41 grand thefts and 24 burglaries.
The city’s Department of Emergency Management only releases law enforcement dispatch data going back three years, so it cannot be used to make pre-pandemic comparisons.
Unibail-Rodamco-Westfield “actively engaged” city leaders for “many years” over its serious concerns, the company said.
City officials touted a number of steps taken to improve public safety and deter retail theft, specifically at the mall.
These actions include dedicated police officers posted at the property, introducing public safety ambassadors nearby, and increased collaboration around an organized retail theft task force.
While no closure plans have been announced, a Nordstrom worker said they believe that the mall will close once Westfield exits.
"I think it's the end of an era," said the worker, who spoke on the condition of anonymity because they were not authorized to speak to the press. "I figured this mall was going to close sooner or later. It's time."
"It's going to be sad if this place closes," said a mall security guard, also speaking on the condition of anonymity because they were not authorized to speak to the press. "I'm born and raised in this city, and I've been coming to this mall as long as I can remember."
This is a developing story.