San Francisco’s largest mall has taken a severe hit in value, plummeting by approximately 75% to $290 million, as reported by Morningstar Credit. This represents a staggering loss of nearly $1 billion since the property was last financed by Wall Street lenders.
Owners Westfield URW and Brookfield Properties made the difficult decision in June to relinquish control of the mall to their lenders. This move has dealt a further blow to San Francisco’s post-pandemic recovery plans.
Recognized as the upscale Westfield San Francisco Centre, the mall and office building underwent refinancing in 2016 through a collaboration of Wall Street banks. This restructuring divided the 10-year mortgage debt into various bond deals.
Unfortunately, the effects of the pandemic have not only impacted mall owners but have also been felt throughout urban centers like San Francisco. The city is now bracing for an estimated $800 million budget deficit over the next two years, partly due to an unprecedented number of vacant office spaces.
Insight: Foot traffic in San Francisco office buildings has declined by 53% compared to four years ago.
Westfield Mall Refinanced Amid Tenant Changes
At the time of refinancing, the Westfield mall was 93.7% leased and valued at $1.2 billion, according to financing documents.
The Westfield mall, now renamed the San Francisco Centre, recently underwent a refinancing process. The mall, previously known for having anchor tenants such as Bloomingdale’s and Nordstrom, as well as major tenant Century Theatres, experienced some changes in occupancy. Nordstrom’s flagship store, which once occupied a significant portion of the mall, has since closed down.
Recent reports indicate that the mall’s occupancy rate has dropped to approximately 46%, with additional tenants choosing to leave the property. In response to these changes, a receiver has been appointed to oversee the San Francisco Centre.
Although the commercial real estate sector has been facing challenges, there is some optimism due to hopes for Federal Reserve interest-rate cuts. This has led to a retreat in the 10-year Treasury yield, ultimately boosting confidence in the industry.
Requests for a comment from Westfield and Brookfield, the mall’s parent companies, have gone unanswered. Westfield’s parent company, Unibail-Rodamco Westfield, initially planned to reduce its presence in the U.S. by the end of 2023, but has since slowed down its efforts to focus on their European malls.
