Westfield gives up the SF shopping center in the wake of Nordstrom’s closure

Westfield is giving up its namesake San Francisco mall in the wake of Nordstrom’s planned closure, handing over the city’s largest mall to its lender after foot traffic and sales plunged during the pandemic.

The company defaulted on a $558 million loan, and Westfield and its partner, Brookfield Properties, began the process of transferring control of the mall at 865 Market St. this month.

“For more than 20 years, Westfield has proudly and successfully operated San Francisco Center, investing significantly over that time in the vitality of the property. Given the challenging operating conditions in downtown San Francisco, which have led to declines in sales, occupancy and foot traffic, we made the difficult decision to begin the process of transferring the management of the shopping center to our lender to allow them to appoint a receiver to take the property forward,”[ads1]; the company said.

Nordstrom, which occupies 312,000 square feet in the mall, will close in August after 35 years when its lease expires. The mall — which includes 1.2 million square feet of retail space and 300,000 square feet of office space — will be just 55% leased after Nordstrom’s departure, well below other US Westfield malls that average 93% leased.

The mall’s commercial mortgage-backed securities loan has multiple lenders, which were not disclosed. Future mall operations will be determined by the receiver, but typically retail properties that go through foreclosure continue to remain open.

Westfield’s withdrawal comes on top of the economic turmoil affecting the Powell Street area. Park Hotels & Resorts stopped payments on a $725 million mortgage tied to the nearby Hilton Union Square and Parc 55 hotels, two of the largest in the city, and plans to surrender those as well. Adjacent to the Westfield mall, Old Navy is also closing in a few weeks, and the April fatal shooting of Banko Brown by a Walgreens security guard on the same block underscored crime and public safety challenges in the area.

Last month, Westfield blamed “unsafe conditions” and “lack of enforcement against widespread criminal activity” in part for Nordstrom’s departure from the mall.

Westfield said the “unprecedented” poor performance in San Francisco was a stark contrast to the rest of its properties.

The San Francisco Center generated $455 million in sales in 2019 before the pandemic. Sales fell by about a third in 2022 to $298 million between January and December, according to Westfield.

Westfield Valley Fair in San Jose and Santa Clara, boosted by the opening of the Eataly food hall, had a 66% increase in sales between the same time periods. Westfield’s flagship mall in California increased by 26% and sales in the US increased by 23%.

San Francisco foot traffic totaled 5.6 million visits between January and December 2022, compared to 2019’s 9.7 million visits, a decrease of more than 42%. Foot traffic across other Westfield-owned US malls was down just 2%.

Last year, Westfield’s parent company Unibail-Rodamco-Westfield said it planned to sell all its US malls to focus on Europe and currently owns 18 of them after completing some sales.

The San Francisco mall has several leases expiring soon: Century Theatres’ 52,000-square-foot lease expires in September and H&M’s 25,289-square-foot lease expires in January 2024.

Telecommuting, a decline in tourism and safety concerns have hit downtown San Francisco and the nearby Mid-Market area hard, sending offices, apartment buildings and hotels into default and foreclosure.

The Chronicle office building, a block from Westfield mall, faces a 60% vacancy rate by the fall as tenants Yahoo and Autodesk’s leases expire. The nearby office tower 415 Natoma, also owned by Brookfield, is 97% vacant.

In 2003, Westfield partnered with what was then developer Forest City on a massive expansion of the former Emporium store, a $440 million project that preserved and restored a century-old dome and created one of the largest malls on the West Coast anchored by Nordstrom and Bloomingdale’s. But the pandemic closed it for months, leading to Westfield’s demise.

Westfield has hit financial distress in other markets: It missed a payment on a $195 million loan tied to the Valencia downtown in Southern California in January. It said at the time it was working with the lender and had no update Monday. It also gave up four malls in Florida in foreclosures earlier in the pandemic.

Westfield shopping center was pretty quiet and mostly empty around noon on Monday.

Tine Skov, a tourist from Denmark and a repeat visitor, said she likes the mall’s architecture and many of its stores, but was stunned by the absence of shoppers. “There are a lot of expensive stores, but there is no one in them,” she said.

Source link

Back to top button

mahjong slot