The parent company of the formerly Australian shopping center brand Westfield announced a year ago that it wanted to divest itself of its US mall properties. And following the Nordstrom closure announcement, they are walking away from their Market Street mall in SF and surrendering it to the lender.
The Chronicle reported Monday that the Westfield Corporation and its partner, Brookfield Properties, have stopped making payments on a $558 million loan and are in the process of transferring ownership to an eventual receiver. While this could be a negotiating tactic with the lender — which one expert surmised could be the case with a similar public announcement by the owner of the Union Square Hilton and Parc 55 hotels — Westfield has already in recent years walked away from several of its US properties, including four malls in Florida.
And in April 2022, the Wall Street Journal reported that Westfield parent company Unibail-Rodamco-Westfield had near-term plans to back out of the US market altogether and focus solely on the EU. Chief Executive Jean-Marie Tritant told investors at the time that the plan was to sell off most of its US real estate by the end of 2023.
But, much like Nordstrom, the Hilton owner, and Whole Foods in recent months, the company points to downtown San Francisco's specific problems and not the retail climate overall.
In a statement Monday, the company said, "For more than 20 years, Westfield has proudly and successfully operated San Francisco Centre, 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 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."
The Chronicle notes that, according to Westfield, gross sales at the Market Street mall were down by a third in 2022 as compared to 2019. And after the departure of Nordstrom, the property will be just 55% leased — compared to the average for its malls, which is 93%.
The other anchor tenant in the mall, Bloomingdale's, is reportedly tied in to a long-term lease that doesn't expire until 2046. But, as the SF Business Times reported, two large tenants, the Century Cinema and H&M, both have leases expiring in the next six months.
Westfield opened the grand, fully rebuilt mall in 2006 along with then partner Forest City, and it was then called the largest mall on the West Coast — connecting the pre-existing, Nordstrom-anchored shopping center, open since 1989, to the historic Emporium building next door. The renovation project, which included the preservation of the Emporium's grand glass dome on the fourth floor, began in 2003.
While the mall is in no immediate danger of closing, it has certainly seen better days in terms of foot traffic — and even on relatively busy weekends, many stores are far from crowded.
As SFist noted several weeks ago, this follows a larger, national trend in which large-scale retail in major cities is suffering generally, with more shoppers moving online or patronizing suburban shopping centers over urban downtowns. A new research paper from the JP Morgan Chase Institute found that Los Angeles, San Diego, New York City, Seattle, Miami, and Chicago all lost more retail stores than they gained between 2017 and 2021, as did San Francisco. And the pandemic was only one of multiple factors in that trend.
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