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San Francisco's Westfield mall sees value slashed by 75% - erasing nearly $1 billion

By Joy Wiltermuth

Value of upscale mall is slashed to $290 million from $1.2 billion in 2016, according to Morningstar

San Francisco's biggest mall saw its value slashed by about 75% in December, to $290 million - marking a loss of nearly $1 billion since the property was last financed by Wall Street lenders, according to Morningstar Credit.

Owners Westfield (FR:URW) and Brookfield Properties (CA:BN) in June surrendered the shopping center in the heart of San Francisco's downtown to their lenders, dealing another blow to the city's post-pandemic recovery plans.

The large, upscale mall and office building, formerly known as Westfield San Francisco Centre, was refinanced by a group of Wall Street banks in 2016 in a transaction that sliced up the 10-year mortgage debt into several bond deals.

In the wake of the pandemic, fortunes have shifted downward not just for mall owners, but also the urban cores of cities like San Francisco, where officials are forecasting an $800 million budget deficit over the next two years, in part due to record office vacancies.

See: San Francisco office buildings have 53% less foot traffic than four years ago

At the time the Westfield mall was refinanced, it was 93.7% leased and valued at $1.2 billion, according to financing documents. Those records showed Bloomingdale's (M) and Nordstrom (JWN) as anchor tenants, and Century Theatres (CNK) as a major tenant.

Nordstrom in August said it was closing its flagship store at the mall, which had an occupancy rate last pegged at 46%, according to Morningstar Credit. Morningstar noted that news reports since that last occupancy reading indicate additional tenants have since left the property.

The Union Square mall has since been renamed the San Francisco Centre, with a receiver appointed in October to manage the property, according to the San Francisco Chronicle.

Hopes for Federal Reserve interest-rate cuts have led a retreat in the 10-year Treasury yield BX:TMUBMUSD10Y to about 4% from a high of 5% in October, fueling some optimism in the reeling commercial real-estate sector.

Westfield and Brookfield didn't immediately respond to requests for comment.

Westfield's parent company, Unibail-Rodamco Westfield, has been slowing its plans to cut its remaining mall footprint in the U.S., after earlier outlining plans to shed most of its U.S. properties by the end of 2023 to focus on its European malls.

-Joy Wiltermuth

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01-13-24 0956ET

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