Fallout after mall operator Westfield pulls out of San Francisco

SAN FRANCISCO - News of shopping center giant, Westfield, walking away from its San Francisco Centre mall and handing it back to the bank, overstates the city's social problems with homelessness, theft and crime.

The Westfield San Francisco Centre is owned by Unibail-Rodamco-Westfield, a multinational company based in Paris. The company recently announced that it stopped payments on its $558 million loan for the mall and is transferring management to its lender.

Typically, individuals and businesses that walk away from mortgages lose the property, damage their credit, and risk forfeiting other assets to compensate for the outstanding debt. 

However, URW has a loan arrangement that allows them to walk away without adversely affecting their other financial obligations or exposing their additional assets to collection lawsuits.

Economist and professor Tom Davidoff is an international expert in commercial real estate. He says such loans are common in big business so expect more companies to walk away.

"We've seen very large corporations worth billions and billions of dollars defaulting on loans and it's pretty remarkable," said the University of British Columbia professor.

The losers are the lenders.

"A lot of people are concerned that U.S. banks are going to run into trouble due to their exposure to commercial real estate loans," said Davidiff.

But banks are not alone.

"Some loans are securitized and held more diversely by pension funds, hedge funds, investors," he said.

Davidoff talks about a kind of death spiral where fewer workers coming downtown, usually drives a lot of businesses that serve them, out of business. That leaves even fewer workers, and the spiral just continues.

That obviously affects the tax base, leaving other taxpayers to try to pick up the difference.

On the entire block where the San Francisco Centre mall sits, only one small shoe store remains. Other nearby stores are also departing citing crime and a reduction in foot traffic.

San Francisco Supervisor Ahsha Safaí said, "It is clear we need a change in the conditions on our streets so shoppers and employees feel safe in our downtown."

What will ultimately pull Market Street, and the city, out of a potential death spiral is its tech base, mild climate, lifestyle opportunities and natural beauty.

"I think we've got at least a few years of some real problems for downtown San Francisco," said Davidoff.