Brookfield Lands $190 Million Refinancing for San Francisco Mall

Brookfield Lands $190 Million Refinancing for San Francisco Mall




In the latest positive sign for the thawing investment capital market and distressed retail property, Brookfield Properties has secured a $190 million refinancing for its Stonestown Galleria, a major shopping center in San Francisco.

The new loan, which is being rolled into a commercial mortgage-backed securities offering, comes about six months after Brookfield, along with Paris-based Unibail-Rodamco-Westfield, stopped making payments on the $558 million mortgage for Westfield Centre, the city’s largest mall at 1.5 million square feet and centrally located downtown at 865 Market St.

The smaller 800,000-square-foot Stonestown Galleria is on San Francisco’s west side at 3521 20th St. and is being eyed for an overhaul that would add residences, a move growing in popularity at retail sites across the country. Stonestown’s $180 million loan matured in October. However, Brookfield received a 30-day extension, CoStar data shows, and subsequently secured the refinancing, according to an analysis from Moody’s Investors Service of the upcoming CMBS deal BPR 2023-STON.

Retail property financing carries extra significance in San Francisco, where the downtown has seen several stores close because of reduced foot traffic. The city’s real estate challenges, including fewer workers commuting to offices, make the funding lifeline for Stonestown a welcome reprieve, according to David Putro, head of commercial real estate analytics at Morningstar Credit.

“For a market that can use any type of positive news, getting this property [refinanced] and avoiding a stint in special servicing is very positive,” Putro said in an email, referencing the third-party firms that help borrowers pay back debt.

Stonestown joins a list of shopping malls nationally that have secured financing. The San Francisco mall’s loan terms are aligned with these deals, according to Putro.

“We’ve seen a surprising amount of mall activity recently,” he said. “Tyson’s Corner Center in Northern Virginia, Oakbrook Center outside Chicago, Scottsdale Fashion Square are among a number of malls that have been securitized in standalone deals in the past few months; a number of others have [refinanced] into multi-borrower deals.”

Lindsay Kahn, director of public relations for retail at Brookfield, told CoStar News in a phone interview that Stonestown was “never in danger of defaulting.”

The terms of the refinancing, originated by Deutsche Bank, Wells Fargo and Barclays, are four years with a 7.91% interest rate, according to Moody’s. The original loan was issued by Wells Fargo in 2013 and had a remaining balance of $164 million when it matured, CoStar data shows.

Stonestown’s strongest performers are small shops, according to Moody’s analysis. Reported sales for retailers under 10,000 square feet as of August averaged $779 per square foot excluding Apple. Average sales per square foot jumped to $1,237 per square foot including Apple, an increase of 10% from pre-pandemic 2019 sales of $701 per square foot or $1,367 per square foot including Apple.

However, the strong retail sales have helped tenants land favorable leases where they aren’t responsible for paying building expenses including taxes, insurance, utilities and repairs, according to Moody’s.

“Despite several tenants generating strong profitability due to high sales volume, the tenants’ negotiating power appears to have strengthened in recent years as gross lease structures with average rents have become more common,” the analysis said.

The refinancing, which was reported earlier by The San Francisco Chronicle, will allow Brookfield to redevelop Stonestown into a mixed-use property with up to 3,500 residential units, as well as retail, office, plazas, and parks. The proposal is part of the reason “it makes sense to me that they found a way to get it done,” according to Putro.


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