AE Retail West LLC, the company that owns and operates the American Eagle retail chain, is seeking legal redress against Westfield, the company that owned the San Francisco Centre on Market Street. They allege that Westfield allowed the mall to deteriorate, neglecting their obligations to maintain it and ensure the security of the American Eagle outlet and its employees.
Allegations in Detail
American Eagle claims that the mall has become a hotspot for “rampant criminal activity.” Between May 2022 and May 2023, the American Eagle store reportedly experienced over 100 significant security incidents. These incidents included violence, thefts, aggressive guests, and situations where patrons brandished firearms at store employees. In a shocking episode, a patron even threatened the store’s staff with a machete. Despite paying millions of dollars in rent and expecting the benefits promised in their lease, American Eagle contends that Westfield failed to uphold its end of the agreement. The lease mandates Westfield to maintain the mall’s common areas comparable to other regional shopping malls. Westfield has been accused of investing over $2 billion in other malls while neglecting the San Francisco Centre, despite having the financial resources to do so.
Impact on Business
American Eagle took measures to ensure the safety of its staff and patrons. They closed the street-facing entrance, hired more security personnel, upgraded their CCTV systems, and applied security window film. However, the mall’s deteriorating conditions and growing public safety concerns have negatively impacted American Eagle’s business. The public’s perception of the mall has reportedly been tainted due to Westfield’s alleged negligence.
Westfield’s Response and Business Strategy
Westfield, a prominent shopping center giant with locations even at the World Trade Center in New York, previously mentioned in a statement about the challenges they faced in downtown San Francisco. Due to declining sales, foot traffic, and occupancy, they made a crucial decision. Westfield and its partner, Brookfield Properties, decided to cease payments on a $558 million loan for the San Francisco property. This led to the transfer of the shopping center management to their lender. In a significant business move in April 2022, Paris-based Unibail-Rodamco-Westfield, which owns Westfield, unveiled plans to sell most of its American malls to shift its focus on European properties.
Public and Business Reactions
This lawsuit, as reported by the San Francisco Business Times, is just one example of a growing concern about San Francisco’s business environment. Some critics have labeled the situation a “doom loop,” a vicious cycle where rising crime leads to business setbacks. Park Hotels & Resorts also expressed concerns, handing two of its renowned hotels back to the bank due to perceived street insecurities and skepticism over the area’s recovery prospects. AE Retail West LLC’s lawsuit has been filed in San Francisco Superior Court, seeking “compensatory monetary damages” whose exact amount will be determined at trial.
Broader Implications for San Francisco’s Business Climate
The lawsuit not only underscores the challenges faced by businesses operating in downtown San Francisco but also prompts a broader conversation about the city’s evolving business landscape.
The “Doom Loop” Phenomenon
The concept of the “doom loop” — a recurring cycle of rising crime leading to business setbacks — has been gaining traction among business analysts and city planners. San Francisco, known for its vibrant business ecosystem and thriving tech industry, has witnessed a series of high-profile companies withdrawing or re-evaluating their commitments due to security and operational concerns. The situation at Westfield Mall is a microcosm of this broader trend. The alleged decline in safety and security has ripple effects on businesses, employees, and patrons alike.
Businesses Re-evaluate their Footprint
As businesses continue to express concerns over security and the overall business climate, there is a growing trend of re-evaluation. Companies are assessing their physical footprint in the city, with some considering relocation, downsizing, or altering operational strategies. The departure of Park Hotels & Resorts from prominent locations underscores the urgency of these concerns. If large enterprises with significant investments are reconsidering their positions, smaller businesses may soon follow suit.
Statements and Responses
Westfield refrained from making an extensive comment on the situation, stating they haven’t been served the lawsuit yet. Similarly, Brookfield Properties hasn’t responded to comment requests as of the time of reporting. American Eagle, too, has reserved its comments on ongoing litigation. While Mayor London Breed’s office has not commented on the issue, the lawsuit and the broader implications it holds for businesses in San Francisco remain a focal point of discussion for stakeholders in the region.