Pyramid gets loan extension on Buffalo mall, but what about Destiny USA?

Syracuse, N.Y. — Pyramid Management Group announced Monday it has received a three-year loan extension on its Walden Galleria mall in the Buffalo suburb of Cheektowaga, but the company was silent on the status of $430 million in mortgages that were due on Destiny USA in Syracuse the same day.

The Syracuse-based mall developer had sought a five-year extension on $236 million in loans on the Walden Galleria. The loans had a maturity date of May 1, 2022.

On Monday, the company said it “successfully worked with its lenders to extend the loan on Walden Galleria, the dominant retail destination of Western New York, offering a powerful collection of upscale brands.”

“The three-year extension of Walden Galleria’s loans allows Pyramid to continue to reinvest in the shopping center, ensuring its health, vibrancy and dominant positioning in Western New York,” the company said in a statement.

“Walden Galleria emerged from the pandemic maintaining its position as the dominant retail and entertainment destination in the region,” said Pyramid CEO Stephen J. Congel.

The company did not say anything about the status of $430 million in mortgage loans on Destiny USA that were due to mature on Monday. A spokesman did not respond to requests from syracuse.com | The Post-Standard for comment.

Overall, Destiny carries more than $700 million in debt, which is five times the mall’s value.

The mortgage loans — one for $300 million and another for $130 million — were originally due in June 2019. They were originally issued by J.P. Morgan Chase Bank, which later sold them on Wall Street as commercial mortgage-backed securities.

Pyramid has received three extensions on the loans, with the last one set to expire yesterday.

The loans, on which the company has been making only interest payments since they were issued, were transferred to special servicer Wells Fargo on April 1 after Pyramid requested a “forbearance.”

The loans are not the only debt on Destiny USA. Pyramid also owes about $278.5 million on bonds issued by the Syracuse Industrial Development Agency under a payment-in-lieu-of-tax (PILOT) agreement to finance an expansion that opened in 2012.

That puts its total debt load at $708.5 million. Kroll Bond Rating Agency estimated in a March 25 report that the present value of the Syracuse mall was just $139.2 million.

Pyramid has been making its payments on the bonds. However, last week, Fitch Ratings dropped its rating on the bonds further into junk territory, lowering it to C from CC, reflecting Fitch’s opinion that the bonds are near default.

Fitch said the recent decline in the mall’s valuation to well below the outstanding amount of the bonds “will further erode the owner’s incentive and ability to make the increasing annual PILOT payments and that a default of some kind appears probable.”

Though the city’s development agency issued the bonds, Pyramid is solely responsible for making the payments on them. In the event of a default, bondholders could foreclose on the mall but could not look to the development agency for payment.

Greg Loh, chief policy officer for Mayor Ben Walsh, said Monday the city has received no information from Pyramid on the status of its mortgage loans.

Destiny USA is the largest mall in New York and one of the largest in the country. But it has been hurt by the national trend away from enclosed shopping centers, which has only intensified since the coronavirus pandemic began.

Many large tenants have left the mall, the most recent being J.C. Penney and Lord & Taylor in 2020 and Best Buy in 2021. Remaining anchor tenants include Macy’s and Dick’s Sporting Goods.

See also:

Destiny USA, Syracuse’s mammoth mall, faces a crisis of debt and uncertainty (Part 1)

How it could end for Destiny USA: Some unpleasant ways out for the struggling mall (Part 2)

Rick Moriarty covers business news and consumer issues. Got a tip, comment or story idea? Contact him anytime: Email | Twitter | Facebook | 315-470-3148