Syracuse, N.Y. — Pyramid Management Group, the developer behind Destiny USA and the rebuilding of Syracuse’s Franklin Square, has lost two malls to foreclosure in the past year, and its troubles are far from over.
High debts and a shift in consumer shopping habits have left Pyramid struggling to hold on to its remaining malls.
Pyramid lost its Hampshire Mall in Hadley, Massachusetts, last summer, then its Palisades Center in West Nyack, New York, in September after lenders foreclosed on the properties.
Six of its remaining eight malls — including Destiny USA, New York’s largest mall — have balloon mortgages requiring the company to refinance them or pay them off in full after a certain number of years.
But with the value of its malls falling well below the amount of the debt on them, Pyramid has found it difficult to obtain new financing by the loans’ maturity dates.
As a result, the company has focused on negotiating extensions of the loans. And it has had some recent success in doing so, though not, for the moment at least, with the $430 million in mortgage loans on Destiny USA.
Destiny USA
A special servicer overseeing the overdue loans on Destiny USA told Pyramid last summer it had to make a $38.9 million payment to gain another one-year extension on its mortgages.
When Pyramid said it could not make the payment, the special servicer terminated a forbearance agreement and threatened “enforcement action,” according to the Kroll Bond Rating Agency.
Enforcement action usually means foreclosure, in which lenders step in to seize ownership of a property that is in default. But Pyramid said in August it was in discussions with the special servicer about modifying the loans on Destiny. The company did not respond to a request for comment on the status of those discussions.
The mortgage loans are not the only debt on Destiny USA. The company also owes nearly $260 million on bonds issued by the Syracuse Industrial Development Agency to help finance a 2012 expansion of the mall.
That means the total debt on Destiny USA is nearly $700 million, which is far more than what the mall is worth.
The city of Syracuse recently dropped its tax assessment on Destiny from $834.7 million to $224.3 million, a 73% reduction. The last time the mall had been reassessed was in 2014.
The mall has a 30-year property tax exemption under a payment-in-lieu-of-tax agreement with the city that took effect in 2007. So the reduced assessment will not impact the city’s property tax revenues.
“It shouldn’t have any net effect on payment or any financial arrangements on the mall,” said city Assessment Commissioner Matthew Oja.
Nevertheless, he said his department decided to reassess the mall because it tries to keep the tax rolls as accurate as possible regardless of whether a property is tax-exempt.
In Destiny’s case, the mall’s value had obviously dropped in value because of the vacancies the shift in consumer shopping habits have created, he said.
Those vacancies include the former JC Penney, Lord & Taylor and Sports Authority stores.
“The vacancies, I think, have eliminated a lot of value,” Oja said. “There’s so much space that can’t be monetized that they’re paying to heat and secure even though it’s empty.”
Pyramid has been trying to diversify the offerings in its malls. Large parts of the newer section of Destiny USA, for example, are dedicated to dining and entertainment venues, as well as outlet stores.
The company has also partnered with housing developers to build apartments near some of its malls to drive more traffic to the centers.
Vacant storefronts
But it continues to struggle to keep the storefronts in its malls filled.
Nordstrom Rack, the off-price version of the luxury retailer Nordstrom, opened in the expanded section of Destiny in 2015. But it announced in October that it plans to leave the mall when its lease expires on Feb. 1.
More recently, Ardene — a Canadian retailer selling apparel, footwear and accessories for women and girls — closed its store in the mall. So did upscale clothing retailer Boss by Hugo Boss. And Styluxe, a women’s clothing store selling second-hand designer clothing and shoes, told syracuse.com | The Post-Standard it is closing in the next several weeks.
Last week, Pyramid announced that the Margaritaville restaurant was closing after a 10-year run at Destiny.
The news was not all bad for Destiny. Pyramid said construction will start this spring on a 40,000-square-foot indoor pickleball facility and a 14,000-square-foot virtual reality concept.
JD Sports, an athletic footwear and apparel store, opened on Saturday on Level 1 across from FYE. And Charcoal Grill and Modern Buffet will soon be offering its contemporary buffet experience in the mall’s Canyon section.
Despite those efforts, Ray Wimer, professor of retail practice at Syracuse University’s Whitman School of Management, said he sees no easy solutions for the challenges Pyramid is facing.
“I don’t believe at this time there’s a magic bullet,” he said.
While the death of department stores and the shift to e-commerce are hurting malls, Wimer said they aren’t the only things that are killing enclosed shopping centers.
Consumers increasingly are flocking to open-air shopping plazas because of the convenience they offer to people pressed for time, he said.
“We have a ton of shopping plazas, like Marshalls Plaza (DeWitt) and in Fayetteville and Camillus, and they’re full of retailers,” Wimer said. “They always seem to be busy. Destiny doesn’t seem to be busy all the time.”
Here’s a look at what’s happening at Pyramid’s other malls:
Holyoke Mall
In recent weeks, Pyramid secured a three-year extension on a $161 million loan on the Holyoke Mall at Ingleside in the western Massachusetts city of Holyoke.
Pyramid took out a $215 million mortgage on the Holyoke Mall from JPMorgan Chase in 2011, according to MassLive.com.
The 1.6-million-square-foot mall is anchored by Macy’s, JCPenney, Target, Hobby Lobby and Best Buy. A Sears store at the mall closed in 2018 and its space remains vacant.
Sangertown Square
Pyramid also recently obtained a three-year extension on a mortgage loan on its Sangertown Square mall in New Hartford, near Utica. The company has provided no details on the amount of the loan on Sangertown.
Sangertown is anchored by Boscov’s, Dick’s Sporting Goods, Target and Home Goods. It offers over 50 retail and entertainment venues, including DSW, H&M, PiNZ, Billy Beez, Victoria’s Secret and coming soon, Fun Hub Action Park. But it lost JCPenney in 2020 and Macy’s in 2021.
Last month, Pyramid received preliminary approval for a zone change that would permit the company to build apartments next to Sangertown Square.
David Aitken, director of government affairs for Pyramid, told the New Hartford Town Board that the company hopes to do something similar across its portfolio.
Aitken said the company expects that having people living next to its malls will help attract more dining and entertainment tenants to the centers, the Daily Sentinel reported.
Crossgates Mall
At the end of 2023, Pyramid announced it had reached a deal with its lender to extend a loan on the 1.7-million-square-foot mall in Guilderland, near Albany, for five years.
A few months earlier, the holders of $242 million in loans on Crossgates sold the debt for nearly $174 million to a joint venture between Morgan Stanley and a private investment firm based in Greenwich, Conn., according to the Times Union. After accounting for nearly $30 million in liquidation expenses, the lenders wound up taking a loss of nearly $100 million on the loans.
The unusual move left Pyramid as the mall’s owner and operator, but it remains on the hook for the full balance of the original loan.
Two apartment projects with a total of 245 residential units recently opened next to Crossgates. The two projects were originally proposed by Pyramid but later built by other companies, the Albany Business Review reported.
The Times Union reported earlier this month that Pyramid could begin construction soon on a planned Costco Wholesale store on a 16-acre parcel next to Crossgates.
Poughkeepsie Galleria
In June 2023, Pyramid avoided foreclosure on its Poughkeepsie Galleria by working a deal to restructure and extend nearly $132 million in loans on the mall, Dutchess County’s largest shopping destination.
The deal came after the mall lost 71% of its value in little more than a decade. Its valuation fell $169 million to $68 million since Pyramid obtained two commercial loans totaling $131.5 million on the center in 2011.
Walden Galleria
Pyramid is having trouble with a $223.5 million loan on its Walden Galleria mall in the Buffalo suburb of Cheektowaga.
The loan, originally a $270 million mortgage secured from JPMorgan Chase in 2012, was due to mature on Nov. 1. But Pyramid was unable to pay it off or refinance it.
In December, the company obtained an extension on the loan to May 1 of this year. That allowed it to avoid a foreclosure – for now – on the mall, the largest in western New York.
Update: Pyramid did not meet the May 1 deadline and has requested a short-term forbearance period.
“Walden Galleria has remained a very healthy and viable shopping center under our ownership and management,” Pyramid CEO Stephen Congel told Buffalo Business First in a statement. “We are currently engaged in active dialogue with all of the lenders on Walden Galleria and are optimistic that there will be a positive resolution.”
Galleria at Crystal Run
Pyramid settled with Axonic Capital after defaulting on a $20.5 million loan in 2021, The Real Deal reported.
The following year, the company sold five acres of land directly across from the mall in Wallkill to Long Island-based Eliviat Group for $2.49 million. Eliviat plans to build a $45 million, 224-unit residential complex called “The Galleria Residences” on the land.
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