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Mall Owner Pyramid Sees 6 CMBS Loans Slip Into Special Servicing

Retail owner Pyramid Cos. now has had six CMBS loans transferred to special servicing, with two more added this week.

All of the properties associated with the loans have been shuttered because of the coronavirus pandemic, which has put intense pressure on loans tied to retail properties as mall revenue dries up.

Palisades Center Mall
Palisades Center mall in West Nyack, N.Y.

The company, which owns and operates 16 malls totaling 17.8M SF, is now at risk of bankruptcy, the Rockland County Business Journal reports, though it is still in negotiations with lenders to stave off that eventuality.

The latest two Pyramid CMBS loans that have gone to special servicing are tied to 1.2M SF of Destiny USA, a mall in Syracuse, New York, and an expansion phase of the property totaling 1.2M SF. 

All together, the mortgages on the two phases total $430M, and were securitized by JPMorgan Chase with a maturation scheduled for June of this year, Commercial Real Estate Direct reports, citing DBRS Morningstar data.

Other Pyramid CMBS loans transferred to special servicing recently include those tied to Crossgates Mall, a property near Albany, New York; Poughkeepsie Galleria in Poughkeepsie, New York; Palisades Center in West Nyack, New York; and Walden Galleria Mall in Cheektowaga, New York.

The pandemic has put pressure on about $4.6B in regional mall CMBS loans, DBRS Morningstar estimates. Some of the stress is compounded by how soon the maturities are. In the case of 49 malls, their loans are scheduled to mature either this year or in 2021.

As of last month, DBRS Morningstar reports, 31 outstanding regional mall CMBS loans with a total balance of $2.2B were in special servicing.

Though it has been hit particularly hard, CMBS woes aren't limited to the retail sector. Besides retail, also vulnerable are loans associated with hotels, student housing and single-tenant properties with non-creditworthy tenants, Fitch reports

Fitch forecasts a 19% cumulative default rate for CMBS in 2020, up from 15.4% in 2019, as a direct result of the pandemic. For the purpose of its forecast, the rating agency considers a loan in default as it becomes 60 or more days delinquent or does not pay off at maturity.