One of the largest U.S. shopping malls is slated to go on the auction block next month after years of struggling financially, suffering amid the pandemic and losing two anchor stores.
Palisades Center, a roughly 2.2 million-square-foot retail property in West Nyack, New York, is scheduled to be sold on Feb. 4. A notice of the public auction, with a listed price of $463.4 million for the mall, was filed with the New York Supreme Court, according to media reports.
The mall, which debuted in 1998 and was developed by Syracuse, New York-based Pyramid Management Group, has been in receivership for several years now. It has $418.5 million in debt, a CMBS, or commercial mortgage-backed security, loan. Last October, Stamford, Connecticut-based Black Diamond Capital Management — an alternative asset management firm specializing in high-yield credit, stressed and distressed credit — acquired the defaulted loan at a discount.
Palisades Center's travails reflect what is happening with some older malls that have not been seen as investments by their owners to be redeveloped or to expand their tenant base to include new types of retailers that attract frequent foot traffic. Palisades Center lost JCPenney and Lord & Taylor as anchors, and its current roster includes retailers such as Target, BJ's Wholesale Club, Burlington, Dick's Sporting Goods, Home Depot, Macy's and AMC Theatres.
A default and receivership
"There is still a lot of vacancy there because the mall is so big, particularly closed anchors like JCPenney and Lord & Taylor," Rudy Milian, president and CEO of retail consultant Woodcliff Realty Advisors, said in an email to CoStar News on Wednesday. "Macy’s, which took over the Filene’s location in 2006, is still there."
Palisades Center went into special servicing in September 2022 because of imminent maturity and monetary default. The loan defaulted in October 2022.
Black Diamond, Pyramid and special servicer Mount Street didn't respond to emails from CoStar News seeking comment on Wednesday.
The mall ranks in the Top 15 in terms of square footage in the U.S., with Mall of America in Bloomington, Minnesota, and American Dream in East Rutherford, New Jersey, topping that list. Mall of America has roughly 5.6 million square feet, while American Dream has about 3 million square feet.
Diminished values for malls
"The [Palisades Center] mall is very, very big but it is the only mall in Rockland County and draws from a large geographical area from Orange County, Rockland County and on Sundays, from Bergen County," Milian said. "Simon [Property Group] recently sold the other mall in the area that they redeveloped as a lifestyle center, the Shops of Nanuet, to a local owner looking to add multifamily."
Palisades Center spans 151.3 acres. It was last appraised at $209 million in 2023, down from an $881 million valuation in 2016.
Black Diamond bought Palisades Center's "defaulted loan for a fraction of its value, but these types of malls are only worth a fraction of what they were worth a decade ago and those loans are underwater," according to Milian.
"The mall definitely needs an owner that has capital and a vision to redevelop it with other uses, particularly multifamily," he said. "Pyramid had done a good job of bringing a lot of entertainment uses but since the foreclosure I don’t think management has had the support of the ownership entity to provide the capital needed to bring in the right tenants or redevelop it. As a result, traffic is dwindling and deferred maintenance is obvious."
Pyramid's portfolio has nine malls, with eight of them in New York state.