Facing default on the $237 million loan it owes on the Walden Galleria property, mall owner Pyramid Management Group has reached an agreement on a three-year extension with its lenders.
The Walden Galleria has been facing hard times, as the drop-off in shoppers in recent years due to the Covid-19 pandemic and increase in online shopping is creating financial hurdles for the owner of the Cheektowaga mall.
While the Boulevard, Eastern Hills and McKinley malls struggled with tenant departures, dismal consumer traffic and plummeting sales, the Galleria thrived and grew. And then Covid-19 hit.
Before the border with Canada reopened, the Galleria had been hammered even more than other malls in Erie County by the pandemic because the Canadian shoppers who constituted a significant part of its regional destination business were prevented from visiting for most of the last two years.
Signs of better times for the Galleria – the largest and dominant mall in the region– had been apparent this spring, with the expanding of weekend hours and several new business openings. The Galleria still is mostly occupied by stores and entertainment sites, unlike other regional malls.
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Syracuse-based Pyramid said the extension allows the company to reinvest in the shopping center, ensuring its “health, vibrancy and dominant position in Western New York.”
Malls were struggling long before Covid-19, but the virus and its fallout have accelerated their decline.
Pyramid is still current on its debt, but the 10-year loan was due in May with a massive balloon payment, and the property is now only worth $216 million – a big drop from $600 million when the loan was originated and sold in 2012. Pyramid was asking the servicer, KeyBank, for a five-year extension.
“The resilience and strength of the shopping center, along with Pyramid’s continued efforts to reimagine, redefine and enhance the guest experience, enabled us to successfully extend the loan,” said Stephen J. Congel, CEO of Pyramid Management Group. “We look forward to continuing that success over the coming years and remain committed to ensuring the health, vibrancy and longevity of the center for decades to come.”
Sales at the mall in 2020 were down by 38% from just two years earlier, and profits plunged by half in the same period. Its finances improved somewhat in 2021, but the appraised value of the mall had been slashed by almost two-thirds in November 2020 – putting its mortgage underwater, just as it came due.
Pyramid was facing "imminent default" on its $237.7 million mortgage, which was sent back for "special servicing" by KeyBank for the second time in the past two years, according to commercial real estate research firm Trepp LLC. It was the second time that Pyramid asked for help. The first time was during the depths of the pandemic, and the company got a deferral of debt payments from June 2020 through December 2020.
Built in 1989, the super-regional mall features 200 stores, including an assortment of big-box stores, retailers, restaurants and entertainment venues. It has more than 1.6 million square feet of space and was renovated in 2008. Pyramid Management and its tenants employee about 4,000 people. Occupancy, which had fallen to 75% in 2020, was back up to 90% last year.
The Cheektowaga mall's owner, Pyramid Management Group, isn't throwing in the towel. It is asking its lenders for five more years to overcome its hurdles.
Walden Galleria has recently welcomed to the shopping center Urban Air Adventure Park, an indoor trampoline and amusement venue; Aloha Krab, a Cajun seafood boil restaurant; rue21, a trendy, fast-fashion retailer; Offline by Aerie, a new athleisure concept; Bravo! Italian Kitchen and Lovesac.
Also planning openings at the mall are discount retail chain Five Below, which will be taking over a 9,000-square-foot space on the upper level at the former Johnny Rockets, and Primark, an Irish international department store that will occupy nearly 50,000 square feet.
Buffalo Next reporter Jonathan D. Epstein contributed to this report.
Michael Petro
Reporter
Michael J. Petro is a business reporter for The Buffalo News. The Buffalo State College graduate is a former sports writer who previously served as the editor of both The Sun and Buffalo Law Journal.
