Fitch Ratings has upgraded the following
Approximately
Approximately
Approximately
RATING ACTIONS
Entity / Debt
Rating
Prior
Syracuse
Syracuse
LT
CC
Upgrade
C
Page
of 1
VIEW ADDITIONAL RATING DETAILS
The upgrade reflects Fitch's assessment that an eventual default is probable, though not immediately forthcoming. The rating is based on Fitch's view that that the PILOT bonds will continue to be paid from net operating income (NOI) of the Carousel Center mall in
Fitch anticipates that the NOI will continue to experience pressures due to the overall decline in the performance of non-trophy malls, which is attributed to slower revenue growth and rising expenses. This situation is exacerbated by declining consumer demand in the retail sector, inflationary costs, and a shift in spending from goods to services, which is anticipated to further impact weaker malls. Retailers are expected to adjust their space requirements, with some closing stores and others expanding, resulting in minimal net change in total occupancy.
The 'CC' rating also considers the significant 81% drop in the Carousel Center's appraisal values since 2014, which reflects reduced mall activity. The value of the mall experienced a 17% decrease in
The rating also considers the credit risks tied to the subordinate CMBS loans, which are now subject to a CMBS modification agreement with Wells Fargo (A+/Stable). The agreement stipulates that the mall must achieve increasing annual NOI targets through 2027. Failure to meet these targets could result in the CMBS loan not being extended past its current expiration date of
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A decline in NOI and inability to cover debt service on the PILOT revenue bonds.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
The ongoing recovery of the mall, which may be reflected in an improving NOI and increased debt service coverage on the bonds;
A solid indication of the mall's value increasing relative to all of the debt outstanding.
Dedicated Tax Security
The bonds are secured by PILOTs on the original or 'legacy' Carousel Center mall payable to SIDA by the
Dedicated Tax Key Rating Drivers
Mall operations have weakened, which is evidenced by a compound average growth rate of -8.2% in net operating income since 2014. NOI increased by 1.9% in 2023 compared to 2022, but the results are well below pre-pandemic NOI in 2019 by -46%.
NOI in 2023 covers the maximum annual PILOT debt service by 1.1 times or 1.7x annual debt service. . Fitch believes that MADs coverage could fall below 1.1x coverage in the near term given the flat to declining NOI trend.
SIDA has no material exposure to mall's operating risks. As such, Fitch has not assigned an Issuer Default Rating (IDR), and there is no related cap on the PILOT bond rating.
PROFILE
Pyramid has a senior obligation to pay PILOTs equal to debt service on the PILOT revenue bonds. Mall tenants are obligated to pay their share of PILOTs to Pyramid, an obligation that is absolute and unconditional. Pyramid's PILOT payment is secured by PILOT mortgages granted by both Pyramid and the SIDA on the original mall (the PILOT mortgages do not extend to the mall expansion project completed in 2012).
The lien provided by the PILOT mortgages is similar to those by taxing authorities, offering foreclosure as a remedy. The senior obligation of the PILOTs, on par with property taxes, ensures that support funding and any proceeds from foreclosure will be allocated first to the PILOTs before the excess is utilized for underlying mortgage claims.
The Carousel Center carries a
Pyramid entered into a standstill agreement, which included a moratorium on monthly debt service payments and an extension of the loan until
The servicer for the CMBS loans for the mall reported that the appraisal value as of
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
(C) 2024 Electronic News Publishing, source