Crossgates on a post-COVID upswing as it battles for lower assessment

GUILDERLAND — In its recent reply to the town of Guilderland’s request seeking disclosure of financial records in a nearly year-long court battle, Crossgates Mall’s dismissive response included a thread asking to be pulled on.

The town since January has been looking for additional proof from Crossgates that the property “is not income-producing,” a request Guilderland first made in October of last year in its response to the mall’s July 2020 court filing seeking to cleave its $282.5 million assessed value in half.

Crossgates responded in part that the documents sought by the town are publicly available.

Public records paint a somewhat contradictory, if perhaps unflattering, picture of Crossgates — playing a victim of the pandemic and seeking relief from a $282.5 million assessment, yet unwilling, at least initially, to grant a similar reprieve when it has the ability to its tenants. 

For all the apparent difficulty inflicted upon the retail sector by the pandemic, public data that, at times, can appear to conflict with itself, show retail in general and Crossgates Mall in particular on a post-COVID upswing.


Demand for discovery

Just before New Year’s, Guilderland made the demand for discovery and inspection, seeking from Crossgates, among other financial documents: 

— Copies of leases the mall had with anchor tenants;

— Copies of leases Crossgates holds with its non-anchor tenants;

— Rent rolls for the years 2017, 2018, and 2019; 

— “Detailed annual retail sales reports by tenant with annual total” for the years 2017, 2018, and 2019;

— Expenditures on capital projects for the mall itself as well as tenant-improvement allowances for 2017 through 2019;

— A list of real-estate tax reimbursements given to tenants for the years 2017 through 2019; and

— Copies of appraisals performed on the property in 2012, 2013, and 2014 related to the three refinanced loans held on the property.

Crossgates argued the requests “impose[d] burden[s]” and “obligations” that were “inconsistent with, or in excess of, the obligations” associated with an Article 7 tax certiorari proceeding. 

The requests were also “overbroad, cumulative or duplicative, vague and ambiguous, expansive, oppressive, unduly burdensome, and exceed[ed] the scope of discovery,” the mall argued.

The town was seeking information that was “privileged,” Crossgates argued, “including but not limited to information protected by the attorney-client privilege ….”

And Guilderland was looking for documents “already in its possession, custody, or control, have been filed in this or any other court of record, or are otherwise publicly available,” the mall argued in its response. 

For example, Crossgates has filed 15 lawsuits against its own tenants for non-payment of rent during the pandemic, the records of which are available to the public.

The mall is suing four Gap-owned tenants whose collective monthly rent is $153,000.

It is also suing Lord & Taylor, bankrupt and no longer a tenant, for $487,000 in back-rent. The once-luxury retailer paid $900,000 per year in rent.

Ruby Tuesday’s, which is no longer operating at Crossgates, paid nearly $26,00o per month in rent.

The Standard Supper Club’s monthly rent is $21,000 

World of Beer — which closed in March of last year because of pandemic restrictions and reopened after the state-mandated shutdown was lifted — was only in the third year of a 10-year lease agreement with Crossgates when it stopped paying its $30,000-a-month rent in April 2020.


Retail big picture

The country’s brick-and-mortar retailers have been bleeding customers for years, but COVID-19 acted as an e-commerce accelerant. 

More than 12,200 retailers permanently closed in 2020, according to commercial real-estate firm CoStar Group; that number was reported in December 2020 as about 11,150, but was revised up by nearly 1,000 retailers just a month later. 

As a percentage of overall retail sales, e-commerce increased its market share from 11.4 percent in the first quarter of 2020 to 13.6 percent for the same three-month period this year, according to the Census Bureau, from about $154.6 billion (out of $1.35 trillion in total retail sales) to $215 billion (out of $1.58 trillion).

And yet, the number of closures in 2020 is a markedly better outcome than an earlier-in-the-pandemic estimate from retail analytics firm Coresight Research, which predicted 20,000 to 25,000 retailer shutdowns last year. 

In 2019, there were about 10,000 store closures.

The pandemic helped speed up the department-store industry’s struggle, which saw icon retail names like Lord & Taylor and JCPenney end up in the dustbin of bankruptcy history. Department stores suffered a year-over-year revenue decline between 2019 and 2020 of about 15.6 percent — about 40 percent of department stores in the United States have closed since 2016.

The department store downturn helped precipitate record-high vacancy rates in regional malls across the country, which hit an all-time high of 11.4 percent in the first quarter of 2021, according to Moody’s Analytics, up from 9.2 percent a year ago, when 84 percent malls in America reported vacancy rates of 10 percent or less. 

The credit-rating agencies DBRS Morningstar and Fitch placed Crossgates Mall’s occupancy rate in 2020 at about 86 percent, down 2 percent from 2019. 

The United States has about 1,000 malls, according to the commercial real-estate services firm Green Street (Coresight Research puts the number at 1,200 but also 1,000) — one estimate of malls in the United States at the turn of the millennium said there were about 3,000.

A report from UBS released the same week as Moody’s data on record-high vacancy rates at regional malls, estimated that, under the best circumstances, there would be about 80,000 retail-store closures in the next five years, which would impact about 9 percent of all retailers.


Rosier outlook

But the retail industry appeared to be rebounding somewhat at the start of 2021, with department-store sales for the first three months of this year higher than they were during the same period last year — from about $31 billion in the first quarter of 2020 to approximately $31.7 billion this year, according to Census Bureau data.

The retail trade in America is measured by sales at the country’s cars and auto parts dealers; food and beverage stores; general merchandise stores; food services and drinking places; and gas stations.

In early 2020, pre-pandemic, about 91 percent of retail rents were being collected, a number that dropped to 57 percent in April and 59 percent, according to trade association International Council of Shopping Centers, by March of this year, the most recent available month for which there is data; retail rent collections were around 86 to 87 percent.

Total retail sales increased by 14 percent year-over-year in the first quarter this year compared to the same period in 2020. 

In 2020, retail sales were $5.58 trillion, which was up from $5.54 trillion in 2019. The retail sales recorded in the first quarter of 2021 were higher than any other three-month period that preceded it, according to Census Bureau data.

Pandemic relief in the form of $1,400 government checks to individuals were one major reason cited for the year’s strong start. 

In April, The Wall Street Journal reported that real-estate investment trusts, “companies that own shopping centers, hotels, and … office buildings,” were “decimated most of last year,” but saw their overall share price increase by about 9 percent during the first three months of this year. 

“Fueling the REIT [real estate investment trust] rally was an 18-percent rise in the shares of lodging owners and a 32-percent gain by mall owners,” The Journal reported in April.

“The recovery will likely continue to be mixed,” according to The Journal, which notes the share prices of shopping-mall owners had “bounced off the bottom, but their business remains under pressure as e-commerce grows.”



Delinquent tenants weren’t offered the type of forbearance Crossgates received from creditors when it stopped paying its bills because of the pandemic and entered loan delinquency in May 2020. 

Over the course of the pandemic, Crossgates Mall had missed $10 million in principal and interest payments on its now-balance of $259.2 million in debt spread across three refinanced loans associated with the property.  The mall also received a year’s extension to pay back its loans, which come due in 2023. 

As with other malls, Crossgates’ financial situation appears to have improved since last year.

For the first three months of 2021, the mall’s net operating income was $7.55 million; for the same three-month period last year, it was $6.78 million. For comparison, that number was $8 million, pre-pandemic, for January through March 2019; while in the first quarter of 2018, Crossgates had an operating income of $8.1 million.

And there are places to point when looking for reasons for Crossgates’ year-over-year decline in income. 

The mall’s three shuttered tenants, for example — Lord & Taylor, World of Beer, and Ruby Tuesday’s — would have accounted for approximately $356,000 in rent for the first three months of 2021, which leaves Crossgates about $94,000 short on its 2021 first-quarter net operating income compared to 2019.

Finally, another indication of Crossgates’ financial outlook improving since the relaxing of pandemic restrictions is the DBRS Morningstar report in May that two of Crossgates three loans, about $166 million worth of debt, were due to lose their troubled-loan status. 

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