GUILDERLAND — If at first you don’t succeed, make a more audacious ask.

In July of last year, citing the impact of the pandemic and the yearslong decline of brick-and-mortar retail, Crossgates Mall asked an Albany County Court judge to lop off $139 million from its $282 million tax assessment — a near 50-percent cut in the assessed value. 

In a petition filed July 9, Crossgates, again citing similar reasoning, requested that Justice Margaret T. Walsh slash $162.5 million from its current assessed value of $282.5 million.

Macy’s, not Pyramid, owns the 12 acres of mall on which Macy’s sits. And Macy’s is looking to have its assessment even more dramatically dropped, from $15.7 million to $3 million.

The new Crossgates filing states that, prior to the issuance of Guilderland’s tentative 2021 assessment roll, Crossgates provided information to Heather Weinhold, the town’s assessor, that showed its “value had declined year-over-year due to, [among other things], continuing pressure on its ‘bricks and mortar’ business from ecommerce, sales declines, and record bankruptcies and store closures, particularly for department stores and fashion retailers that were once the primary focus of [Crossgates’] business.”

The petition additionally states that Weinhold was informed the property’s value was also “negatively affected by the devastating impact of the COVID-19 pandemic ….”

In June 2020, as COVID-19 shut down New York’s shopping centers, local politicians and business owners rallied at Crossgates, calling on Governor Andrew Cuomo to reopen the state’s indoor malls. During the press conference, Assemblyman John McDonald said Crossgates had 225 tenants.

The mall’s current directory has 208 listings, which includes bathrooms and tenants, like World of Beer, that have closed permanently — a PDF directory shows far fewer listings. 

Crossgates claims its $282.5 million assessment “is erroneous and unlawful by reason of overvaluation,” and the mall is or will be “injured because of the overvalued, unequal, improper, unlawful” assessment. 

Crossgates’ parent company, Pyramid Management Group, is coming off a big win which, given its track record, is likely to result in more tax certiorari cases against the town. On July 8, an appeals court unanimously overturned a lower court’s ruling that halted the construction of the company’s Rapp Road and Western Avenue projects — a 222-unit apartment development and proposed Costco Wholesale store.

Macy’s

Macy’s July 15 petition, unlike Crossgates’, did not include specific reasoning for why it should receive the reduced assessment, but said those specifics were offered to the town’s assessor — some in the form of statements made under oath — when the retailer grieved its assessment. 

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

The pandemic helped speed up the department-store industry’s struggle, which saw iconic retail names like Lord & Taylor, once a Crossgates tenant, and JCPenney, still a tenant, 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. 

Census data show that, with two exceptions, annual department-store sales have declined every year since 2000, when sales, $231.6 billion, were the highest of any year since the Census Bureau began tracking the data, in 1992.

With the exception of January through May 2020, the first five months of 2021 have had the lowest department-store sales numbers, $54.6 billion, since 1992. 

Macy’s 2020 sales were $17.3 billion, which were down considerably from 2019 sales of $24.5 billion. Macy’s annual median sales for the three years prior to 2019 were $24.9 billion, while annual median sales between the years 2013 and 2015 were $27.9 billion.

The retailer, which plans to close 125 of its 727 stores over the next three years, avoided bankruptcy in 2020 in part because it often owns the real estate on which its stores are built and was able to put the land up as collateral as part of a broader securing of $4.5 billion in financing to help fund its operations. 

Macy’s filed similar Article 7 petitions against Guilderland in 2019 and 2020 as well; both cases are still outstanding. However, a letter recently filed in Macy’s 2020 tax certiorari docket indicates a resolution may soon be at hand.

The letter, dated July 9, 2021, is from the town’s lawyer, William Ryan, to the judge in the case, Walsh. 

Ryan writes, “My adversary and I are conducting serious settlement negotiations and are hopeful about a resolution.”

With things going well, Ryan requested a 30-day extension from Walsh to continue the negotiations before having to report back to her on the status, if any, of a resolution.

Walsh okayed the extension on July 12.  

It’s like déjà vu all over again

With the United States economy shrinking by an unprecedented 9.5 percent between April and June of last year — the fastest the quarterly rate has dropped since records have been kept — Crossgates sought redress from its retail woes by filing suit against the town of Guilderland in July 2020 in an attempt to lower its then-$282 million tax assessment by almost half.

Crossgates in its 2020 court filing said it should receive a near 50-percent drop in its assessed value for all the reasons stated again in its 2021 petition.

In the year since the petition was filed, Crossgates first ignored and then fought a disclosure demand made by the town seeking property appraisals that it used to obtain some $290 million in loans. 

In late April, the town’s lawyer, Ryan, wrote a letter to Crossgates’ attorney “in a good faith effort to resolve” the dispute the two sides were having over the mall’s objections to handing over the appraisals as well as promissory notes related to the mortgage-loan refinancing.

Guilderland is looking for documentation on the mall’s $470 million appraisal. Last summer after an appraisal, Crossgates’ value was lowered to $281 million.

Crossgates in a June 16 response said the appraisals from 2012, 2013, and 2014 had no relevance because they were prepared long before the assessment it is now looking to cut in half.

The mall stated the appraisals were paid for and prepared for Crossgates’ loan-lenders — not Pyramid itself, the mall’s owner, which court papers argue, never “approved or adopted” them.

Crossgates also argued, “While mortgage loans, unlike the Lending Appraisals, may be admissible in certain Article 7 proceedings, here, the Promissory Notes are neither relevant nor discoverable, for at least three reasons.”

New York State courts have acknowledged that, because of the length of a mortgage and specific nature of an assessment with regard to date, the promissory note is a reliable indicator of market value, the mall states. 

An appraisal is an opinion of a property’s value as of a specific date. It’s based on facts, but it’s an opinion.

The second reason the promissory notes are not relevant nor discoverable, Crossgates argues, is that, when a there has been a long passage of time between when the mortgage loan was made and the assessment was challenged, the loans or notes no longer “reflect or establish a property’s value as of the relevant valuation date.” 

And third, in tax certiorari cases, Crossgates argues, it’s “well-established” that a property is to be assessed “without regard” to any existing financing.  

The town responded a few days later. 

Crossgates, Guilderland argued in its June 22 response, has “unfettered access to all the information related to their property and its value,” but the town, “on the other hand lacks such information and access.”

It’s “only fair,” the town argues, that it be “provided with relevant documents through discovery to permit it to adequately prepare a defense in this proceeding,” given that Crossgates is looking to reduce its assessment by close to $140 million. 

As the town previously argued, the June 22 filing states, the promissory notes “reflect current, outstanding obligations for the subject property and its owners.”

The notes need to be disclosed so the town can determine whether “they affect the current income stream and whether the current income stream is at market value,” the filing states. 

With Crossgates arguing the property is worth significantly less due in part to the general multi-year decline of brick-and-mortar retail, the appraisals should be disclosed, the town argues in its filing, because of the “fact that these documents relate directly to and specifically analyze this particular property.”