GUILDERLAND — Major ratings agencies are wary about the recent refinancing of $193 million in Crossgates Mall loans.

The mall’s parent company, Pyramid Management Group, announced in November that it had secured new financing totaling more than $200 million for Crossgates Mall in Guilderland and Crossgates Commons in the city of Albany. 

Morningstar DBRS takes a cautious stance on the Crossgates Mall loan due to issues with the loan’s sponsor, Pyramid, while viewing the loan as overleveraged, but also likes that there’s an $18.8 million injection of fresh equity. 

Pyramid did not respond to an Enterprise request for comment. 

S&P Global Ratings assesses the loan with significant caution, highlighting the mall’s distressed history and a “significant value decline" from a $470 million appraisal in 2012 to the current $285 million appraisal, which both S&P and DBRS value at a lower figure. 

Commercial loan lenders and ratings agencies typically use two metrics to determine a borrower’s risk: the debt-service coverage ratio (DSCR) and loan-to-value (LTV) ratio.

DSCR is a measurement of a company’s ability to pay its current debt obligations. A debt-service coverage ratio of less than 1 indicates negative cash flow, which means that the borrower would be unable to cover or pay current debt obligations without drawing on outside sources — in essence, borrowing more.

A property with a DSCR of 1.5, for example, generates enough income to pay all of its annual debts, as well as its operating expenses, in addition to producing 50 percent more revenue than is needed to pay its debts and operating expenses.

The loan-to-value ratio is a number that determines whether or not a borrower can qualify for a commercial mortgage-backed security loan. The LTV ratio is defined as the principal loan amount divided by the market value of the property.

A higher appraisal value helps a borrower be eligible for a larger loan balance as well as a lower interest rate; the lower the LTV ratio, the stronger the odds the loan will be able sustain a decline in property value.

The $193 million Crossgates loan is actually a handful of refinanced loans with different terms attached.

In Morningstar DBRS’s view, while the senior mortgage, $105 million, has a manageable LTV of 68.3 percent, the whole loan has an LTV of 125.5, an indication that, based on Morningstar’s valuation, the mall’s value is lower than the total debt owed. The underwriter of Crossgates’ loan determined the mall had an LTV of 36.8 percent. 

Morningstar also determined that Crossages had a DSCR of 0.79, meaning the mall’s net cash flow cannot cover its debt-service payments. Morningstar also noted the mall has seen its net cash flow (NCF) decline steadily, from $25.6 million in 2022 to $23.7 million in 2024.

 Morningstar DBRS valued the mall at $153.8 million — a 46 percent “haircut,” which in  financial parlance refers to a percentage reduction applied to the market value of an asset. A haircut is a risk-management tool used to establish a safety buffer against price volatility or credit default.

S&P applied an even steeper haircut to the mall’s valuation, estimating the property value at $138.3 million, a 51.5 appraisal reduction, resulting in a whole loan LTV of 125.1 percent. 

The weak sponsor rating for Pyramid was driven by a specific track record of distress. In 2023, Pyramid defaulted on the mall’s previous mortgages, which ended up being sold at auction for far less than their original value. Control of Crossgates remained in the hands of Pyramid. 

Trepp, a real-estate data firm, wrote at the time, “The resolution appears to come via note sale,” a real estate practice where some or all of a property’s debt is acquired, “as opposed to the asset itself.”

Trepp reported that the once-$242 million in loans were sold for nearly $174 million, which, after subtracting $29.6 million in liquidation expenses, left $144 million in net proceeds — an approximately $98 million loss for bondholders. 

In July 2020, the mall’s appraised value was lowered from $470 million to $281 million, which placed its mortgage underwater, meaning Crossgates Mall’s current value was less than what it owed in loan payments on the property. 

In May 2023, as its loan extension expired, Pyramid failed to refinance the mortgages. The loan was subsequently auctioned off rather than traditionally refinanced. 

More broadly, S&P and DBRS noted, Pyramid has historically utilized defaults and extensions across its portfolio (including at other malls like the Galleria at Crystal Run in Orange County and Palisades Center in Rockland County) to force debt restructuring.