A $388.5 million securitization is being planned for a single commercial loan to the Palisades Center Mall in New York, a metro super-regional mall emerging from two years of renovations and major retail tenant poachings by a rival development.
Palisades Center Trust 2016-PLSD is a five-notes structure backed by the interest-only $418.5 million loan, itself secured by the 19-year-old, 2.2-million square foot retail shopping and entertainment property in West Nyack, N.Y. The capital stack includes a $229.1 million Class A tranche of notes that Friday were given provisional triple-A structured-finance ratings by Standard & Poor’s and Moody’s Investors Service.
The transaction also includes $55.5 million in Class B notes (rated ‘AA’ by S&P, ‘Aa3’ by Moody’s), $48.8 million in Class C notes (‘A’/’A3’) and $55.1 million in Class D notes (‘BBB-’/’Baa3’). A series of interest-only notes carry provisional ‘BBB-’/‘A2’ ratings.
The deal is expected to close April 29.
In pre-sale reports, both Moody’s and S&P favorably noted the mall’s size as the 11th-largest mall in the U.S., its locally affluent customer base as well as its popularity, drawing more than 24 million visitors a year. Palisades is operated by Pyramid Management Group LLC, one of the largest shopping mall developers and managers in the Northeast united States with 17 properties in New York Massachusetts and Virginia.
But the mall’s sales have fallen in recent years, a factor driven by the exit of several major retailers – including an Apple Inc. retail store – in the past two years for the Shops of Nanuet that welcomed Apple and other former Palisades tenants such as Banana Republic. The mall recently completed over $31 million in revolvations.
Like any single-asset transaction, the ratings agency warn the portfolio carries risks for investors from the lack of diversification and the correlation to Palisades Center performance that in recent years has seen a decline in occupancy and sales (the mall has had two years of declining net operating income of -5.5% and -14.2%). “The current [year-end] 2015 NOI is at its lowest level in over 8 years and is approximately 27.2% below levels last recorded at the peak of the market in 2007,” reported Moody’s.
The loan for Palisades carries a 4.188% interest rate, with a maturity date of 2021. S&P notes than in addition to the mortgage loan, the operator has also taken out two mezzanine loans totaling $75 million and $66.5 million.