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Destiny USA, the largest shopping mall in New York, is experiencing significant financial difficulties. Fitch Ratings has reaffirmed its low rating on $248 million in bonds associated with the mall, citing ongoing pressure on revenues and declining occupancy rates. As of December, the mall's occupancy rate had fallen to 72%, down from 80% at the end of 2023, leaving over a quarter of its retail space vacant.
Fitch's report anticipates further financial decline due to the loss of tenants and increasing operating expenses. The rating service highlighted that declining consumer demand, inflationary costs, and a slowdown in consumer spending are expected to further impact weaker malls like Destiny USA. The bonds have been rated "CC," indicating a below-investment-grade status, often referred to as "junk bonds." Fitch noted that while an eventual default on the bonds is probable, it is not imminent.
The bonds were originally issued by the Syracuse Industrial Development Agency to finance the expansion of the Carousel Center mall into Destiny USA. Although Pyramid Cos., the mall's developer, has been making payments on these bonds, it defaulted on a separate $300 million mortgage loan last June and is now seeking an extension. This mortgage default could potentially disrupt future bond payments if the mall faces receivership or bankruptcy.
Despite the financial challenges, the city and the industrial development agency are not at risk if Destiny defaults, as the bonds are secured solely by the mall's revenues. Investors in the bonds could foreclose on the mall but cannot demand payment from the agency or the city. Destiny USA spans 2.4 million square feet, making it one of the largest malls in the United States.