Between May and July, Wilmorite Inc.’s Eastview Mall suffered an apparent case of COVID-related difficulty. It has now recovered, but as the pandemic continues to take a toll on brick-and-mortar retail, the Ontario County mall could be facing a less-than-certain future.
At roughly 1.7 million square feet, Eastview is one of the area’s largest and toniest shopping destinations. Seen as the crown jewel in Wilmorite’s extensive mall portfolio, the mall and its stores have provided jobs for many—at last count numbering around 3,800, including part-time workers. That is about 300 more jobs than the county’s top employer based on fulltime positions, Finger Lakes Health.
In mid-July, Fitch Ratings ranked the mall’s mortgage as a “loan of concern,” a not completely surprising development given that, like many of the state’s commercial ventures, Eastview had been forced to shut down for several months.
Since Eastview’s July 10 reopening, some issues that troubled the rating agency have been resolved. Still, Fitch’s July 15 note raised longer-term concerns that could trouble not only Eastview but other retail-dependent businesses for months if not years to come.
Eastview general manager Mike Kauffman is upbeat about the mall’s prospects. Kauffman says most of the mall’s tenants have reopened along with the mall, and shoppers are returning, albeit in not in pre-COVID numbers. Reduced traffic is partly due to a state-ordered limit. Gov. Andrew Cuomo’s plan for retail reopening calls for indoor malls to limit occupancy at any given time to half of their full capacity.
To conform to the state guidelines, Eastview for the time being has roped off seating areas and removed tables and chairs from the food court. To make sure the half-capacity rule is followed, mall personnel are monitoring parking lots to get a feel for how many patrons are wandering the mall’s corridors. So far, Kauffman says, hewing to the half-capacity rule hasn’t been a problem.
Fitch’s July 15 research note pointed to possible longer-term difficulties, however, detailing a downgrade of a group of Deutsche Bank pass-through commercial mortgage securities packed into a portfolio that includes the Eastview loan.
The rating agency’s qualms over the pass-through commercial mortgage security includes questions about Wilmorite’s ability to pay off or refinance Eastview’s mortgage, a 10-year, interest-only loan whose $210 million balloon payment comes due in roughly two years. The collateral for the loan is Eastview Mall and the adjacent Eastview Commons, anchored by Target and Home Depot.
Kauffman referred questions concerning the mall’s mortgage to Janice Sherman, Wilmorite corporate director of marketing. After conferring with the company’s chief operating officer, Sherman said in an Aug. 4 phone interview that the mortgage had been paid and since it was no longer in forbearance, there was nothing further to discuss. She did not respond to a subsequent email requesting an interview with the COO or another appropriate official.
The Eastview loan accounts for 13.9 percent of the securitized commercial mortgage vehicle’s pooled loans. It was the second-largest mortgage marked as a loan of concern by the rating agency’s analysts.
Concerns the Fitch analysts aired in the July 15 note included the fact that Wilmorite had voluntarily moved the Eastview loan to a special servicer in May and that the mall operator as of mid-July was not fully making payments on the loan. In a later note published this month, Fitch noted that those issues have been resolved with the loan moved back to its regular servicer with any reduced or missed payments brought up to date as of Aug. 7.
However, the July 15 note also cited other concerns.
“(Eastview’s) occupancy and (net operating income) have declined and there are refinance concerns surrounding the lack of amortization and potential lack of liquidity given the subject property type, market location and nearby competition,” the note states.
The July 15 note came days before a long-anticipated bankruptcy filing by Lord & Taylor, a main anchor of the Ontario County mall. Lord & Taylor is not alone. Two other venerable but troubled retailers, Sears & Roebuck Co. and JCPenney, also have been Eastview anchor tenants.
The more than century old Lord & Taylor chain’s bankruptcy was filed simultaneously with its parent company, Le Tote Inc.’s own Chapter 11. Le Tote’s Chapter 11 plan calls for all 38 Lord & Taylor stores close after selling of their inventory.
While not happy at the prospect of losing Lord & Taylor, Kauffman remains cautiously optimistic about the mall’s prospects. Other anchor tenants including Von Maur and Macy’s remain open, and so far, only three of the mall’s smaller tenants that were shuttered during the COVID-19 lockdown have said they would not reopen, the mall manager says.
Sears closed its Eastview store in 2018. Pennsylvania-based Dick’s Sporting Goods plans to move one of its stores—currently located in Cobblestone Mall, a shopping center that sits across the street from Eastview—into the former Sears space.
Under the Chapter 11 it filed earlier this year, JCPenney said that it would permanently shutter 154 stores. The chain’s Eastview store was not among them. The bankrupt retailer plans another 88 store closings this fall, however.
Smaller Eastview tenants that have put themselves in Chapter 11 and either plan to or might contemplate store closings include Abercrombie & Fitch, Brooks Brothers, Lane Bryant, Forever 21 and J.Crew.
Those companies’ filings are only part of a rash of bankruptcies by brick-and-mortar retailers that have come over the past few years in a trend that has been accelerated by the pandemic and its attendant shutdowns. In a July 30 research note, CB Insights counted 113 such filings.
While many blame increasingly fierce competition from online sellers like Amazon.com for brick-and-mortar retailers’ woes, CB Insights concludes that “Amazon is not the only reason that physical retail is troubled—mounting debt and retailers’ own missteps and lack of adaptability are also to blame.”
Whether a sufficient number of faltering brick-and-mortar retailers can realign their businesses in time to keep malls like Eastview’s ships afloat, is a question yet to be answered.
Will Astor is Rochester Beacon senior writer. All coronavirus articles are collected here.