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Black Diamond Capital, Having Acquired The Underlying Debt At A Deep Discount, Stands To Reap Substantial Rewards From Its Investment
ANALYSIS
The Supreme Court for New York County has authorized a court-appointed referee to hold a public auction of the Palisades Center in West Nyack on February 4 at 2:15 pm.
What does that mean?
The public auction is the natural culmination of years of litigation between lender Wilmington Trust and Eklecco, the owner of the mall. The foreclosure action was filed by Wilmington in 2023 when after years of working with Eklecco to postpone and restructure $418 million in debt. The mall was placed in receivership, a judgment was entered against Eklecco, and a sale was sought to satisfy the debt. But while the litigation was pending, Black Diamond Capital Management, an “alternative asset management firm” purchased the mall’s underlying debt at a substantial discount in October 2025 and stepped into Wilmington’s shoes as the plaintiff.
What happens next is complicated.
An “alternative asset management firm” is one that specializes in high yield credit, stressed and distressed credit, restructurings and business turnarounds. Black Diamond is not in the business of owning or running shopping malls – it seeks to profit on its acquisition of the underlying debt.
Background
The original refinancing in 2016 was a $418.5 million CMBS (Commercial Mortgage-Backed Security) loan when the mall was valued at $881 million. The mall’s fortunes turned south when anchors JCPenney and Lord & Taylor shuttered their stores in 2017 and 2019 respectively. COVID-19 and e-commerce further hurt revenue when occupancy fell from 100 percent to 78 percent, leaving inadequate income to service the underlying debt.
The loan against the property, known as an SASB (Single-Asset, Single Borrower) loan, entered “special servicing” in 2022. Bonds backed by a single-asset (a shopping mall) with payments from a single-borrower (Pyramid) are inherently more risky than other AAA bonds. A foreclosure action was filed in February 2023, and in September 2024, a court appointed a temporary receiver to oversee the property’s operations and finances.
Black Diamond purchased the debt obligation in October 2025 (which increased to $463 million) for about $170 million, effectively wiping out most of the bondholders that had purchased bonds secured by the original debt.
The Auction Sale
Black Diamond is first in line (except for taxes and other municipal obligations) to receive funds from the sale. But a number of things can happen between now and the auction, or at the auction, if the auction actually occurs. The most likely scenario is that Black Diamond will submit what is known as a lender (or a lender affiliate) credit bid. The “credit bid” will be some number north of the $170 million Black Diamond has invested, up to the $463 million judgment (plus interest).
What that means is that unless some other entity bids higher than the credit bid, Black Diamond will take title to the property, issue a credit to Eklecco for the credit bid amount, and likely write off the balance of the debt. Black Diamond would then secure new management for the mall, and/or retain a commercial broker to market it for sale.
But it is more likely that Black Diamond would prefer a buyer willing to pay a premium over the $170 million it paid for the debt, making a quick profit from its investment.
What is the market value of the mall?
The mall has two aging vacant anchor stores (Lord & Taylor and JCPenney) and has largely shifted toward down-market tenants in recent years. An investor could see value in the mall by repurposing the anchors, adding a hotel/convention center, or seek to have the property rezoned for multi-family residential use. The Town of Clarkstown, which controls the zoning at the mall site, has been cold to Eklecco’s earlier efforts to rezone the property to allow residential development, though circumstances are different now.
While the current rent roll doesn’t support a buyer paying more than $463 million for the site, a savvy buyer could see value in a future rezoning. The mall is one of Clarkstown’s largest taxpayers and a declining market value doesn’t serve the town’s finances.
During a recent tax certiorari challenge, Eklecco argued that the Palisades Center had a market value in 2023 of around $155 million while the town countered that the value for the mall was $578 million. The parties settled the case, and under the terms of the settlement, the tax assessment is based on a market value of $300 million.
Potential Buyers
So, who are the potential buyers for the Palisades Center?
Several investment firms and private equity groups are purchasing distressed or foreclosed large shopping malls to manage as secondary assets or to repurpose for sale. Key players in this market include Kohan Retail Investment Group, Namdar Realty Group, Rialto Capital, and others.
Kohan Retail Investment Group is a New York-based firm known for acquiring distressed, second-tier malls. They purchased the Montgomery Mall in Pennsylvania for $55 million in 2021 and Golden East Crossing Mall in North Carolina in 2022. Kohan lost the Golden East Crossing Mall to foreclosure in 2025.
Namdar Realty Group & Mason Asset Management are New York-based partners and active buyers of struggling malls. They purchased The Shoppes at Buckland Hills in Connecticut in 2025 for $27 million. Namdar Realty Group has been aggressively acquiring struggling malls in Connecticut, including the Meriden Mall, Enfield Square Mall, Crystal Mall in Waterford and Trumbull Mall.
Rialto Capital Advisors is a Miami-based investment company that acquired The Mall at Barnes Crossing in Mississippi for $53.2 million in a 2025 foreclosure auction.
Concord Capital New York purchased the Aviation Mall in New York for $21 million in 2025 after a loan default.
Morgan Stanley acquired the Ingram Park Mall in Texas for $100.7 million at a 2021 foreclosure auction.
Amazon is also known to purchase defunct mall sites for conversion into fulfillment centers, such as the former Cortana Mall in Louisiana for which it paid $17.25 million. It also acquired malls in Knoxville, Tennessee and Worcester, Massachusetts for conversion to fulfillment centers.
Also, locally, Alexander Properties may have an interest in the Palisades Center. It acquired the Shops of Nanuet last year from Simon Properties for about $60 million. Part of its plans include seeking a zoning change to allow for residential development at the former Sears Automotive site.
Eklecco’s Foreclosure History
Eklecco is no stranger to foreclosure, having lost the Aviation Mall in Queensbury, NY and the Hampshire Mall in Hadley, Massachusetts to excessive debt and the inability to refinance.
Ecklecco also faces challenges refinancing and holding onto its Walden Galleria property in Buffalo. Walden Galleria is the largest shopping mall in Western New York, with more than 200 retailers, 10 sit-down restaurants, an international food court and Regal Cinemas Stadium 16 with RPX theaters.
Pyramid is also struggling with debt at Destiny-USA in Syracuse. Destiny USA is a 2.4 million square foot shopping, dining, and entertainment complex located in Syracuse, New York. Ikea recently leased 90,000 square feet for a showroom, giving the mall’s finances a boost. It is New York’s largest shopping mall and the 10th largest in the United States.
