Malls Spent Billions on Theme Parks to Woo Shoppers. It Made Matters Worse.

SYRACUSE, N.Y.—Destiny USA is New York’s largest shopping mall, a six-story structure by Onondaga Lake. Its feature attraction is WonderWorks, a 40,000-square-foot theme park where children can experience a simulated earthquake, learn about space travel wearing an astronaut suit or play laser tag.

They could, that is, until the state made the mall close many of the attractions in November for the second time last year to counter Covid-19. Only 18% of the space leased to entertainment tenants is open currently, said a spokesman for the mall’s owner, Pyramid Management Cos.

Adding theme-park-like attractions was a strategy that Pyramid viewed as crucial to drawing foot traffic and reversing the yearslong struggles of mall operators battling online shopping. Now, the strategy looks less like a lifeline and more like a millstone.

Even as new pandemic measures have allowed the mall’s stores to reopen, regulations have kept many of its entertainment attractions closed. Pyramid, which is privately held, borrowed heavily to expand and to build entertainment extravaganzas at Destiny USA and another mall, Palisades Center in West Nyack, N.Y., and the bills are coming due.

In April, the Pyramid entities that operate the two malls became delinquent on securitized debt called commercial mortgage-backed securities, or CMBS, according to real-estate-data provider Trepp LLC, eventually negotiating extensions and deferrals.