4 ms·

Here's the actual part of relevance: "Some enclosed mall and shopping center landlords say only 25%-30% of their retail tenants have paid their April rents thus

Here's the actual part of relevance: "Some enclosed mall and shopping center landlords say only 25%-30% of their retail tenants have paid their April rents thus far, according to three owners with properties around the country. " This is a small sample and specific to a single sector of retail. That said, I think this trend will likely hit retail more widely this month since so many small businesses and franchisees are struggling right now.

_curious_ 7y ago
Do you or does anyone know a good index or industry standard to look for and follow on CRE defaults/data come May?
- whatshisface 7y ago
  You might be able to find some packaged funds that become more or less valuable depending on the yield of the debt held by those entities, which would correspond to the market's best estimate of their default risk.
- kccqzy 7y ago
  You might want to look at commercial mortgage-backed securities. The credit default swaps on them could be a way to gauge their likelihood of default.
Mountain_Skies 7y ago
It'd be painful but it might make sense for mall owners to forgive the rent while everything is closed. If their tenant goes out of business, they're not getting the back rent and now they'll have a vacancy in a time they're unlikely to find another tenant quickly. Waiving back rent might enable some of their tenants to stay in business, paying rent going forward. In the case of enclosed shopping malls, if the entire facility has shutdown, it seems unethical to charge rent to stores that no one could physically access. This situation is probably covered in the lease in boilerplate language somewhere.
- rebuilder 7y ago
  OTOH, insurers might not pay if rents are voluntarily forgiven. Then again, a pandemic quite likely falls outside the remit of many policies anyway.
- felipemnoa 7y ago
  >>It'd be painful but it might make sense for mall owners to forgive the rent while everything is closed You are assuming that the owner himself does not have a mortgage with a bank. A bank would never just waive mortgage payments. The preferable thing to do is to make a payment agreement for the late rent payments. With the first payment for the late rent not due until conditions improve. Although, this is what the 2 trillion stimulus package is supposed to address. I think.
  - jfoutz 7y ago
    Well, good luck to the bank. Foreclose and enjoy owning a few acres of urban blight. Banks are highly specialized, and that specialization isn't well suited to property management. Property management is highly specialized and that specialization isn't well suited to running a retail operation. Retail operations are highly specialized and blah blah blah. So, you gotta pick. Either put things on pause, and hope it comes back, or let those with specialized skills wander off and do what they do in other places. I'm pretty sure there will be plenty of demand all over the country once there's a vaccine. 2 years? Funny how organizations have an appetite for risk until they start losing. Too much avocado toast I guess. This is glib, but, I think, has a kernel of truth. Economies work due to markets. The market is coming back either way. Hang on to the mall in the hope it'll bounce back, or unload it now.
    - r00fus 7y ago
      > Well, good luck to the bank. Foreclose and enjoy owning a few acres of urban blight. Theoretically Id' agree with you, but that's exactly what happened in 2008. Banks got bailed out (bigger banks got more $$) and they just rode out the recession by getting SEC to pass a rule that removed "mark to market" rules. There is no law or regulation that is exempt from being manipulated by the most powerful lobby in the country.

_curious_ 7y ago

Do you or does anyone know a good index or industry standard to look for and follow on CRE defaults/data come May?

whatshisface 7y ago
You might be able to find some packaged funds that become more or less valuable depending on the yield of the debt held by those entities, which would correspond to the market's best estimate of their default risk.
kccqzy 7y ago
You might want to look at commercial mortgage-backed securities. The credit default swaps on them could be a way to gauge their likelihood of default.

Mountain_Skies 7y ago

It'd be painful but it might make sense for mall owners to forgive the rent while everything is closed. If their tenant goes out of business, they're not getting the back rent and now they'll have a vacancy in a time they're unlikely to find another tenant quickly. Waiving back rent might enable some of their tenants to stay in business, paying rent going forward. In the case of enclosed shopping malls, if the entire facility has shutdown, it seems unethical to charge rent to stores that no one could physically access. This situation is probably covered in the lease in boilerplate language somewhere.

rebuilder 7y ago
OTOH, insurers might not pay if rents are voluntarily forgiven. Then again, a pandemic quite likely falls outside the remit of many policies anyway.
felipemnoa 7y ago
>>It'd be painful but it might make sense for mall owners to forgive the rent while everything is closed You are assuming that the owner himself does not have a mortgage with a bank. A bank would never just waive mortgage payments. The preferable thing to do is to make a payment agreement for the late rent payments. With the first payment for the late rent not due until conditions improve. Although, this is what the 2 trillion stimulus package is supposed to address. I think.
- jfoutz 7y ago
  Well, good luck to the bank. Foreclose and enjoy owning a few acres of urban blight. Banks are highly specialized, and that specialization isn't well suited to property management. Property management is highly specialized and that specialization isn't well suited to running a retail operation. Retail operations are highly specialized and blah blah blah. So, you gotta pick. Either put things on pause, and hope it comes back, or let those with specialized skills wander off and do what they do in other places. I'm pretty sure there will be plenty of demand all over the country once there's a vaccine. 2 years? Funny how organizations have an appetite for risk until they start losing. Too much avocado toast I guess. This is glib, but, I think, has a kernel of truth. Economies work due to markets. The market is coming back either way. Hang on to the mall in the hope it'll bounce back, or unload it now.
  - r00fus 7y ago
    > Well, good luck to the bank. Foreclose and enjoy owning a few acres of urban blight. Theoretically Id' agree with you, but that's exactly what happened in 2008. Banks got bailed out (bigger banks got more $$) and they just rode out the recession by getting SEC to pass a rule that removed "mark to market" rules. There is no law or regulation that is exempt from being manipulated by the most powerful lobby in the country.