3 ms·
I’m familiar with the argument but I think people overstate the importance of unrented high price to refinancing. Banks (and CMBS investors) don’t simply look
by JackFr 7y ago
I’m familiar with the argument but I think people overstate the importance of unrented high price to refinancing. Banks (and CMBS investors) don’t simply look at market rent levels in isolation. They also look at percent vacant and length of tenancy. Except over the very short term, no one is being deceived.
- mdtusz 7y agoI can't say that it's specifically the case, but in Montreal, there's been an ever increasing number of vacant commercial spaces - seemingly because they know that "eventually" some BigCo will come along and be willing to pay the extremely high rent. As anecdata, there's a corner space on the ground floor of Duluth and St. Laurent that's been vacant for well over a year - maybe even two. It's pricing out smaller businesses, and even though the space is available and empty, it's just unaffordable and priced far above the true market value. We don't want more A&W's and Starbucks, but that's what eventually happens here. The only places that survive are bars.
- mark-r 7y agoRefinancing isn't the answer, because the borrowers will need to make up the difference between the old value and new value in cash. That's what makes this such a strong incentive, where it's worth it to leave a property unrented for a long time. If there's no refinancing, there's no reevaluation and no big lump of cash to be produced - everything just continues on as it did before.