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> This is exactly why we have bankruptcy! You're not wrong, and under normal circumstances this would be a blip on the radar. However, the hundreds if not thou

> This is exactly why we have bankruptcy! You're not wrong, and under normal circumstances this would be a blip on the radar. However, the hundreds if not thousands of locations each of these companies plan to shutter will have an unprecedented effect on the commercial real estate market. Within months we will have thousands of property owners suddenly unable to pay their mortgages because they no longer have tenants, meaning they will have to default on their loans. This will greatly affect banks and other lenders in the months and years following. It's a domino effect that will be felt for many, many years after we've wiped out SARS-CoV-2.

dragontamer 6y ago
Which is also the point of financing and securities. I invest money into the market. Sometimes the market does poorly and goes down. My job as an investor is to accept risk when others do not. It is my money that disappears in these circumstances. The general idea is for the riskier among us to lose money. The investing class reaps benefits when the economy is good, but they lose money when the economy suffers. ---------- When downturns happen, investors become frightened. Which is fine: it means more opportunities for me to buy back into the market. But accepting this year's losses is part of the plan.
dencodev 6y ago
Won't somebody please think of the landlords and banks
- morganvachon 6y ago
  I think you missed my point, that eventually the pain will trickle down to the rest of us at the bottom. I should have continued the domino metaphor to this conclusion to avoid misunderstanding, I'm sorry. And to be fair, I and likely many other "regular Joes" benefited initially from the 2008/9 downturn; I was able to buy my first home, humble as it is, at less than half its usual market value. I'm still enjoying that benefit today, with a monthly house payment less than most people's car payment even on a used vehicle. I think this time around it will be much different; this is approaching a true depression, not just a downturn. We are at 30 million jobs lost due to the pandemic, on top of the existing unemployment not related to it. We are on a dark road.
  - valuearb 6y ago
    There is a lot less pain tricking down if the lenders and real estate owners take the brunt of it.
    - munk-a 6y ago
      I think you vastly underestimate how over-leveraged everyone is. The real estate owners are no more resilient than a sheet of paper when it comes to the guillotine that could be coming for the economy. And, while I'm sure a lot of people aren't feeling any particular love for real-estate folks in general due to the current administration - letting them get liquidated and then trying to build up a replacement is harder and more damaging than just propping them up. But I, personally, am seriously done with this slap-on-this-wrist for endangering the economy during clear weather BS. Engaging in unsafe business practices can cause massive loss of life - whether you're Wells Fargo inflating fake accounts and leveraging them as assets, the wolf of wall street or just committing some plain old accounting fraud we need to come down hard as a society and stop glorifying it as if these clowns are sticking it to the man.
    - WanderPanda 6y ago
      You are right, sadly Schadenfreude (gloat?) would mean a non-trivial relief to the pain of many people
      - valuearb 6y ago
        My point was someone has to bear the losses. Forcing the owners to bear those losses means the rest of us don’t, which is a while lot less pain in general. It’s like this. Suppose a real estate speculator in your town buys a mall, leverages it with debt to afford it, and becomes rich. They buy the biggest house in town, drive a Bentley, in general live well for a decade. Then the pandemic happens, and some of their tenants stop paying. They personally signed for the mall mortgage, and are now in default. They need $10M to recapitalize their loan, avoid foreclosure, and ride out the rest of this. So they come to the city council and ask it to raise property taxes by an average of $100 a year per person in the town so the city can loan them the $10M. They explain by doing this they will keep the mall open, be able to work things through with the tenants, saving jobs, the mall, the bank, the city, even goddamn America! The speculator then sits back smoking a cigar to await his bailout. Then the (secretly libertarian$”) mayor points out if the city doesn’t step up, the bank will sell the mall to a new owner, who will work with the tenants to keep the mall open, and sell the speculators mansion, Bentley and jewelry to help recoup their losses. And the citizens of the town will all be $100/year ahead. Then he slams his gavel down and screams, “and there is no smoking in public meetings you arrogant leach!”
- shard 6y ago
  I don't understand this attitude that someone who decides to invest their money into real estate instead of the stock market should be derided as a plague on society, as if it's not much more work to be a landlord than a stock market investor. When you are a landlord, you have to worry about tenants that don't pay (and threaten you with physical violence when you try to collect), tenants that damage your property, having to fix the property (some even do their own work to save money). You might not even be able to evict a problem tenant easily without some long dragged out court case, during which time you are collecting no rent. When tenants move out, you worry about how long it will take to find another tenant, as mortgage payments and taxes and repairs don't stop when there is no tenant. You have to worry about the local market situation changing, perhaps some new construction like a factory might make your property less desirable, perhaps young people just think that the area is played out, and so you will have to try to sell your property ahead of the change while looking for a new one. You have to constantly track possible changes in other neighborhoods as potential places to buy if needed. This information is not available online, you have to beat feet and constantly talk to other people and track down rumors, trying to get the big picture over all the little neighborhoods in your city. And if you are actually forced to sell and buy somewhere else, you have to spend months or years going all over the city to find another property (good real estate are just not on the market that often). Mistakes have a huge cost, and a poor choice could wipe you out as you are locked in to a property that doesn't bring income and have no buyers. You have to worry about tax laws and real estate laws changing, maybe forcing you to sell at a loss just to avoid a bigger loss later. Landlords are not people sitting on the porch, drinking iced tea and twirling their mustache while the money gets delivered in big bags. There's a lot of work and stress that goes into it, just like most other jobs.
  - true_religion 6y ago
    I don’t think it’s derision, just the attitude that people in power ought to defend themselves. Banks have no shortage of money, lawyers, and friends in high places. They do not need you or I also apologizing their actions. If anything we should be extremely suspicious of ant bailout and scrutinize it to ensure it’s well deserved, and will result in a better society overall.
landryraccoon 6y ago
I hope it ends up causing residential real estate prices to fall as a consequence. Maybe then millennials will be able to afford homes. I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be really unwise.
- Bombthecat 6y ago
  Everyone still wants to live in cities. Firms want to settle in cities. If shops close, it wont change much.
  - cobookman 6y ago
    You could see commercial real-estate be converted to residential.
    - Analemma_ 6y ago
      How much does that cost, and is anyone going to pay that cost when residential rents are also falling? Commercial property is so different from living quarters that I wouldn't be surprised if "conversion" isn't actually possible, short of just razing it and building from scratch.
      - pkaye 6y ago
        I've seen that conversion in Silicon Valley. There is the Valco mall in Cupertino being demolished for mixed use residential, retail and office space. That mall was dying for a decade. https://revitalizevallco.com/ https://revitalizevallco.com/ Then there is Santana Row in San Jose. Used to be a strip mall as I recall. Now its high end shopping and residential. https://en.wikipedia.org/wiki/Santana_Row https://en.wikipedia.org/wiki/Santana_Row
    - Nasrudith 6y ago
      In practice unfortunately most attempts seem to get aborted as zoning requirements differ too much to be economical. For one the plumbing tends to come with per resident requirements for the units they wish to sell for health code reasons of wanting a shower, toliet, and bath. Going more "dorm" style could work for low end if there wasn't a pandemic and even then it would carry plenty of risks that would scare people away from such an arrangement let alone the consumer desires.

dragontamer 6y ago

Which is also the point of financing and securities. I invest money into the market. Sometimes the market does poorly and goes down. My job as an investor is to accept risk when others do not. It is my money that disappears in these circumstances. The general idea is for the riskier among us to lose money. The investing class reaps benefits when the economy is good, but they lose money when the economy suffers. ---------- When downturns happen, investors become frightened. Which is fine: it means more opportunities for me to buy back into the market. But accepting this year's losses is part of the plan.

dencodev 6y ago

Won't somebody please think of the landlords and banks

morganvachon 6y ago
I think you missed my point, that eventually the pain will trickle down to the rest of us at the bottom. I should have continued the domino metaphor to this conclusion to avoid misunderstanding, I'm sorry. And to be fair, I and likely many other "regular Joes" benefited initially from the 2008/9 downturn; I was able to buy my first home, humble as it is, at less than half its usual market value. I'm still enjoying that benefit today, with a monthly house payment less than most people's car payment even on a used vehicle. I think this time around it will be much different; this is approaching a true depression, not just a downturn. We are at 30 million jobs lost due to the pandemic, on top of the existing unemployment not related to it. We are on a dark road.
- valuearb 6y ago
  There is a lot less pain tricking down if the lenders and real estate owners take the brunt of it.
  - munk-a 6y ago
    I think you vastly underestimate how over-leveraged everyone is. The real estate owners are no more resilient than a sheet of paper when it comes to the guillotine that could be coming for the economy. And, while I'm sure a lot of people aren't feeling any particular love for real-estate folks in general due to the current administration - letting them get liquidated and then trying to build up a replacement is harder and more damaging than just propping them up. But I, personally, am seriously done with this slap-on-this-wrist for endangering the economy during clear weather BS. Engaging in unsafe business practices can cause massive loss of life - whether you're Wells Fargo inflating fake accounts and leveraging them as assets, the wolf of wall street or just committing some plain old accounting fraud we need to come down hard as a society and stop glorifying it as if these clowns are sticking it to the man.
  - WanderPanda 6y ago
    You are right, sadly Schadenfreude (gloat?) would mean a non-trivial relief to the pain of many people
    - valuearb 6y ago
      My point was someone has to bear the losses. Forcing the owners to bear those losses means the rest of us don’t, which is a while lot less pain in general. It’s like this. Suppose a real estate speculator in your town buys a mall, leverages it with debt to afford it, and becomes rich. They buy the biggest house in town, drive a Bentley, in general live well for a decade. Then the pandemic happens, and some of their tenants stop paying. They personally signed for the mall mortgage, and are now in default. They need $10M to recapitalize their loan, avoid foreclosure, and ride out the rest of this. So they come to the city council and ask it to raise property taxes by an average of $100 a year per person in the town so the city can loan them the $10M. They explain by doing this they will keep the mall open, be able to work things through with the tenants, saving jobs, the mall, the bank, the city, even goddamn America! The speculator then sits back smoking a cigar to await his bailout. Then the (secretly libertarian$”) mayor points out if the city doesn’t step up, the bank will sell the mall to a new owner, who will work with the tenants to keep the mall open, and sell the speculators mansion, Bentley and jewelry to help recoup their losses. And the citizens of the town will all be $100/year ahead. Then he slams his gavel down and screams, “and there is no smoking in public meetings you arrogant leach!”
shard 6y ago
I don't understand this attitude that someone who decides to invest their money into real estate instead of the stock market should be derided as a plague on society, as if it's not much more work to be a landlord than a stock market investor. When you are a landlord, you have to worry about tenants that don't pay (and threaten you with physical violence when you try to collect), tenants that damage your property, having to fix the property (some even do their own work to save money). You might not even be able to evict a problem tenant easily without some long dragged out court case, during which time you are collecting no rent. When tenants move out, you worry about how long it will take to find another tenant, as mortgage payments and taxes and repairs don't stop when there is no tenant. You have to worry about the local market situation changing, perhaps some new construction like a factory might make your property less desirable, perhaps young people just think that the area is played out, and so you will have to try to sell your property ahead of the change while looking for a new one. You have to constantly track possible changes in other neighborhoods as potential places to buy if needed. This information is not available online, you have to beat feet and constantly talk to other people and track down rumors, trying to get the big picture over all the little neighborhoods in your city. And if you are actually forced to sell and buy somewhere else, you have to spend months or years going all over the city to find another property (good real estate are just not on the market that often). Mistakes have a huge cost, and a poor choice could wipe you out as you are locked in to a property that doesn't bring income and have no buyers. You have to worry about tax laws and real estate laws changing, maybe forcing you to sell at a loss just to avoid a bigger loss later. Landlords are not people sitting on the porch, drinking iced tea and twirling their mustache while the money gets delivered in big bags. There's a lot of work and stress that goes into it, just like most other jobs.
- true_religion 6y ago
  I don’t think it’s derision, just the attitude that people in power ought to defend themselves. Banks have no shortage of money, lawyers, and friends in high places. They do not need you or I also apologizing their actions. If anything we should be extremely suspicious of ant bailout and scrutinize it to ensure it’s well deserved, and will result in a better society overall.

landryraccoon 6y ago

I hope it ends up causing residential real estate prices to fall as a consequence. Maybe then millennials will be able to afford homes. I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be really unwise.

Bombthecat 6y ago
Everyone still wants to live in cities. Firms want to settle in cities. If shops close, it wont change much.
- cobookman 6y ago
  You could see commercial real-estate be converted to residential.
  - Analemma_ 6y ago
    How much does that cost, and is anyone going to pay that cost when residential rents are also falling? Commercial property is so different from living quarters that I wouldn't be surprised if "conversion" isn't actually possible, short of just razing it and building from scratch.
    - pkaye 6y ago
      I've seen that conversion in Silicon Valley. There is the Valco mall in Cupertino being demolished for mixed use residential, retail and office space. That mall was dying for a decade. https://revitalizevallco.com/ https://revitalizevallco.com/ Then there is Santana Row in San Jose. Used to be a strip mall as I recall. Now its high end shopping and residential. https://en.wikipedia.org/wiki/Santana_Row https://en.wikipedia.org/wiki/Santana_Row
  - Nasrudith 6y ago
    In practice unfortunately most attempts seem to get aborted as zoning requirements differ too much to be economical. For one the plumbing tends to come with per resident requirements for the units they wish to sell for health code reasons of wanting a shower, toliet, and bath. Going more "dorm" style could work for low end if there wasn't a pandemic and even then it would carry plenty of risks that would scare people away from such an arrangement let alone the consumer desires.