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I still don't understand. > if the developer had cut the rent in half to get the building full, the banker now has to lower the building's value from $10M to $
by executesorder66 5y ago
I still don't understand.
> if the developer had cut the rent in half to get the building full, the banker now has to lower the building's value from $10M to $5M, and therefore the maximum loan is reduced to $4M. But the developer owes $8M to the bank, and doesn't have the money to pay it off. Not even the $4M to cover the difference and refinance the rest.
Why do they still owe $8M if the loan was changed to $4M?
And why can't they pay it back since now they have a full building of paying tenants compared to a previously empty building not making any money?
- monocasa 5y ago> Why do they still owe $8M if the loan was changed to $4M? The loan wasn't changed to $4M, the appraisal of the property was. They bank already paid the $8M to the previous owner (and their bank), but if it gets revalued, then the bank only has $4M of collateral against an $8M loan and starts looking for that lost money.
- executesorder66 5y agoAh okay. That makes more sense. I was confused by the wording "therefore the maximum loan is reduced to $4M."