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Don't know if it's true, but I've been told that loan renewals for commercial properties use the most recently rented unit as an anchoring point, so if you lowe
by aidenn0 4y ago
Don't know if it's true, but I've been told that loan renewals for commercial properties use the most recently rented unit as an anchoring point, so if you lower rents too much, you end up under-water in your loan.
- lotsofpulp 4y agoLenders are smarter than that. CMBS (commercial mortgage backed securities) lenders require borrowers to maintain a certain debt service coverage ratio. https://en.wikipedia.org/wiki/Debt_service_coverage_ratio https://en.wikipedia.org/wiki/Debt_service_coverage_ratio You do not get to pretend a half empty building is worth the same as a full one.
- IG_Semmelweiss 4y agoThe rent affects the comps. If the landlord happens to own the comps (he owns the building after all) He will run into trouble in multiple ways if hes lowering rent, for example with resets (every 10yrs or so), rolling the debt, refi, , lowering the floor for units in negotiation or renewal etc Still it doesnt mitigate the fact that there is a real estate loan that must be paid.