14 ms·

Sources Tell Me Some Messed Up Stuff Is Happening in Commercial Real Estate

65 points by gsibble 3y ago

bell-cot 3y ago
Sounds like the only actual bad stuff is the (hypothesized future) fat government bail-outs of the idiot banks - which allowed "just give us back the keys and you can walk away" clauses in a bunch of big-money contracts. Obvious (if politically impossible) fix - banks that go bust become U.S. Gov't. property. Bank executives are fired as unneeded/incompetent, and their stock options become worthless paper. U.S. DoJ gets nasty about clawing back recent executive bonuses, compensation, and such.
- rfgmendoza 3y ago
  > Obvious (if politically impossible) fix - banks that go bust become U.S. Gov't. property. the assets should become government property and administered long enough to sell off the assets to the market. the bank itself should be dissolved as a legal business entity, with no protection for the executives
xyst 3y ago
Seems plausible. Vacancy rates of commercial property is ~~down~~ up significantly in major cities (SF, ATX, NYC, SEA, ...). What I want to know is: is it possible to find out how many of these commercial loans contain a "non-recourse" clause?
- unstatusthequo 3y ago
  Not sure if UCC filings have this information in them, but that's one place I'd look first.
  - mistrial9 3y ago
    I can say from experience, that when there is money to be made, or commercial advantage to be had, some group will be on it before any news or any report shows it. On the other hand, when there are losses, and big mouths on big mics are trying to make a public case, you better find a team and make sure you know where you stand, because it is not going to be fair, or pretty. definitely interested in this topic for practical reasons here in California
  - xyst 3y ago
    thanks I'll look into this. hopefully I don't have to make requests for each individual state.
- danans 3y ago
  > Vacancy rates of commercial property is down significantly in major cities (SF, ATX, NYC, SEA, ...). You mean occupancy rate right?
  - xyst 3y ago
    yes, occupancy rates :)
- jandrese 3y ago
  It may be expensive, but in places like San Francisco it seems like it would be worthwhile to have those commercial spaces rebuilt as residential. The city has such a dire housing crunch that letting a building sit empty waiting for a commercial client is almost malfeasance. If the zoning is wrong that is a political issue that can be corrected. There should be a strong offices to condos push.
  - cudgy 3y ago
    But will the demand be there for the new housing to live in an expensive poorly run city with fewer jobs in the commercial centers?
    - jandrese 3y ago
      I am not worried about running out of demand in the Bay Area anytime soon.
      - cudgy 3y ago
        I was talking about San Francisco not the general Bay Area.
wewtyflakes 3y ago
I don't know that I agree with the author's assessment that this is "disgusting"; it just seems like a shift in wealth from bankers to commercial real estate companies, and I am not particularly sympathetic to either. Maybe there is another angle here.
- anoonmoose 3y ago
  I also came here to comment on that word choice. It's disgusting to activate a clause of a contract that both parties agreed to, when neither party seems to have a substantial power imbalance relative to the other? Seems pretty odd to me.
  - flutas 3y ago
    I think I could say that it's disgusting if you view it as a mafialike group getting ready to cause a financial shock for their own gain to the detriment of everyone else... But that's a hyper specific view point that I doubt many hold, but I feel like that's the view the author has.
  - N_A_T_E 3y ago
    That's not the disgusting part. It's the assumption by banks that they will be bailed out (by us) for their bad investments if the investments are large enough.
    - cudgy 3y ago
      And even more disgusting that taxpayers and their elected representatives keep allowing this to happen over and over again. There is no accountability.
- rcme 3y ago
  Maybe you missed the part about a bail out. That's not a transfer of wealth from bankers to commercial real estate companies, it's a transfer of wealth from the tax payers to the real estate companies.
gojomo 3y ago
Fits the pattern of recent major-developer default-walkaways in San Francisco: - Westfield Mall: https://twitter.com/rolandlisf/status/1668356986256375808 https://twitter.com/rolandlisf/status/1668356986256375808 - 2 major downtown hotels: https://sfstandard.com/business/real-estate-group-halts-loan-payments-two-san-francisco-hotels/ https://sfstandard.com/business/real-estate-group-halts-loan... (with more likely to follow)
thinkingkong 3y ago
I wouldnt be surprised if it turned out to be bigger than 2008 by some order of magnitude. But has the market priced this in yet? Are there financial instruments that you can monitor to see what big players might be thinking? Im also not really optimistic anyone will stay angry enough for anything to happen. The news cycle burns so hot right now that people seem to be OK with paying almost double for food and still people are like “ooh but theres so much content”.
- ganeshkrishnan 3y ago
  >But has the market priced this in yet? The market is currently on a blind bull run stampede because too many retail are short and holding puts or outright shorts. This was exacerbated few months back when Burry tweeted "SELL" and millions or retail traders straight out started shorting stocks and buying puts. SPX and TSLA is running up for absolutely no reason beyond their wildest EPS just to bankrupt the retail. I suspect it will keep running for months until all the retail have either bought in to the bull run or died of trying to short the market. When that happens is when the music stops for this game of musical chair.
jarym 3y ago
I'm not sure if it is the case in the US but in the UK we have similar issues around commercial real estate and there is a problem - a lot of pension funds are invested in them. If they don't recover in value then it will create a shortfall in future pensions which would be a bigger issue.
- cudgy 3y ago
  Maybe they’ll consider bailing out the pensions like they do the banks? … Nah that wouldn’t make any sense (sarcasm).
kderbyma 3y ago
Same thing happens with rent and housing. they ruin an economy and then buy it to rent back to the old guard.
wombatpm 3y ago
Not surprised as there are a lot of real estate projects that only make sense at low interest rates. They need to be recalibrated to the new reality and bankruptcy is how it happens
malfist 3y ago
Why should we believe this person? It's hearsay of hearsay
- gojomo 3y ago
  Well, it's hard to verify raising private funding, as either money-in-bank or contractual-commitments for when the timing is right. But the 1st part of this story fits recent trends in SF's commercial market, with some high-profile loan-walkaways on marquee properties. And it fits history, where deep-pocketed investors are happy to see many kinds of asset crashes – if they've kept their "powder dry" – to snatch up valuable properties at lows. Do you think people running this strategy want it to be widely understood?
crazygringo 3y ago
Putting aside the nonsense of "absolutely disgusting", this is incredibly vague and exceedingly implausible. Critiquing: > They say the largest property companies in the US (they named names, I can’t) are raising huge amounts of money... if they stop paying the loan, and the bank gets the building back, the bank cannot sue them for the remainder of the loan. For this reason, banks generally do not loan more than what the building is worth. Banks aren't dumb, they're not going to fall for something as obvious as this. > Banks will take hundreds of billions to trillions of dollars in losses. And literally everyone knows the US government will have no choice but to bail them out, as usual. Not really. They sure didn't bail out Lehman. And the owners of SVB lost all their equity. Bank owners do everything they possible can to avoid failing and being "bailed out". > Then, when the banks turn around and sell these properties for pennies on the dollar, these same property companies that caused the problem in the first place are going to buy better properties for cheaper and end up better off than they were before. Properties are sold at auction or similar and go to the highest bidder. It's certainly not "pennies on the dollar". In sum, none of this makes any sense.
- taeric 3y ago
  They may not be idiots, but has the value of the buildings also plummeted? This could be akin to the toxic mortgage loans of years ago, just without the predatory lending that jacked up the values. Doesn't matter, too much, if the values just dropped naturally versus having been inflated by poor lending practices.
- vel0city 3y ago
  > banks generally do not loan more than what the building is worth. The building's worth was often based on pre-pandemic rent expectations. Lots of buildings are very empty these days, even if they're still currently leased. I wonder what the rates of renewals will be on suites where practically nobody goes to.
  - crazygringo 3y ago
    The article is talking about new loans, which are always going to be based on current valuations, not pre-pandemic ones.
sparrish 3y ago
Why would a bank give a "non-recourse" loan for commercial property? Doesn't make sense to me.
- rfgmendoza 3y ago
  commercial real estate was considered extremely safe, and competitive, so such deals were a way to build trust in commercial tenants and compete with other banks. it was considered safe because a commercial tenants was likely trying to run a stable business and moving location is very expensive, so it was unlikely for a business to want to change location on a whim.
- failuser 3y ago
  Real estate, especially prime commercial real estate was a sure bet for a while. If a company can’t service the debt the bank gets a valuable asset. It might be not so valuable with work from home taking hold. I still doubt the whole scenario. I hope some emergency regulations to turn empty commercial real estate into housing is passed, I know it’s not ideal, but it’s not impossible.
- nocoiner 3y ago
  The loans are non-recourse to the developers, so while they might have to turn over the keys to the property at the end of the day, the bank isn’t coming after them for their other projects or personal assets. A busted deal isn’t a happy outcome for a real estate developer, at all, and they lose whatever equity they invested on the project, but non-recourse debt protects them on the downside and they make their real money on the successful deals.
ryanwaggoner 3y ago
This is ridiculous, there aren't going to be trillions in losses from intentional defaults in commercial real estate. First of all, if it's done intentionally, it's fraud. And if two people have blabbed to random Substack guy, then this would be easy to prove. Secondly, what exactly is the strategy here? Borrow a ton of money to buy buildings, then default on them and walk away? Where's the profit exactly? Third, the firms capable of raising this level of capital also care about their reputation and ability to borrow money in the future. And finally, the buildings won't be worthless when the bank takes them over, they'll just be worth less. To lose trillions here, this would have to happen on a scale of $10 trillion or more? The entire commercial real estate market in the US is only worth like $20 trillion.
- cudgy 3y ago
  > Where's the profit exactly? Admin fees
- gojomo 3y ago
  "Trillions" may be a stretch barring larger recession & wider commercial real-estate collapse. But it's far from impossible! A 10% drop would be enough to deliver (2) "trillions" in losses to a ~$20T sector - & broad commercial-real-estate price indexes often show swings of 15% or more within a year. Since then end of 2021, major indexes already show a 15% drop with no hint of slowdown - and from 2007-2009, there was a broad ~40% drop. If there's a 2008-style crash – and it seems likely much of these losses, whether strategic no-recourse defaults, or simple inability-to-pay defaults, will pass through to banks – there could be $8T in losses.
mcherm 3y ago
Cached version if the original site is down: https://web.archive.org/web/20230613173521/https://innovationnation.blog/p/sources-tell-me-some-messed-up-stuff https://web.archive.org/web/20230613173521/https://innovatio...
failuser 3y ago
I don’t think this is credible, but commercial real estate is in trouble indeed.
debacle 3y ago
This is farcical. Commercial real estate is being bought up at very fast rates because, in every state that I have looked into, the deal for developers is getting better and better. In a world of remote workers without retail, commercial real estate has taken a big hit. In my area, that means that there are 4 malls that are planned for demo, and one with a lot of vacancies, not to mention untold strip malls ready for the same fate. These properties are all being rezoned to mixed use or residential development. All of them.
unstatusthequo 3y ago
This is probably true for office buildings. The math no longer works due to higher vacancy post-COVID and interest rates essentially doubling. No surprise there. These types of builded are financed with non recourse CMBS loans though, so it’s actually the bond buyers and not the banks that will take the brunt of it on the debt side. Obviously the equity is completely blown out as well. As for firms then circling back to buy at a discount, HA! Good luck raising money again after you’ve completely blown out your investors on the first go around, this time for a massive value add plan on a building that’s bleeding money. There will be winners and losers, a lot of buildings will be repurposed. But with $500BN of loans maturing in the next 2-3 years there is a lot of pain to come.
danielvf 3y ago
Here's an alternative explanation, which I know is true for at least one nationwide property ownership/investment company. The company has three core activities: 1. Raising money from investors 2. Buying properties when the price is less than the expected profits. 3. Selling properties when the price is more than the expected profits. At a point a year or two or three ago, the math on buying properties just stopped making sense on individual property basis. That whole side of the business just ended up going into sleep mode. No purchases since forever. However selling properties (adding cash), and fund raising (adding cash) kept right on going. The net result is the company owning only a small percentage of what it used to own, but having one heck of a war chest. Which they are sitting on, waiting for the economics to make sense again.
deepfriedchokes 3y ago
A lot of assumptions in this article and you know what they say about assumptions.
cvccvroomvroom 3y ago
Vulture capitalism is the consequence of regulatory capture, which is a nice way to say that politicians like Joe Manchin are taking bribes so the rich can freeload even more off of people who don't get billionaire tax breaks.
nocoiner 3y ago
thatsnothowanyofthisworks.tiff But back in reality, of course we all know that the commercial real estate market is by and large looking at a world of hurt. But I think by and large they’re going to muddle through. Some developers will lose their buildings, equity is definitely taking a hit and there will surely be some losses on loans. But on balance, I think the banks will be fine (and some fulcrum security holders somewhere in the capital stack will find themselves owners of, in some cases, VERY nice new buildings). I worry less about the debt lended to finance these building than I do about the many, many pensions, retirement systems and insurance companies that rely on a structured equity return to meet their long term financing needs.
- fundad 3y ago
  Remember the panic about a "Restaurant Apocalypse" because cheap labor either moved somewhere cheaper or died? The industry is still there kids. Free money led to overbuilding restaurants and offices. This is a correction, value is lost and companies will go under. The remaining industry will match the remaining demand.

65 points by gsibble 3y ago

Sounds like the only actual bad stuff is the (hypothesized future) fat government bail-outs of the idiot banks - which allowed "just give us back the keys and you can walk away" clauses in a bunch of big-money contracts. Obvious (if politically impossible) fix - banks that go bust become U.S. Gov't. property. Bank executives are fired as unneeded/incompetent, and their stock options become worthless paper. U.S. DoJ gets nasty about clawing back recent executive bonuses, compensation, and such.

rfgmendoza 3y ago
> Obvious (if politically impossible) fix - banks that go bust become U.S. Gov't. property. the assets should become government property and administered long enough to sell off the assets to the market. the bank itself should be dissolved as a legal business entity, with no protection for the executives

xyst 3y ago

Seems plausible. Vacancy rates of commercial property is ~~down~~ up significantly in major cities (SF, ATX, NYC, SEA, ...). What I want to know is: is it possible to find out how many of these commercial loans contain a "non-recourse" clause?

unstatusthequo 3y ago
Not sure if UCC filings have this information in them, but that's one place I'd look first.
- mistrial9 3y ago
  I can say from experience, that when there is money to be made, or commercial advantage to be had, some group will be on it before any news or any report shows it. On the other hand, when there are losses, and big mouths on big mics are trying to make a public case, you better find a team and make sure you know where you stand, because it is not going to be fair, or pretty. definitely interested in this topic for practical reasons here in California
- xyst 3y ago
  thanks I'll look into this. hopefully I don't have to make requests for each individual state.
danans 3y ago
> Vacancy rates of commercial property is down significantly in major cities (SF, ATX, NYC, SEA, ...). You mean occupancy rate right?
- xyst 3y ago
  yes, occupancy rates :)
jandrese 3y ago
It may be expensive, but in places like San Francisco it seems like it would be worthwhile to have those commercial spaces rebuilt as residential. The city has such a dire housing crunch that letting a building sit empty waiting for a commercial client is almost malfeasance. If the zoning is wrong that is a political issue that can be corrected. There should be a strong offices to condos push.
- cudgy 3y ago
  But will the demand be there for the new housing to live in an expensive poorly run city with fewer jobs in the commercial centers?
  - jandrese 3y ago
    I am not worried about running out of demand in the Bay Area anytime soon.
    - cudgy 3y ago
      I was talking about San Francisco not the general Bay Area.

wewtyflakes 3y ago

I don't know that I agree with the author's assessment that this is "disgusting"; it just seems like a shift in wealth from bankers to commercial real estate companies, and I am not particularly sympathetic to either. Maybe there is another angle here.

anoonmoose 3y ago
I also came here to comment on that word choice. It's disgusting to activate a clause of a contract that both parties agreed to, when neither party seems to have a substantial power imbalance relative to the other? Seems pretty odd to me.
- flutas 3y ago
  I think I could say that it's disgusting if you view it as a mafialike group getting ready to cause a financial shock for their own gain to the detriment of everyone else... But that's a hyper specific view point that I doubt many hold, but I feel like that's the view the author has.
- N_A_T_E 3y ago
  That's not the disgusting part. It's the assumption by banks that they will be bailed out (by us) for their bad investments if the investments are large enough.
  - cudgy 3y ago
    And even more disgusting that taxpayers and their elected representatives keep allowing this to happen over and over again. There is no accountability.
rcme 3y ago
Maybe you missed the part about a bail out. That's not a transfer of wealth from bankers to commercial real estate companies, it's a transfer of wealth from the tax payers to the real estate companies.

gojomo 3y ago

Fits the pattern of recent major-developer default-walkaways in San Francisco: - Westfield Mall: https://twitter.com/rolandlisf/status/1668356986256375808 https://twitter.com/rolandlisf/status/1668356986256375808 - 2 major downtown hotels: https://sfstandard.com/business/real-estate-group-halts-loan-payments-two-san-francisco-hotels/ https://sfstandard.com/business/real-estate-group-halts-loan... (with more likely to follow)

thinkingkong 3y ago

I wouldnt be surprised if it turned out to be bigger than 2008 by some order of magnitude. But has the market priced this in yet? Are there financial instruments that you can monitor to see what big players might be thinking? Im also not really optimistic anyone will stay angry enough for anything to happen. The news cycle burns so hot right now that people seem to be OK with paying almost double for food and still people are like “ooh but theres so much content”.

ganeshkrishnan 3y ago
>But has the market priced this in yet? The market is currently on a blind bull run stampede because too many retail are short and holding puts or outright shorts. This was exacerbated few months back when Burry tweeted "SELL" and millions or retail traders straight out started shorting stocks and buying puts. SPX and TSLA is running up for absolutely no reason beyond their wildest EPS just to bankrupt the retail. I suspect it will keep running for months until all the retail have either bought in to the bull run or died of trying to short the market. When that happens is when the music stops for this game of musical chair.

jarym 3y ago

I'm not sure if it is the case in the US but in the UK we have similar issues around commercial real estate and there is a problem - a lot of pension funds are invested in them. If they don't recover in value then it will create a shortfall in future pensions which would be a bigger issue.

cudgy 3y ago
Maybe they’ll consider bailing out the pensions like they do the banks? … Nah that wouldn’t make any sense (sarcasm).

kderbyma 3y ago

Same thing happens with rent and housing. they ruin an economy and then buy it to rent back to the old guard.

wombatpm 3y ago

Not surprised as there are a lot of real estate projects that only make sense at low interest rates. They need to be recalibrated to the new reality and bankruptcy is how it happens

malfist 3y ago

Why should we believe this person? It's hearsay of hearsay

gojomo 3y ago
Well, it's hard to verify raising private funding, as either money-in-bank or contractual-commitments for when the timing is right. But the 1st part of this story fits recent trends in SF's commercial market, with some high-profile loan-walkaways on marquee properties. And it fits history, where deep-pocketed investors are happy to see many kinds of asset crashes – if they've kept their "powder dry" – to snatch up valuable properties at lows. Do you think people running this strategy want it to be widely understood?

crazygringo 3y ago

Putting aside the nonsense of "absolutely disgusting", this is incredibly vague and exceedingly implausible. Critiquing: > They say the largest property companies in the US (they named names, I can’t) are raising huge amounts of money... if they stop paying the loan, and the bank gets the building back, the bank cannot sue them for the remainder of the loan. For this reason, banks generally do not loan more than what the building is worth. Banks aren't dumb, they're not going to fall for something as obvious as this. > Banks will take hundreds of billions to trillions of dollars in losses. And literally everyone knows the US government will have no choice but to bail them out, as usual. Not really. They sure didn't bail out Lehman. And the owners of SVB lost all their equity. Bank owners do everything they possible can to avoid failing and being "bailed out". > Then, when the banks turn around and sell these properties for pennies on the dollar, these same property companies that caused the problem in the first place are going to buy better properties for cheaper and end up better off than they were before. Properties are sold at auction or similar and go to the highest bidder. It's certainly not "pennies on the dollar". In sum, none of this makes any sense.

taeric 3y ago
They may not be idiots, but has the value of the buildings also plummeted? This could be akin to the toxic mortgage loans of years ago, just without the predatory lending that jacked up the values. Doesn't matter, too much, if the values just dropped naturally versus having been inflated by poor lending practices.
vel0city 3y ago
> banks generally do not loan more than what the building is worth. The building's worth was often based on pre-pandemic rent expectations. Lots of buildings are very empty these days, even if they're still currently leased. I wonder what the rates of renewals will be on suites where practically nobody goes to.
- crazygringo 3y ago
  The article is talking about new loans, which are always going to be based on current valuations, not pre-pandemic ones.

sparrish 3y ago

Why would a bank give a "non-recourse" loan for commercial property? Doesn't make sense to me.

rfgmendoza 3y ago
commercial real estate was considered extremely safe, and competitive, so such deals were a way to build trust in commercial tenants and compete with other banks. it was considered safe because a commercial tenants was likely trying to run a stable business and moving location is very expensive, so it was unlikely for a business to want to change location on a whim.
failuser 3y ago
Real estate, especially prime commercial real estate was a sure bet for a while. If a company can’t service the debt the bank gets a valuable asset. It might be not so valuable with work from home taking hold. I still doubt the whole scenario. I hope some emergency regulations to turn empty commercial real estate into housing is passed, I know it’s not ideal, but it’s not impossible.
nocoiner 3y ago
The loans are non-recourse to the developers, so while they might have to turn over the keys to the property at the end of the day, the bank isn’t coming after them for their other projects or personal assets. A busted deal isn’t a happy outcome for a real estate developer, at all, and they lose whatever equity they invested on the project, but non-recourse debt protects them on the downside and they make their real money on the successful deals.

ryanwaggoner 3y ago

This is ridiculous, there aren't going to be trillions in losses from intentional defaults in commercial real estate. First of all, if it's done intentionally, it's fraud. And if two people have blabbed to random Substack guy, then this would be easy to prove. Secondly, what exactly is the strategy here? Borrow a ton of money to buy buildings, then default on them and walk away? Where's the profit exactly? Third, the firms capable of raising this level of capital also care about their reputation and ability to borrow money in the future. And finally, the buildings won't be worthless when the bank takes them over, they'll just be worth less. To lose trillions here, this would have to happen on a scale of $10 trillion or more? The entire commercial real estate market in the US is only worth like $20 trillion.

cudgy 3y ago
> Where's the profit exactly? Admin fees
gojomo 3y ago
"Trillions" may be a stretch barring larger recession & wider commercial real-estate collapse. But it's far from impossible! A 10% drop would be enough to deliver (2) "trillions" in losses to a ~$20T sector - & broad commercial-real-estate price indexes often show swings of 15% or more within a year. Since then end of 2021, major indexes already show a 15% drop with no hint of slowdown - and from 2007-2009, there was a broad ~40% drop. If there's a 2008-style crash – and it seems likely much of these losses, whether strategic no-recourse defaults, or simple inability-to-pay defaults, will pass through to banks – there could be $8T in losses.

mcherm 3y ago

Cached version if the original site is down: https://web.archive.org/web/20230613173521/https://innovationnation.blog/p/sources-tell-me-some-messed-up-stuff https://web.archive.org/web/20230613173521/https://innovatio...

failuser 3y ago

I don’t think this is credible, but commercial real estate is in trouble indeed.

debacle 3y ago

This is farcical. Commercial real estate is being bought up at very fast rates because, in every state that I have looked into, the deal for developers is getting better and better. In a world of remote workers without retail, commercial real estate has taken a big hit. In my area, that means that there are 4 malls that are planned for demo, and one with a lot of vacancies, not to mention untold strip malls ready for the same fate. These properties are all being rezoned to mixed use or residential development. All of them.

unstatusthequo 3y ago

This is probably true for office buildings. The math no longer works due to higher vacancy post-COVID and interest rates essentially doubling. No surprise there. These types of builded are financed with non recourse CMBS loans though, so it’s actually the bond buyers and not the banks that will take the brunt of it on the debt side. Obviously the equity is completely blown out as well. As for firms then circling back to buy at a discount, HA! Good luck raising money again after you’ve completely blown out your investors on the first go around, this time for a massive value add plan on a building that’s bleeding money. There will be winners and losers, a lot of buildings will be repurposed. But with $500BN of loans maturing in the next 2-3 years there is a lot of pain to come.

danielvf 3y ago

Here's an alternative explanation, which I know is true for at least one nationwide property ownership/investment company. The company has three core activities: 1. Raising money from investors 2. Buying properties when the price is less than the expected profits. 3. Selling properties when the price is more than the expected profits. At a point a year or two or three ago, the math on buying properties just stopped making sense on individual property basis. That whole side of the business just ended up going into sleep mode. No purchases since forever. However selling properties (adding cash), and fund raising (adding cash) kept right on going. The net result is the company owning only a small percentage of what it used to own, but having one heck of a war chest. Which they are sitting on, waiting for the economics to make sense again.

deepfriedchokes 3y ago

A lot of assumptions in this article and you know what they say about assumptions.

cvccvroomvroom 3y ago

Vulture capitalism is the consequence of regulatory capture, which is a nice way to say that politicians like Joe Manchin are taking bribes so the rich can freeload even more off of people who don't get billionaire tax breaks.

nocoiner 3y ago

thatsnothowanyofthisworks.tiff But back in reality, of course we all know that the commercial real estate market is by and large looking at a world of hurt. But I think by and large they’re going to muddle through. Some developers will lose their buildings, equity is definitely taking a hit and there will surely be some losses on loans. But on balance, I think the banks will be fine (and some fulcrum security holders somewhere in the capital stack will find themselves owners of, in some cases, VERY nice new buildings). I worry less about the debt lended to finance these building than I do about the many, many pensions, retirement systems and insurance companies that rely on a structured equity return to meet their long term financing needs.

fundad 3y ago
Remember the panic about a "Restaurant Apocalypse" because cheap labor either moved somewhere cheaper or died? The industry is still there kids. Free money led to overbuilding restaurants and offices. This is a correction, value is lost and companies will go under. The remaining industry will match the remaining demand.