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I don't think the claim is about new or future loans. The suggestion is that they're raising money via equity, not via new loans. They'd just be defaulting on t

by jsnell 3y ago

I don't think the claim is about new or future loans. The suggestion is that they're raising money via equity, not via new loans. They'd just be defaulting on their old loans. But I agree that the story as a whole made very little sense.

crazygringo 3y ago
The claim seems to be entirely about new loans, because the whole point of the supposed scheme is that the profit is coming from new loans that won't need to be paid back. Raising money by issuing new shares wouldn't have anything to do with anything here.
- vel0city 3y ago
  > the profit is coming from new loans that won't need to be paid back. When they go to buy the properties back, they'll be at the new valuations pricing in the fact they're probably going to have to offer significantly less rent than before to maybe get occupancy up. A lot of buildings have some pretty extreme valuations compared to how many people are actually coming in to the office. I've heard of >200,000sqft buildings leasing for $30-40/sqft with only a few hundred people actually coming in. ~$8MM/yr+ in leasing for like maybe 500 people to come into an office most days in a week. That's $16,000/yr in leasing costs supposedly for each of those seats, before things like utilities and maintenance are figured in. Does >$16,000/yr per desk make sense to keep a lease? I haven't heard those kinds of numbers just once. I've heard it (and seen it) several times. The office I go into has a nearly empty parking garage. It doesn't have the foot traffic to support the one cafe that used to be there. Whole floors are entirely open to be leased. I'm one of about four people who show up to the entire floor of the building. Its crazy how empty so many commercial office buildings are these days. Personally I wouldn't mind seeing a lot of this commercial real estate take a bit of a haircut on valuations, hopefully we'll see rents dip a good bit and we'll see actual occupancy up meaning better usage of the things we've already built. Its depressing seeing tons of capital just sitting there unused based on some improbable dream of getting more in rent.
- jsnell 3y ago
  I think you're misunderstanding the supposed scheme. There is nothing in the article suggesting this is about them taking new loans with the intent to default on them. Or even of them taking new loans at all. The idea is that real estate companies will walk away from all their current properties that are underwater, and default on the old loans. The banks have to offload the buildings for (supposedly) pennies on the dollar. These companies will snatch up those deals with the money they're hoarding now. ^- No new loans being defaulted on there. So, where's the profit? It'd have to be from re-buying the same properties at well below fair market prices. Is that possible? Presumably in that kind of environment loans you can't get a loan for commercial real estate (so there's few possible buyers, only those with cash in hand) and at the same time the banks would be desperate to sell. So, sure, maybe the prices would temporarily be suppressed well below what should be the fair market price. ^- No new loans being defaulted on here either. Again, I think the article is bullshit and flagged it, but you are misreading it and doubling down on the misreading.

by jsnell 3y ago

crazygringo 3y ago

The claim seems to be entirely about new loans, because the whole point of the supposed scheme is that the profit is coming from new loans that won't need to be paid back. Raising money by issuing new shares wouldn't have anything to do with anything here.

vel0city 3y ago
> the profit is coming from new loans that won't need to be paid back. When they go to buy the properties back, they'll be at the new valuations pricing in the fact they're probably going to have to offer significantly less rent than before to maybe get occupancy up. A lot of buildings have some pretty extreme valuations compared to how many people are actually coming in to the office. I've heard of >200,000sqft buildings leasing for $30-40/sqft with only a few hundred people actually coming in. ~$8MM/yr+ in leasing for like maybe 500 people to come into an office most days in a week. That's $16,000/yr in leasing costs supposedly for each of those seats, before things like utilities and maintenance are figured in. Does >$16,000/yr per desk make sense to keep a lease? I haven't heard those kinds of numbers just once. I've heard it (and seen it) several times. The office I go into has a nearly empty parking garage. It doesn't have the foot traffic to support the one cafe that used to be there. Whole floors are entirely open to be leased. I'm one of about four people who show up to the entire floor of the building. Its crazy how empty so many commercial office buildings are these days. Personally I wouldn't mind seeing a lot of this commercial real estate take a bit of a haircut on valuations, hopefully we'll see rents dip a good bit and we'll see actual occupancy up meaning better usage of the things we've already built. Its depressing seeing tons of capital just sitting there unused based on some improbable dream of getting more in rent.
jsnell 3y ago
I think you're misunderstanding the supposed scheme. There is nothing in the article suggesting this is about them taking new loans with the intent to default on them. Or even of them taking new loans at all. The idea is that real estate companies will walk away from all their current properties that are underwater, and default on the old loans. The banks have to offload the buildings for (supposedly) pennies on the dollar. These companies will snatch up those deals with the money they're hoarding now. ^- No new loans being defaulted on there. So, where's the profit? It'd have to be from re-buying the same properties at well below fair market prices. Is that possible? Presumably in that kind of environment loans you can't get a loan for commercial real estate (so there's few possible buyers, only those with cash in hand) and at the same time the banks would be desperate to sell. So, sure, maybe the prices would temporarily be suppressed well below what should be the fair market price. ^- No new loans being defaulted on here either. Again, I think the article is bullshit and flagged it, but you are misreading it and doubling down on the misreading.