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They didn't "fail to repay." Nobody ever repays this type of loan. They failed to refinance. And the fact that no one would refinance their $725 million loan

They didn't "fail to repay." Nobody ever repays this type of loan. They failed to refinance. And the fact that no one would refinance their $725 million loan means that the property has seriously declined in value.

evgen 3y ago
It appears that the only thing that has declined here is the free money support for the fantasy valuation being claimed by the REIT. There are a lot of reasons that hundreds of billions in commercial real estate loans are going to be written off in the next few years and the original article mentioned none of them...
- fallingknife 3y ago
  Apparently it wasn't a fantasy valuation because the banks lent against it. It is now a fantasy valuation because the properties have massively declined in value.
  - hef19898 3y ago
    Banks loaned subprime mortgages, enough actually to tank the global economy. Banks loaned for Musk's Twitter purchase. Free money tends to move the risk assessment done by banks in not a good way. Just ask SVB.
    - ufo 3y ago
      FWIW, SVB didn't go broke because of subprime loans. They had a bank run.
      - Fervicus 3y ago
        They mismanaged their risk. You make it sound like they did nothing wrong.
        ddorian43 3y ago
        Can the other banks handle the same thing that happened to SVB?
        hef19898 3y ago
        From memory, yes. At least better, since SVB had an unusual high amount of uninsured deposits and Edit: other banks have more short term investments to cover withdrawls that were marketed to market, meaning they were more like cash equivalents than the long term stuff SVB had to sell at huge losses. And those losses kind of killed SVB.
- briandear 3y ago
  If it’s a fantasy valuation then was the government collecting property taxes based on those fantasy values?
- onlyrealcuzzo 3y ago
  There's even more reasons that interest rates won't stay this high for long enough to matter.
jgalt212 3y ago
> They didn't "fail to repay." Nobody ever repays this type of loan. Largely, but not strictly true. When the property changes hands, the old loan is paid down by the original owner / creditor and a new loan is taken out by the new owner / creditor.
- fallingknife 3y ago
  And when you pay off a loan with borrowed money the word for that is "refinance"
  - nordsieck 3y ago
    > And when you pay off a loan with borrowed money the word for that is "refinance" Not really. If I buy a house with a mortgage, I wouldn't say I refinanced the house just because the previous owners also had a mortgage. Refinance is only used when the owner is the same across loans.
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- deleted 3y ago
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evgen 3y ago

It appears that the only thing that has declined here is the free money support for the fantasy valuation being claimed by the REIT. There are a lot of reasons that hundreds of billions in commercial real estate loans are going to be written off in the next few years and the original article mentioned none of them...

fallingknife 3y ago
Apparently it wasn't a fantasy valuation because the banks lent against it. It is now a fantasy valuation because the properties have massively declined in value.
- hef19898 3y ago
  Banks loaned subprime mortgages, enough actually to tank the global economy. Banks loaned for Musk's Twitter purchase. Free money tends to move the risk assessment done by banks in not a good way. Just ask SVB.
  - ufo 3y ago
    FWIW, SVB didn't go broke because of subprime loans. They had a bank run.
    - Fervicus 3y ago
      They mismanaged their risk. You make it sound like they did nothing wrong.
      - ddorian43 3y ago
        Can the other banks handle the same thing that happened to SVB?
        hef19898 3y ago
        From memory, yes. At least better, since SVB had an unusual high amount of uninsured deposits and Edit: other banks have more short term investments to cover withdrawls that were marketed to market, meaning they were more like cash equivalents than the long term stuff SVB had to sell at huge losses. And those losses kind of killed SVB.
briandear 3y ago
If it’s a fantasy valuation then was the government collecting property taxes based on those fantasy values?
onlyrealcuzzo 3y ago
There's even more reasons that interest rates won't stay this high for long enough to matter.

jgalt212 3y ago

> They didn't "fail to repay." Nobody ever repays this type of loan. Largely, but not strictly true. When the property changes hands, the old loan is paid down by the original owner / creditor and a new loan is taken out by the new owner / creditor.

fallingknife 3y ago
And when you pay off a loan with borrowed money the word for that is "refinance"
- nordsieck 3y ago
  > And when you pay off a loan with borrowed money the word for that is "refinance" Not really. If I buy a house with a mortgage, I wouldn't say I refinanced the house just because the previous owners also had a mortgage. Refinance is only used when the owner is the same across loans.
- deleted 3y ago
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deleted 3y ago
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