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Owners are not able to cut rent as most commercial financing have covenants which require a minimum lease rate/sq foot. If they cut rent, they could be in techn
by radicaldreamer 3y ago
Owners are not able to cut rent as most commercial financing have covenants which require a minimum lease rate/sq foot. If they cut rent, they could be in technical default and lose the building.
Commercial financing has onerous terms which should be stricken by the government/courts.
- khuey 3y agoThey're going to lose the buildings eventually when the loans need to be refinanced at much higher interest rates while commanding much lower rents.
- varenc 3y agoThis is my take too. The strictness of the tenant rent requirements seem like a "bug" in the lease agreement. In a situation like this where there's a massive downturn in office rental value and not much expectation it'll lift any time soon, it seems in both parties benefit by allowing lower rents. Locking commercial tenants in 5-10 year leases at current market rates will probably mean the building owner defaults on their debt, but that seems inevitable.
- lucianbr 3y agoSeems like whatever entity did the financing would be motivated to relax those terms. Empty buildings can't be good for them either, can they?