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Dear LLs: as your commercial CDO^3's end up eating themselves [and assoc. real assets], will you please lessen-up on triple-net and rents? Capitalism "works bot
by ProllyInfamous 3y ago
Dear LLs: as your commercial CDO^3's end up eating themselves [and assoc. real assets], will you please lessen-up on triple-net and rents? Capitalism "works both ways," and watching storefronts sit vacant for years with ridiculous rental terms is just astonishing.
- deleted 3y ago[deleted]
- Workaccount2 3y agoIt's because those rent prices are being used as collateral for other commercial real estate property loans. The rent price used is based on the rent the previous tenant paid, not the market value of the property. If the owner leases at a lower rent price, they will essentially get margin called on their other properties. Therefore it actually might make sense to just have the property sit vacant with a (now) ridiculous rental price. If governments start implementing a vacancy tax that grows as vacancy duration increases, essentially forcing the market to unstick, we'd likely see a rapid implosion of commercial real estate.
- dgfitz 3y ago> If governments start implementing a vacancy tax that grows as vacancy duration increases, essentially forcing the market to unstick, we'd likely see a rapid implosion of commercial real estate. Doesn’t sounds like a horrible thing, but perhaps I’m not understanding what the impact would be to us “regular folk” if the commercial real estate bubble popped.
- datadrivenangel 3y agoProbably another recession for no good reason.
- alephnerd 3y ago> the impact would be to us “regular folk” Have a 401K, a 403B, or a Government Pension? Most marketmakers tend to be Pension and Retirement Funds - they are the only ones with the actual liquidity needed to capitalize on market changes.
- Projectiboga 3y agoDue to fractional reserve lending, unwinding such a large cohort of debt could really cause problems. The 2008, and the 89-90 contractions both had effects beyond the notes and real estate.
- therockspush 3y agoEvery time I explain this to people you see the 5 stages of grief go across their face, especially when it's a property that used to host their favorite restaurant or something. I sometimes have to go back and remind myself this is really happening, it's such bullshit.
- anotherhue 3y agoYup. Truly our representatives are not representing us.
- StreetChief 3y agoHow does this work? The rate and therefore value is fixed in contract? Is that why the previous tenant rent is used and not a market rate?
- everybodyknows 3y agoDoesn't this impugn the competence of the lenders, that their solvency metrics are being gamed so easily? Or, behind the lenders, is it a matter of gaming a government regulatory solvency test?
- DANmode 3y agoThis isn't unintentional, if that's what you're implying. Property ownership and property "development" has been, and is, propped up at every level, because the people making policy are, or know, the people owning property.
- htrp 3y agojust need the ability to actually have the banks mark collaterals to models or market. unfortunately cre incentives beung what they are, that will never happen
- ethanbond 3y agoLand Value Tax is the solution. Simply tax vacancy into oblivion and force landlords to put the land to productive use. The current dynamic is how economies seize up.