3 ms·
My understanding was that debt servicing drives some of the rental price, which is why they can seem irrational in the short term and are not discounted in orde
by pnw 2y ago
My understanding was that debt servicing drives some of the rental price, which is why they can seem irrational in the short term and are not discounted in order to protect the debt coverage ratio of the building. A low ratio can trigger a technical default on the loan by the bank.
- klipklop 2y agoThis is exactly why. Also why most commercial real estate sits empty forever. To lower the rent would effect the loan and estimated (bullshit) value of the building.
- HeatrayEnjoyer 2y agoWhy even care or measure value in that manner? Seems like an obvious bad idea.
- amanaplanacanal 2y agoThe value of an asset is the return you can get on it. It’s just that in this case the return is a matter of opinion.