121–130 of 226 posts
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Why is this legal?
Why wouldn't it be? Did the PE firm force someone to issue debt for a worthless business? I would hold the lender responsible for due diligence.
Retailing seems to be dying in US irrespective of the company: https://www.bloomberg.com/news/articles/2018-04-17/retail-st... Couple of years ago, one of my friends bought a store at a strip mall. The store was making a loss. And the previously owners were an elderly couple. So my friends thesis was that they weren't exactly tuned into the digital presence business and it was still entirely possible to run a store i…
What I don't get is there are a lot of empty storefronts and places moving that I see... and retailers say the rents are still sky high for those storefronts. Is it really worth the property owners keeping them empty?
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> Is it really worth the property owners keeping them empty? Yes. It's a tax dodge. [1] [2] The owners "...hold out for higher rents to increase the worth of their properties because value is based on future income stream...They can afford to forego current rental income, waiting for higher-paying tenants because they claim big business losses. Landlords get a tax loss from negative rental income when no rent comes i…
It's easy to avoid taxes by not making money, but as someone states in the third article you link to: "A wise colleague told me that until effective income tax rates reach 100 percent, a dollar of income is worth more than a dollar of deduction". That's just the apparently-not-so-well-known First Law of Tax: It is always better to have more money than less money.
For little people like you and me, taking rent is a simple income and forgoing it would be a simple loss. As you say, it wouldn't make any difference for our net taxes.
When you own thousands of square meters of [what will be] prime brownfield development space, leaving it unoccupied just hastens the local government to offer incentives for redevelopment. Tax, rates, planning, VAT. Even if they don't subscribe to broken window theory, an unoccupied building pays them no business rates or council tax (UK) so doing anything else is preferable to doing nothing. They'll bend over backwards to make that happen.
Retailing seems to be dying in US irrespective of the company: https://www.bloomberg.com/news/articles/2018-04-17/retail-st... Couple of years ago, one of my friends bought a store at a strip mall. The store was making a loss. And the previously owners were an elderly couple. So my friends thesis was that they weren't exactly tuned into the digital presence business and it was still entirely possible to run a store i…
What I don't get is there are a lot of empty storefronts and places moving that I see... and retailers say the rents are still sky high for those storefronts. Is it really worth the property owners keeping them empty?
was it built during the rush thereby incurring high land and building costs?
do they have good clients? good are grocery stores, popular chain restaurants, and such. bad are "I want to run my own coffee, cupcake, and such, stores.
So if they ended up with the less than favorable clients in order to get storefronts it does tend to lead to vacancies. that is always compounded by not having the big draw, I love grocery.
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> Is it really worth the property owners keeping them empty? Yes. It's a tax dodge. [1] [2] The owners "...hold out for higher rents to increase the worth of their properties because value is based on future income stream...They can afford to forego current rental income, waiting for higher-paying tenants because they claim big business losses. Landlords get a tax loss from negative rental income when no rent comes i…
It's easy to avoid taxes by not making money, but as someone states in the third article you link to: "A wise colleague told me that until effective income tax rates reach 100 percent, a dollar of income is worth more than a dollar of deduction". That's just the apparently-not-so-well-known First Law of Tax: It is always better to have more money than less money.
I can definitely see a situation where the owner prefers to have some storefronts vacant rather than lowering the rents because they aren't sure lowering the rents would actually fill the storefronts and it might cause the other tenants to demand lower rents. Plus it might attract the wrong sort of business.
I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was living on borrowed time. Not only do most people shop online now, most toys are also online. I imagine most parents put money into TV shows, video games, iPhone apps, etc.
The company had been paying an unsustainable $400 million a year in interest. Normal intuition would say that maybe the company could enter bankruptcy, wipe out that debt, turn the bond holders into the new owners, have the owners issue stock for a debt free company and sell the stock to pay off a fraction of the money they owed. That would seem like a rational approach that would maximize utility for at least owners…
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You're missing the key piece: Toys R Us didn't go into debt for any good business reason, it was bought by a private equity firm and loaded with debt it didn't need. This is how private equity works: 1. A PE firm uses a combination of other people's money (limited partners a.k.a investors) and debt to buy a company. 2. The PE transfers the debt to the company's books. This way, if the company goes bankrupt the PE fun…
> Toys R Us was profitable before it was bought “In 2004, after years of flat sales and falling profits, the Toys R Us board of directors put the company up for sale” [1]. Then, over “the next five years, sales at Amazon quadrupled to $34 billion”. Toys ‘R’ Us was bought as meagre profits fell and right before Amazon went for them. Blaming this outcome on the debt load is inaccurate. [1] https://www.google.com/amp/s/…
> To compete, Toys R Us would have had to invest significantly in its website and stores. But the retailer was using most of its available cash to pay back its debt.
Yes, profits were falling crazily, but the company was still profitable. Without the debt load, they could've spent some time losing money while they pivot to a new business strategy. The debt load really prevented them from trying anything except surviving as long as they could.
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I’ve been wondering the same thing. There’s a former Borders in Pasadena that sits empty for most of the year, and only houses a Halloween costume store seasonally. They finally brought down the part of the sign that said “Borders” a few months ago, but they left up the “Books - Music - Cafe” part. It’s clearly not worth renovating, but maybe the seasonal business brings in enough that it doesn’t need a tenant the re…
The Borders thing is a pattern that happens all over the country; pop-up Halloween costume stores love old Borders locations, and other abandoned retail spaces. I suspect it's a combination of factors that leads to this: * Retail was heavily overbuilt leading up to the 2008 market crash, so even a decade later there's oversupply of retail real estate compared to demand for it * The economics of brick-and-mortar retai…
What a trip. I used to go to the Times Square location with people who came in from out of town, as an attraction for when they inevitably wanted to check out Times Square. The article doesn't really do justice to what a spectacle it was (which is saying something, since the article calls it out repeatedly). The person-sized Lego Hulk they built for that store is still my phone background. Made this even more shockin…
I feel sad thinking that my son will never experience that joy of going to these huge Toy stores. At best, his experience will be limited to the kids section at Target/Walmart (if they are still around by the time he is old enough to visit them).
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What I don't get is there are a lot of empty storefronts and places moving that I see... and retailers say the rents are still sky high for those storefronts. Is it really worth the property owners keeping them empty?
> Is it really worth the property owners keeping them empty? Yes. It's a tax dodge. [1] [2] The owners "...hold out for higher rents to increase the worth of their properties because value is based on future income stream...They can afford to forego current rental income, waiting for higher-paying tenants because they claim big business losses. Landlords get a tax loss from negative rental income when no rent comes i…