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U.S. retailers plan to stop paying rent to offset virus closures

bloomberg.com

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Re: U.S. retailers plan to stop paying rent to offset virus closures

#41

Post by avalys »

Wowfunhappy wrote: post #20

Realistically, who else is the landlord going to rent the space to right now? Seems to me it's in the landlord's interest to corporate. All lessees are going to be in more-or-less the same boat. What surprises me is that they didn't just work this out quietly...

Yes, this is a critical point. It’s one advantage of the fact that this is happening simultaneously across the whole nation. The entire commercial real estate market has no choice but to work out a single solution of some sort.

“If you owe the bank a million dollars, you have a problem. If a million people owe the bank a million dollars, the bank has a problem.”

The problem is, the landlord probably has a mortgage, and their mortgage has been securitized just like everything else. So modifying the terms probably has more of a ripple effect than you’d think. And who knows who is left holding the bag when thousands of commercial mortgage-backed securities suddenly get down-rated and start to default.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#42

Post by wegs »

henrikschroder wrote: post #13

“The court system is just going to get flooded with a million of these disputes between tenants and landlords,” I'm absolutely not a big fan of collectivism, but sometimes, individualism just doesn't work. Sometimes, you have to step in and solve problems collectively. No, it won't be fair, yes it will be one-size-fits-all, no you can't please everyone. Suck it up, buttercup. Whether you like it or not, we're in this…

No, there is a one-size-fits-all solution. https://docs.google.com/document/d/1YbtJGn7ida2IYNgwCFk3Sjhs...

Stop interest on all loans for 90 days. Defer principal on all loans by 90 days. In 90 days, payments start up as before (and just end 90 days later). Same thing bubbles for all contracts. Leases and rents are free for 90 days. Contracts switch from net 30 to net 120 terms. Etc.

You pause the cycle of debt.

It works for home mortgages, small businesses, airlines, and almost everyone else. And it avoids the need for a 2 trillion bailout / stimulus package. It allows much more targeted aid at a fraction of the cost.

It ain't rocket science.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#43

Post by [deleted] »

vkou wrote: post #40
HammockTester wrote: post #36

Earlier quoted context omitted.

As long as you're the one happily shelling out you can reasonably promote that idea.

What does this mean in this context? Are we spilling ink for the sake of the owners of these retail spaces? Do you think they are going to be any better off if these retailers just stop paying rent, and go out of business, instead? Instead of grousing, the landlords should be petitioning for their mortgage payments to be suspended for this time period.

[deleted]

Re: U.S. retailers plan to stop paying rent to offset virus closures

#44

Post by arkades »

_bxg1 wrote: post #17

All rent should be suspended, across the board, for everyone. Rent is a passive expense that businesses and individuals alike who are not getting any income right now will have no hope of paying.

Not all rent is giant corporations. My mother is a retiree who basically pays her living expenses every month by renting out the first floor of her two-floor home. "All rent should be suspended" would drive her into bankruptcy, and ultimately leave both her and her tenant without a place to live.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#45

Post by vkou »

bpodgursky wrote: post #26
_bxg1 wrote: post #17

All rent should be suspended, across the board, for everyone. Rent is a passive expense that businesses and individuals alike who are not getting any income right now will have no hope of paying.

Do you consider property tax to be 'rent'? Because a large percent of rent is getting funneled right back into property tax, which isn't (yet) adjusted down. (to be clear, I'm fine with a lot of rent deferment / freezing, but I do think there needs to be equivalent property tax forgiveness for at least retail space)

1. Property taxes are typically a small portion of rent.

2. In many municipalities, they can be deferred for a long time, without serious penalties, even when we're not in a state of emergency.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#46

Post by nostromo »

charia wrote: post #19

I used to criticize the big tech companies for stockpiling dozens of billions of dollars instead of investing them into their businesses, but it's only now I can see why a move like that was wise. If at all possible, businesses, like people, should keep a rainy day fund. I wonder if all the companies that used their money for stock buybacks are kicking themselves in the foot right now.

I agree but I think us folks in tech could be overly confident about our continued employment.

Yes, companies have cash, but ad spending has dropped tremendously overnight.

https://www.msn.com/en-us/news/other/facebook-twitter-revenu...

And Apple, well, all of their stores are closed and I highly doubt they're selling a ton of expensive luxury goods right now -- as millions of Americans fear unemployment and a deep recession.

Cloud is dependent on large corporate spending, which may be in for a contraction as companies cut back or go under.

Startups may find deals harder to land as investors flee to safety.

Perhaps we'll look back and see WeWork as peak bubble, and Covid-19 as the impetus for a sever pullback.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#47

Post by blackrock »

_bxg1 wrote: post #17

All rent should be suspended, across the board, for everyone. Rent is a passive expense that businesses and individuals alike who are not getting any income right now will have no hope of paying.

All government help will go to those with an overpriced mortgage.

Renters are going to get screwed over! Again. They get nothing. And most of them are going to lose their jobs.

They’re talking about spending $8 Trillion on bailouts for large businesses. Government Motors. Government Hilton. Government Boeing.

Instead, they should just pay everyone’s rent for the next 2 years as a universal basic income, until this blows over.

At this level of insane money printing, then what is the difference between $8 Trillion vs. $10 Trillion? Nothing. It’s just a decimal point.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#48

Post by DougN7 »

refurb wrote: post #8

I'm not sure how widespread this will be, but it will be interesting to see the impact on commercial real estate in SF and NYC where empty storefronts are already a major issue. I'm imaging a lot of businesses were barely scraping by before the shelter-in-place. We might see a huge increase in empty storefronts after this passes.

I think many businesses will discover they don’t need to pay for an office. Would not want to own an office building right now.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#49

Post by nostromo »

wegs wrote: post #42
henrikschroder wrote: post #13

“The court system is just going to get flooded with a million of these disputes between tenants and landlords,” I'm absolutely not a big fan of collectivism, but sometimes, individualism just doesn't work. Sometimes, you have to step in and solve problems collectively. No, it won't be fair, yes it will be one-size-fits-all, no you can't please everyone. Suck it up, buttercup. Whether you like it or not, we're in this…

No, there is a one-size-fits-all solution. https://docs.google.com/document/d/1YbtJGn7ida2IYNgwCFk3Sjhs... Stop interest on all loans for 90 days. Defer principal on all loans by 90 days. In 90 days, payments start up as before (and just end 90 days later). Same thing bubbles for all contracts. Leases and rents are free for 90 days. Contracts switch from net 30 to net 120 terms. Etc. You pause the cycle of debt. It w…

This is a recipe for bank failures and a financial crisis.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#50

Post by wegs »

nostromo wrote: post #37
joe_the_user wrote: post #30

The economy is effectively frozen. But you have to distinguish the production process from the monetary, contractual and ownership relations that normally control the production process. We can continue to produce necessary , essential good during this crisis and let the rest of the economy stay frozen 'till the end of this mess. The situation should be the equivalent of a war or a different natural disaster. Essenti…

You can't turn off and on the economy like a switch. People need to pay rent and mortgages, or loans will not be repaid. If loans don't get repaid, banks fail. If banks fail, we have another financial crisis. The last one took a decade to recover from and there weren't even that many bad mortgages (as a percent of all mortgages). Businesses right now are eating a bunch of costs. That can't last for very long before t…

Sure you can. You stop rent. You stop mortgage interest. You pause mortgage principal. You do that across the board for every rental, contract, and debt obligation in America. In 90 days, it expires, and everything starts back up again.

https://docs.google.com/document/d/1YbtJGn7ida2IYNgwCFk3Sjhs...

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