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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

#51

Post by arkades »

captncraig wrote: post #16
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.

Hopefully the landlords realize there is not going to be anybody lining up to take over these leases if they evict. Forgiving a couple months so a business doesn't have to close is almost certainly the shrewd business choice as well as the moral one.

Storefronts in NYC routinely stay empty for years waiting for a large corporate client to come along, because the long-term stability and rent beat the pants off of any smaller tenant. Losing the stability and rent, I think they're okay with waiting again.

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

#52

Post by Frost1x »

nostromo wrote: post #46
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 r…

Tech is everywhere so it depends on what industry you're in and how your contributions of tech are funded.

With that said, I think were going to see pressure everywhere. As a recent switch to a new employer, I'm concerned, even if our source of revenue currently appears solid.

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

#53

Post by pbourke »

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 wonder if all the companies that used their money for stock buybacks are kicking themselves in the foot right now.

The outside shareholders of these companies: absolutely

The executives and board: lol, no

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

#54

Post by wegs »

nostromo wrote: post #49
wegs wrote: post #42

Earlier quoted context omitted.

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.

Why?

Banks get payments 3 months later. They can also get 0% interest loans from the fed.

Why do they fail?

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

#55

Post by pdonis »

NotAnEconomist wrote: post #27
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.

Why would they? They're not going to have to re-issue shares at a lower price; they're going to get bailed out by the taxpayers. The conditions for government money should be: 1. All current debt is converted into shares, erasing payback preferences and on-going payments to creditors. 2. Companies must issue new shares as collateral to the government at current market rate, in exchange for the money. 3. Rather than r…

> make the shareholders take it in the wallet for their reckless business practices

The problem is that those business practices weren't decided by the shareholders. The shareholders in most cases are mutual funds holding millions of people's retirement savings. Those people had no say in the business decisions made by the companies; they don't even control which individual stocks the mutual funds invest in. Their retirement savings are not what should be taking the hit.

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

#56

Post by digitaltrees »

x2f10 wrote: post #11

Is it the government's job to hold the proverbial hot potato in events like this?

Yes. That is the whole concept of lender of last resort. The goal is to avoid a panic fueled fire sale where prices become decoupled from anything resembling fundamentals and instead collapse as everyone acts in concert to irrationally unload otherwise valuable assets. By acting in this capacity the government can allow the market price seeking mechanisms of capitalism to operate on an appropriately longer time horizon.

The government is uniquely situated to do this because 1. It can use future tax revenue over the long term to pay for supporting the broader economy in the short term thereby providing redistribution over time, 2. Can address the entire economy in a systematic fashion rather than having individual actors chaotically rush to negotiate individual deals, and 3. Can print money to prevent markets from seizing up when panic sets.

The alternative is to let everything just liquidate with the resulting mass panic, cash shortages, bank runs, needless bankruptcy, supply chain disruptions, and eventually massive reduction in demand making the market smaller for everyone.

The liquidationist mindset was dominant in the 1920s and espoused by Hoover’s Secretary of the Treasury. Some argue this made the Great Depression far worse than it needed to be. We largely avoided that in 2008 because the government stepped in.

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

#57

Post by XMPPwocky »

charia wrote: post #10
anonsubmit2671 wrote: post #2

Corporations should keep paying to entities who don't have as much wealth as them. For some people who aren't extraordinarily rich, it maybe their only source of income.

You realize that the retail business can be quite difficult and that a monthlong shuttering can and will drive many into bankruptcy. Rent payments without income will put the nail in the coffin for many businesses. I do agree with your sentiment. Paying their workers who are probably struggling significantly at the moment would be ideal. I don't feel that landlords need the $'s as much as those workers.

> a monthlong shuttering can and will drive many into bankruptcy.

They should have saved up- a decent emergency fund is three+ months of expenses, or so I'm told.

In a better world...

Didn't save up? You lose your business. Either it goes under or you sell it at fire-sale prices to somebody who has the assets to keep it afloat until things stabilize (possibly the government).

Your workers? Of course, the government will support them as individuals. And you, too! You won't be homeless or starving, even if your business fails completely. You just won't have your business anymore.

"But what about startups or very small businesses who haven't had time to accumulate enough capital to survive this?" Then you do what you usually do to turn a rare risk into a predictable expense: buy insurance.

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

#59

Post by mrfusion »

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.

Just to play devils advocate. Wouldn’t that be a large dead weight loss if every corporation had six months of operating expenses sitting around in low interest accounts? In total it could be as large as half the worlds GDP?

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

#60

Post by edmundsauto »

JMTQp8lwXL wrote: post #31
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.

It's easier to stockpile billions of dollars when you have no idea what to do with it. The typical business does not have this luxury. Some tech companies are worth more than some country's GDPs. This advice is analogous to a billionaire telling a minimum wage employee to save more.

They could have done buybacks instead of cash sitting around.
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