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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

#131

Post by kyleee »

joe_the_user wrote: post #107
nostromo wrote: post #37

Earlier quoted context omitted.

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…

You can't turn off and on the economy like a switch. Actually, you can. Money transactions can be suspended and goods can be distributed directly. If banks fail, we have another financial crisis. The last one took a decade to recover from. Not even, what we're looking at is the dead Frankenstein construction created to avoid dealing excess speculation of last time. The economy has been artificially supported by QE si…

"Actually, you can. Money transactions can be suspended and goods can be distributed directly."

Do you mind expounding a bit on this claim? What does it mean to suspend all money transactions and who will distribute the goods?

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

#132

Post by bsanr »

marcus0x62 wrote: post #118
bsanr wrote: post #95

>Offered >Deferment >We are all in this together. Not quite sure how these square.

It seems like a pretty reasonable offer — if you understand how rental markets work. Landlords take on the substantial risk of long-term ownership, maintenance, and uncertain market demand for their product. Operating costs —- that’s excluding financing costs — typically run 45% of rents. Tenants usually, but not always, pay a higher rental rate than the equivalent ownership cost but have no obligations and no capita…

The business 101 was unnecessary.

What matters in this scenario is that these businesses are under government order not to operate. They are unable to make money. Deferment, then, amounts to a catch-22: pay now and go bankrupt; defer, have finances hampered well into the future, and still go bankrupt; or break the lease, shutter the business, and start up elsewhere. The building owner loses a tenant should any of these scenarios play out, and only receives income in the first (wildly cynical) two.

The proper thing to do would be to either waive rent, ask for a percentage relative to the business that could be completed, or to automatically defer payments if they don't arrive on schedule.

You can understand why some would find it unconscionable to insist on anything resembling business-as-usual during this time. Capital owners should be expected to be active supporters of their community interests. If not, I'm unconvinced that they shouldn't simply be chucked out with whatever charity proffered; what good are they?

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

#133

Post by bsanr »

nate_meurer wrote: post #111
bsanr wrote: post #95

>Offered >Deferment >We are all in this together. Not quite sure how these square.

What's confusing about this to you? Would you prefer OP to default on their mortgage, in which case the tenants would likely get tossed out anyway?

I'd prefer capital owners to hedge their risk appropriately.

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

#134

Post by bsanr »

arkades wrote: post #122
bsanr wrote: post #101

Earlier quoted context omitted.

Under the circumstances, the only living expenses should be gas and food. If someone who owns hundreds of thousands of dollars worth of capital doesn't have enough money set aside to weather a bad month, hopefully they've been kind and fair enough to their tenants to receive help, or have supported community efforts to help feed those in need and can receive support in turn. Like, this is why people need to be active…

Calling it "hundreds of thousands of dollars of capital" somehow makes it sound like massive wealth, as opposed to the single accumulated asset of a lifetime of lower middle-class labor.

It's not pennies, and it's supposed to be evidence of fiscal sophistication. That's what Capitalism is marketed as: the people who are most responsible and talented gain the most wealth. Are you telling me it's not true?

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

#135

Post by candybar »

wegs wrote: post #50
nostromo wrote: post #37

Earlier quoted context omitted.

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...

This simply doesn't work at all.

First, the situation is not that dire to start with, most people and businesses can meet their obligations. We don't have anything remotely close to a financial crisis. It makes no sense to effectively turn the entire economy into a command economy and effectively declare a default to save what appears to be a fairly small part of the economy that will have trouble. You can have targeted intervention and get most of the benefit without dragging the rest of the economy into this.

Second, you can't just remove credit from the system. Credit is fundamental to nearly all transactions at scale - transactions in the real world aren't atomic, which means businesses are always dealing with receivables and payables, not to mention lines of credit that are designed to help businesses manage them.

There are tons of offsetting contracts, whether in terms of derivatives or insurance, and no one is going to be able to figure out which side of each contract is covered and which isn't and how to price anything given the uncertainty. Do health insurance companies have to pay hospitals? Do car insurance companies have to pay? These are all payments. Nothing happens in an economy without a payment. Do you have to pay insurance premiums? The effective result of this would be all financial markets not functioning and nearly all real markets too, since they are tied to the financial markets for pricing, settlement and credit.

It would be like the global financial crisis but a substantially worse version where every company becomes the Lehman Brothers. You'd have to basically nationalize everything across the entire world and run a command economy because the markets simply won't function at all even on a purely basic level.

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

#136

Post by nate_meurer »

bsanr wrote: post #133
nate_meurer wrote: post #111

Earlier quoted context omitted.

What's confusing about this to you? Would you prefer OP to default on their mortgage, in which case the tenants would likely get tossed out anyway?

I'd prefer capital owners to hedge their risk appropriately.

So would I. Maybe I should ask a different questions: would you give OP the same critique if they'd offered their tenants rent reductions instead of deferrals?

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

#137

Post by dang »

bsanr wrote: post #95

>Offered >Deferment >We are all in this together. Not quite sure how these square.

"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."

https://news.ycombinator.com/newsguidelines.html

We detached this subthread from https://news.ycombinator.com/item?id=22680612.

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

#139

Post by im3w1l »

wegs wrote: post #94
wrkronmiller wrote: post #84

Earlier quoted context omitted.

And what about international obligations? What about mortgage-backed securities?

International obligations, where governed by US law, get placed on hold too. Ideally, other countries join in the regime. If not, you're just talking about a much smaller amount of debt (US debt held under foreign jurisdictions). Mortgage-backed securities generate no income for a couple of months.

If you stop paying other countries, the goods stop flowing. Or are you going to swing the military dick around to force people to give you stuff for free?

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

#140

Post by im3w1l »

joe_the_user wrote: post #107
nostromo wrote: post #37

Earlier quoted context omitted.

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…

You can't turn off and on the economy like a switch. Actually, you can. Money transactions can be suspended and goods can be distributed directly. If banks fail, we have another financial crisis. The last one took a decade to recover from. Not even, what we're looking at is the dead Frankenstein construction created to avoid dealing excess speculation of last time. The economy has been artificially supported by QE si…

If it goes on for any length of time there will be an explosion in organized crime as people seek out the black market. This is how you get a failed state.
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