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Busted retailers use bankruptcy to break leases by the thousands

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Re: Busted retailers use bankruptcy to break leases by the thousands

#51

Post by AnimalMuppet »

Bombthecat wrote: post #45
landryraccoon wrote: post #41

Earlier quoted context omitted.

I hope it ends up causing residential real estate prices to fall as a consequence. Maybe then millennials will be able to afford homes. I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be rea…

Everyone still wants to live in cities. Firms want to settle in cities. If shops close, it wont change much.

If the shops close, do people still want to live in cities? Isn't that part of the point of living in a city - that you have all these businesses easily within reach?

Re: Busted retailers use bankruptcy to break leases by the thousands

#52

Post by AnimalMuppet »

borkt wrote: post #8
seibelj wrote: post #3

This is exactly why we have bankruptcy! These businesses are failing and need to renegotiate their liabilities. This is expected and healthy if you want any retailers to have any hope of survival going forwards.

It’s going to have severe consequences somewhere down the line as I don’t believe anything nearing the magnitude and density of the coming bankruptcies has ever occurred. That being said I agree it’s meant to be this way, and I will always prioritize RESPONSIBLE business trying to restructure and preserve jobs over landholders who basically do very little work while extractIng as much rent out of their tennants as th…

Ever? 1929, maybe? Crash of 1879?

Or am I being uncharitable, and you mean recently?

Re: Busted retailers use bankruptcy to break leases by the thousands

#53

Post by HarryHirsch »

landryraccoon wrote: post #41
morganvachon wrote: post #28

Earlier quoted context omitted.

> This is exactly why we have bankruptcy! You're not wrong, and under normal circumstances this would be a blip on the radar. However, the hundreds if not thousands of locations each of these companies plan to shutter will have an unprecedented effect on the commercial real estate market. Within months we will have thousands of property owners suddenly unable to pay their mortgages because they no longer have tenants…

I hope it ends up causing residential real estate prices to fall as a consequence. Maybe then millennials will be able to afford homes. I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be rea…

That's the irresistible force (drop in salaries) meeting the immovable object (bank valuations of real estate). It's impossible to see how this is going to be squared up. On one hand, banks cannot possibly be allowed to re-value what real estate they have on their books, else they'll have to declare bankruptcy, on the other hand, wages have dropped spectacularly, and people need some sort of roof over their heads.

Re: Busted retailers use bankruptcy to break leases by the thousands

#54

Post by AnimalMuppet »

dencodev wrote: post #44
floatingatoll wrote: post #17

It's a bit depressing to see the greed-by-framing here. I feel like the banks are playing musical chairs rather than trying to operate sustainably. It seems like a more efficient approach — one that is not as economically destructive to GDP after the pandemic — would be: 1. Retailer notifies their lease holders that a given location is impacted by public health closures, reducing revenues for products originating fro…

7. Abolition of private property

Your "cure" is worse than the disease.

Re: Busted retailers use bankruptcy to break leases by the thousands

#55

Post by vsareto »

derefr wrote: post #30
Digory wrote: post #23

Earlier quoted context omitted.

>ghost towns ...if rents don't fall. And maybe they should.

I think I've seen it stated that property developers and property-management companies are often heavily leveraged, such that they can't lower rents; in about the same way that a VC firm with a ten-year investment time horizon on their fund can't invest in your startup if all your valuation-growth will come only after 11 years. In both cases, the lenders and shareholders of the firm, have contractually obligated the…

>So the firm itself is destined to either return the predicted profit, or die, with no middle road.

Nah, the third option is bailouts, and they are not wrong for having high confidence in getting bailouts.

Re: Busted retailers use bankruptcy to break leases by the thousands

#56

Post by dwighttk »

I wonder how Apple will respond if malls start collapsing.

(I’ve heard rumor that) they pay just pennies on the dollar for their store leases because they draw so much foot traffic to the malls.

I can’t imagine them keeping stores open in the middle of a nearly empty mall, but I’ve only ever seen pictures of an Apple store that wasn’t in a mall or strip mall.

Re: Busted retailers use bankruptcy to break leases by the thousands

#57

Post by derefr »

simonh wrote: post #48
derefr wrote: post #30

Earlier quoted context omitted.

I think I've seen it stated that property developers and property-management companies are often heavily leveraged, such that they can't lower rents; in about the same way that a VC firm with a ten-year investment time horizon on their fund can't invest in your startup if all your valuation-growth will come only after 11 years. In both cases, the lenders and shareholders of the firm, have contractually obligated the…

Then they are doomed. Their current tenants can’t afford the current rent, and no new tenants are going to come along at that rent level while this crisis is still ongoing, so what are they going to do? If the current tenants can be viable if rents are reduced, along with other cost saving measures, then maybe that’s a least worst outcome for society and the landlords. Ultimately though, to me, the actual business le…

The property management company isn't really a company per se; it's more like a conduit for money, an instrument.

If that instrument defaults, it's not of so much concern that a property management company will die; but rather, that the companies who were on either side of it, relying on it as a conduit for money to flow through, will end up illiquid, unable to exchange through that instrument.

On one side, that's large investors, e.g. mutual funds. So the markets will go down.

On the other side, that's the businesses themselves. Having no access to financially-healthy property management companies to rent from, is a lot like having no access to loans: it limits your choices as a business.

Maybe the valuations of these properties will crash without property-management companies around to compete over them, and businesses will be able to afford to buy them directly. But more likely, as we saw in 2007, the commercial real-estate market will just become illiquid, with everyone who is currently holding empty commercial property (i.e. mostly banks, after a presumed default or bailout of PMCs) refusing to sell it "until things recover", so that they don't have to write down a loss. And that means there won't necessarily be any commercial properties on the market for these businesses to buy into in place of their previous rentals.

Re: Busted retailers use bankruptcy to break leases by the thousands

#58

Post by res0nat0r »

Ijumfs wrote: post #50
mikestew wrote: post #16

Man, with (currently) four comments mentioning that this is "what bankruptcy is for", I think the point of the article might have been missed. This isn't some sneaky "one weird trick", and that's not the reason Bloomberg is reporting on it. In fact, the tone of the article to me is, "yup, companies do it all the time, but..." And the "but" is: But the moves threaten to upend huge swaths of the real estate market and…

Oh no, not the poor poor commercial real estate developers! Anyway all the malls died like decades ago. Have you been to a mall lately? As far as I can tell the only people who go are folks engaged in drug transactions and busloads of tourists from SE Asia.

The implication is that this, along with the rest of the current collapsing state of the USA is going to just exacerbate poverty and local decline across large parts of the country.

Re: Busted retailers use bankruptcy to break leases by the thousands

#59

Post by SketchySeaBeast »

landryraccoon wrote: post #41
morganvachon wrote: post #28

Earlier quoted context omitted.

> This is exactly why we have bankruptcy! You're not wrong, and under normal circumstances this would be a blip on the radar. However, the hundreds if not thousands of locations each of these companies plan to shutter will have an unprecedented effect on the commercial real estate market. Within months we will have thousands of property owners suddenly unable to pay their mortgages because they no longer have tenants…

I hope it ends up causing residential real estate prices to fall as a consequence. Maybe then millennials will be able to afford homes. I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be rea…

> I understand some people treat their home as savings but that's bad in every way for society and for the homeowner. I have a home and the only return I expect on it is to be able to continue living there. I'm certainly not going to depend on it for my retirement, as that would be really unwise.

How else can we think about an expense of hundreds of thousands of dollars? It's ludicrous to spend that much on something assuming it'll just depreciate and fall apart on you, worthless. I understand that you're not paying rent in a home, so it's serving a purpose, but they aren't exactly equivalent in terms of upkeep and taxes.

At this point, given the instability in the market I have no idea what is the wise move to put money into for retirement. Investments have tanked and I don't know at what point they'll recover, interest rates are abysmal, and apparently our homes should be worth nothing. There's really no practical, accessible way to invest.

Re: Busted retailers use bankruptcy to break leases by the thousands

#60

Post by ProAm »

oneplane wrote: post #18
mikestew wrote: post #16

Man, with (currently) four comments mentioning that this is "what bankruptcy is for", I think the point of the article might have been missed. This isn't some sneaky "one weird trick", and that's not the reason Bloomberg is reporting on it. In fact, the tone of the article to me is, "yup, companies do it all the time, but..." And the "but" is: But the moves threaten to upend huge swaths of the real estate market and…

On the other hand: what would they go do about it then? It the business fails it fails. It's not like you can pretend it is not failing and have them pay rent with their non-existent money.

isn't this the plot to the movie '2008'
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