Busted retailers use bankruptcy to break leases by the thousands • Hacker News Board

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

#121

Post by joshocar » Thu, Aug 06, 2020, 9:38 PM UTC

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…

I started saying this last March, the next big crash or rather the biggest fallout from the pandemic will in commercial real estate. Just because of how the industry works, these commercial real estate companies are leveraged like crazy and it's not like you can turn around a rent/sell the property easily in this market. Banks set aside billions last quarter in expectation of this happening.

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

#122

Post by valuearb » Thu, Aug 06, 2020, 9:39 PM UTC

simonh wrote: post #65

gremlinsinc wrote: post #25

Earlier quoted context omitted.

isn't that the point of capitalism, the fit live the poor die? Let the poor malls die, if their business model fails. We shouldn't force a failed business to last longer than society needs it to, otherwise that's something beyond capitalism.

In a situation like this, capitalism hits its limits. Don’t get me wrong, Im a thorough going capitalist. To me it’s simply a consequence of respecting individual freedoms and individual property rights. The rest of capitalism flows from those two principles. In this situation though, when there is a threat to society as a whole either military or natural, there’s a legitimate role for society to pull together and co…

I’m fine with bailing out companies as long as the owners and managers forfeit all their equity.

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

#123

Post by valuearb » Thu, Aug 06, 2020, 9:40 PM UTC

morganvachon wrote: post #86

dencodev wrote: post #38

Earlier quoted context omitted.

Won't somebody please think of the landlords and banks

I think you missed my point, that eventually the pain will trickle down to the rest of us at the bottom. I should have continued the domino metaphor to this conclusion to avoid misunderstanding, I'm sorry. And to be fair, I and likely many other "regular Joes" benefited initially from the 2008/9 downturn; I was able to buy my first home, humble as it is, at less than half its usual market value. I'm still enjoying th…

There is a lot less pain tricking down if the lenders and real estate owners take the brunt of it.

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

#124

Post by Buttons840 » Thu, Aug 06, 2020, 9:40 PM UTC

HarryHirsch wrote: post #53

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…

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.

> banks cannot possibly be allowed to re-value what real estate they have on their books

Tell me more about this? Why can't banks re-value things that constantly change in value?

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

#125

Post by supertrope » Thu, Aug 06, 2020, 9:40 PM UTC

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…

It's not just property tax. The investors who fund the mortgages would have to take a haircut. Which could destabilize banks, pensions, insurance companies, any institution relying on endowment earnings to operate, etc.

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

#126

Post by jrehor » Thu, Aug 06, 2020, 9:40 PM UTC

The US has too much retail space. Per capita, it has 5x as much as Europe (23.5 sq ft in the US vs 3-4 sq ft in most European countries) and 8-10x as much as Asia (2-3 sq ft). We may be looking at a permanent decrease as a result of this pandemic. But even if it goes down by 20%, the US will still have way more than anywhere else.

I think we'll be better off when we use the excess retail space for something else whether it's apartments, warehouses, or offices. But the transition will be painful.

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

#127

Post by ProAm » Thu, Aug 06, 2020, 9:41 PM UTC

loktarogar wrote: post #81

ProAm wrote: post #60

Earlier quoted context omitted.

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

if that's a movie, it's impossible to google

I was just referencing the 2008 financial crisis where the US literally printed money to save businesses that should have failed.

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

#128

Post by humaniania » Thu, Aug 06, 2020, 9:41 PM UTC

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…

I recently watched this documentary "Jasper Mall" about the slow death of a shopping mall, it was quite fascinating: https://www.imdb.com/title/tt11262098/

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

#129

Post by joshcain » Thu, Aug 06, 2020, 9:43 PM UTC

dhosek wrote: post #9

I have a heavy exposure in REITs (my only non-index fund investment). I treat these as passive investments so I had to look to see what I was actually invested in. I have no commercial exposure, but even what I have has been hit hard by COVID. AVB (residential), PEAK (life science/medical office/senior housing) and PSA (Public Storage) are all down roughly 25% YTD. I have to imagine that REITS in retail/office space…

PSA being down is interesting. I might have thought there would be greater demand for storage units as people clear stuff out of their houses to make room for home offices/gyms/etc.

That said, all the people who've lost jobs or hours are probably not looking to pay $100s/month for an auxiliary junk room.

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

#130

Post by ghaff » Thu, Aug 06, 2020, 9:43 PM UTC

SketchySeaBeast wrote: post #64

AnimalMuppet wrote: post #51

Earlier quoted context omitted.

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?

It's the jobs. People didn't migrate from rural to urban in the last several hundred years because they wanted the shops, they went where the highest concentration of jobs were. Moving to a rural area won't help people find jobs.

You mean the jobs that are likely to be at least somewhat less location-dependent coming out of this? (Not arguing for 100% remote or anything like this but still a fairly major shift. I certainly know plenty of people who have already moved out of cities to quite rural locations.)