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

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

#261

Post by jtbayly » Fri, Aug 07, 2020, 1:27 PM UTC

bleuedejapan wrote: post #253

jader201 wrote: post #237

Earlier quoted context omitted.

Sounds like the underlying question behind the “and?” is, why is this news on HN? As has been stated, this happens, it’s what bankruptcy is for, and is not all that shocking or worth particular notice here.

Considering that there will be a huge amount of unused, cheap real estate, and that only tech companies seem to be holding off the crisis, it is pretty much relevant - real estate will be a huge opportunity for tech.

Opportunity for what? Given the increase in WFH, tech companies are also using less real estate.

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

#262

Post by fortran77 » Fri, Aug 07, 2020, 1:30 PM UTC

swiley wrote: post #241

fortran77 wrote: post #105

Earlier quoted context omitted.

They bail out mom and pop, too. They bailed out hunrdreds of thousands of people who thought they could make money flipping condos during the 2008 housing bubble.

Weren’t they just bailing the banks servicing the debt and not the borrowers?

They excused the income tax on forgiven debt, they handed out "first time home buyers" tax credits, they excused tax on "imputed income" from living without mortgage payment for years in foreclosed houses while evictions were held back in court, etc.

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

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Post by z_ » Fri, Aug 07, 2020, 1:34 PM UTC

Tiktaalik wrote: post #103

coliveira wrote: post #95

Earlier quoted context omitted.

This has always been this way. Major investors will not plunge into some big investment without some kind of support from governments. The difference is that now we see this support given after the fact.

socialize losses, privatize gains. :\

Lemon Socialism

https://en.m.wikipedia.org/wiki/Lemon_socialism

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

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Post by PaulDavisThe1st » Fri, Aug 07, 2020, 2:19 PM UTC

lmm wrote: post #247

PaulDavisThe1st wrote: post #226

Earlier quoted context omitted.

This seems profoundly naive to me. "If it's profitable do something" is beyond simplistic. Profitable compared to what? Profitable for whom? Profitable based on what assumptions? Profitable by what metric? Dollars accrued to capital? Dollars accrued to GDP? Quality of life index? Happiness index? Life expectancy numbers? Infant mortality? Profitable with what externalities forced to be part of cost-factoring? What is…

To refuse to decide is even more simplistic. The free market offers a clear way to decide where resources are invested. If you're going to override that and prop up failing companies, what grounds are you going to use to decide, and why do you believe your process will be better? Letting the market decide at least ensures that completely useless companies go to the wall, and companies that people are willing to spend…

I don't propose propping up failing companies. I agree with others who have suggested that ensuring that individuals (i.e. employees/workers) are adequately protected so that the immediate aftermath of corporate failure doesn't fall on them. Remember: the usual reason why employees are not entitled to the same share of profits as investors is that "employees are not taking a risk". If we're going to start arguing that deciding to take a job at a company is just as much of a risk as investing capital, then the relationship with profit will need to change too.

But the implications go beyond the people who work for corporations that fail, into communities (possibly far and wide). I don't think there are policies that can mitigage this without damaging the entrepeneurial climate, which I'd rather not do. At the same time, the incredible ease with which one can start new businesses in the US, and the trivial availability of credit, almost guarantees that we have huge numbers of businesses that play valuable roles in their communities but have absolutely no resilience to negative economic shifts. I don't know how we fix that.

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

#265

Post by PaulDavisThe1st » Fri, Aug 07, 2020, 2:24 PM UTC

shard wrote: post #235

PaulDavisThe1st wrote: post #227

Earlier quoted context omitted.

"small business owners who scrimp and save to make a living", to me, is not really aligned with "a few million to purchase". Perhaps it is for you.

It seems like you are assuming that the few millions used in the purchase are 1. liquid, and 2. all from the owner. Many owners take out a loan to purchase property, so they are paying monthly mortgage. Also, the millions are locked up in the property and is inaccessible, so they have to live off of the rental income from the property. A $3M property with a 5% CAP, which is not bad for the US, nets the owner $150k a…

150k a year is nearly 3x the median household income. I'm sorry, but I don't regard this as someone who "scrimps and saves to make a living". Yes, they are not part of the 0.01%, but that level of income puts them in the top 15% or so, and talking about such landlords as if they are representative of an average person is misleading. They are not wealthy mega corporations, that is true. But they are people in vastly more fortunate positions that the vast majority of the population, and although there's no reason to be punitive towards them, I don't find their situation incredibly demanding of sympathy.

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

#266

Post by shard » Fri, Aug 07, 2020, 4:48 PM UTC

PaulDavisThe1st wrote: post #265

shard wrote: post #235

Earlier quoted context omitted.

It seems like you are assuming that the few millions used in the purchase are 1. liquid, and 2. all from the owner. Many owners take out a loan to purchase property, so they are paying monthly mortgage. Also, the millions are locked up in the property and is inaccessible, so they have to live off of the rental income from the property. A $3M property with a 5% CAP, which is not bad for the US, nets the owner $150k a…

150k a year is nearly 3x the median household income. I'm sorry, but I don't regard this as someone who "scrimps and saves to make a living". Yes, they are not part of the 0.01%, but that level of income puts them in the top 15% or so, and talking about such landlords as if they are representative of an average person is misleading. They are not wealthy mega corporations, that is true. But they are people in vastly m…

You are correct. Such earnings are above the median. Note that typical incomes are heavily based on salaries, and will not have the expenses of a business owner (such as the ones I listed earlier), and thus the $150k income of the business owner does not equate to $150k of a wage earner. Since business expenses can vary widely, it's hard to put an estimate on what the equivalent wage is, but consider it more like a $75k salary -- definitely above average, but still clipping coupons and waiting for sales and applying for financial aid when the kids go to college.

I'm glad you agree that there is no need to be punitive towards them. This is a reoccurring issue I often find on HN which I find surprising, the derision towards lines of business that people don't have much understanding of. There are no free lunches in the world that will not get optimized out quickly, and any business you believe are simple are likely to have hidden complexities that you did not consider.

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

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Post by davidf18 » Fri, Aug 07, 2020, 5:01 PM UTC

throwaway0a5e wrote: post #179

munk-a wrote: post #173

Earlier quoted context omitted.

The US has never been a free-market and, honestly, the vitriol that folks use when talking about socialism has just hurt efforts to apply sane regulations that would help stabilize the market. The US still uses SSNs for everything because everyone is too afraid of government identification to pursue a more sane approach, the result is a government issued identification that is poorly designed for what it's used for a…

>The US has never been a free-market Pretty much every market in the US has been insanely free, like "just don't kill people quickly and we don't care" free at some point. They all stopped being free when they got big. Then government got involved and regulation, regulatory capture and whatnot happened (I'm intentionally glossing over the details because they vary by industry and I don't want to pass judgement).

Suggest you read some microeconomics, specifically about rent-seeking, a market failure or market inefficiency typically but not always caused by politics.

As a simple example, consider that NYC taxi medallions were limited by NYC city council to about 13,000 and as a result, the market value of a medallion was about $1.2 million.

Then Uber/Lyft came and relieved the politically induced rent-seeking market failure of hailable vehicles in NYC and now medallions are worth a fraction of what they had been.

Real estate including housing costs in NYC, Boston, DC, Seattle, SF, LA, and much of state of CA are not free markets, but again through rent-seeking, politics has created an artificial scarcity of land by use of zoning density restrictions primarily but also overuse of historic landmark status.

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

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Post by davidf18 » Fri, Aug 07, 2020, 5:05 PM UTC

martinald wrote: post #148

brudgers wrote: post #71

Earlier quoted context omitted.

Commercial mortgaged backed securities are an investment. Investments come with risks. Bankruptcy is just part of that risk. The US is thirty years out from the previous commercial real-estate reckoning. The S&L crisis. Everything that was booming a year ago was built on top of that reckoning.

Exactly. That is the whole deal with being a commercial landlord. It isn't just "upward-only rent adjustments" every 5-10 years and cream a load of profit. There is meant to be some risk in return. In London a lot of commercial rents in newly gentrified areas have went up 10x+ in the last 10-20 years. There has been an awful of lot of value transferred to these landlords for really not a huge amount of work in many c…

It's called rent-seeking, in this case there is an artificial scarcity of land use through politics of zoning density restriction.

In microeconomics, rent-seeking along with externalities and information assywmety are three cases of market failures.

The fix for this rent-seeking is quite easy: simply reverse the regressive laws that create artificial land use scarcity, those laws that create zoning density restrictions.

David Ricardo first popularized this notion when he as a member of parliament overturned to "Corn Laws."

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

#269

Post by coliveira » Fri, Aug 07, 2020, 5:45 PM UTC

treeman79 wrote: post #213

coliveira wrote: post #107

Earlier quoted context omitted.

If capitalism is to be the law of the land, why not let the rich lose everything? I guess they can easily live on the streets.

That’s one of the tenants (no pun) of capitalism. Bad execution is punished by going out of business. This forces everyone to be hyper efficient at taking raw resources and getting useful value out of them. Thus people have more goods for less money. People get confused because government gets involved and you end up with cronyism. Free market is as another comment says, the minimum amount of regulation possible that…

Crony capitalism is something that doesn't exist. It is all capitalism. For example, Facebook using the support of the US government to control markets around the world (while TikTok is banned) is just capitalism. MZ's fortune can only happen due to this marriage of capitalism and government.

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

#270

Post by rrrrrrrrrrrryan » Fri, Aug 07, 2020, 7:20 PM UTC

0xy wrote: post #239

rrrrrrrrrrrryan wrote: post #192

Earlier quoted context omitted.

When corporations start buckling during sharp economic downturns, everyone's first instinct is always "let them burn." But it's often not a choice between letting entire swaths of our economy collapse, and dumping absurd amounts of our tax dollars to prop up these poorly-run companies. We can give them loans with strings attached, force them to go through bankruptcy, wipe out the shareholders but preserve the structu…

In this case, the downturn is caused by deliberate government action. How can you call a small local cafe forced to shut by government "poorly-run"? They were literally forced out of business by legislation that prevented them from even trading.

I was specifically discussing how we could better handle bailing out these too-big-to-fail corporations, not small companies, which should obviously be assisted in different ways.