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The world’s empty office buildings have become a debt time bomb

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Re: The world’s empty office buildings have become a debt time bomb

#191

Post by jupp0r »

closeparen wrote: post #150
api wrote: post #65

Earlier quoted context omitted.

Seems to me that we've speed run the story of why suburban sprawl exist in the first place. A car is a machine to provide negotiating leverage in real estate markets. Dense urban centers, while awesome in many ways, easily lend themselves to the development of grassroots real estate cartels made up of property owners who block new construction to profit from real estate appreciation. As this occurs people are forced…

Sprawl is also a technology for balancing public order and civil rights. I don’t think there’s any way to square the circle of cities being nice places for middle class families to live while also having a right to camp on the sidewalk and urinate on the train.

I still have to see any super dense city that is actually a good place for families with small children. This is for the reasons you mentioned but also for others like like lack of living space, nature, transportation for the purpose of travel/vacation, etc.

Re: The world’s empty office buildings have become a debt time bomb

#192

Post by jupp0r »

voisin wrote: post #144
lproven wrote: post #67

Earlier quoted context omitted.

It is an excellent idea to step back and look at the bigger picture. I put it to you that while you have taken one step back, you will get a clearer view if you take 10 paces back. We are in the midst of catastrophic accelerating climate change. We are heading for a world that is 3-4º C warmer by the end of the 21st century, when children born today are getting to old age. That means the certain collapse of the West…

I don’t disagree with you at all, which is why I believe dense, vibrant cities are the future rather than endless suburban sprawl so that people can have their 1/4 acre with backyard and everyone has their own in-home office. I view WFH as a setback to the climate argument rather than a benefit. We should be tackling commutes by building denser cities with mass transit, not by having everyone with more space in the b…

The problem is that people do not want to live in densely packed high rise buildings with noisy neighbors, lots of crime and no nature for their kids to play in when the alternative is a nice little house in the suburbs or in a small rural town.

HVAC is a completely solved problem by just putting solar on roofs, especially for single family homes.

Re: The world’s empty office buildings have become a debt time bomb

#193

Post by piva00 »

wnolens wrote: post #31
rcme wrote: post #22

Earlier quoted context omitted.

I think the reason they preferred the vacancies is that the value of the property is related to the rent price, so if they lowered the rent they’d have to lower the book value of the asset as well.

Right, and so lower collateral for other loans. This is apparently rampant in NYC. It's wild that incentives exist to make vacancy profitable. But there's a LOT of vacant storefronts and apparently vacant apartments (though it's hard to get this data..)

> It's wild that incentives exist to make vacancy profitable.

As usual with financial instruments, it's probably the result of a model being applied and the limits of the model institute some perverse incentive that is not rational.

In this case seems that the convoluted way of tying up property value to last rental price, and using that proxy to extend margin for loans is where this model breaks down.

Re: The world’s empty office buildings have become a debt time bomb

#194

Post by rcme »

gorjusborg wrote: post #180
rcme wrote: post #174

Earlier quoted context omitted.

My point is that the FDIC DIF premiums and assessments are mandated by law and are thus a tax levied on banks. So the you’re trying to make it seem like the banks are managing the risk themselves but another way of looking at it is that all FDIC operations are funded via tax revenue, just like everything else the government does. Ultimately, the FDIC is backed by the full faith and credit of the US.

> funded via tax revenue, just like everything else the government does FDIC assessments and taxes are different. You can over-simplify mentally to a tax, but that doesn't make it true. The FDIC runs more like an insurance provider than a run-of-the-mill government agency.

Social security and Medicare are also a form of insurance. Are you not paying a social security and Medicare tax? How is that different?

Re: The world’s empty office buildings have become a debt time bomb

#195

Post by bobthepanda »

sahila wrote: post #109
bobthepanda wrote: post #44

Earlier quoted context omitted.

It’s not the investor but about the loan. Commercial loans IIRC tie default rates to the last rent charged. So long as the payment can be made at all, it doesn’t seem like people look that hard if the space is vacant or not. Usually only the ground floor is retail.

If the bank is not looking at whether the space is vacant or not, why would they look closely at what the rental price is if payments are being made?

* All loans are priced based on the paper rental price, among other things. Pretty much no one buys commercial property with cash, so if the rent is lower the next purchaser won't be able to get as big of a loan, and the original landowner will be underwater.

* Posted rents are sticky, in that they are the basis of the negotiation for the next round of rents, and especially so for commercial real estate where leases are multiple years long and landlords often throw in renovation for leasees. Banks would prefer a space be empty rather than lower rent and then you have to negotiate from a lower base, and getting another tenant would mean having to rip out everything you put in for the current tenant at your own cost.

You see similar issues in multifamily where landlords would rather offer you "X free weeks" instead of lowering the actual rent by an equivalent amount.

Re: The world’s empty office buildings have become a debt time bomb

#197

Post by [deleted] »

api wrote: post #136
Animats wrote: post #120

Earlier quoted context omitted.

> A car is a machine to provide negotiating leverage in real estate markets. Now that's a good insight. It's amusing to read the comments from commercial real estate owners. There's a huge sense of entitlement. If they're losing money, somebody else must do something to make them stop losing money. Immediately. The commercial real estate business did this in 2006-2008, and in 1999-2000 in San Francisco. The mall indu…

> It's amusing to read the comments from commercial real estate owners. There's a huge sense of entitlement. If they're losing money, somebody else must do something to make them stop losing money. Immediately. Many homeowners have the same attitude toward their home value. If their home value is going down, politicians need to do something. It's part of why reform is so hard. It's political suicide to do anything th…

[deleted]

Re: The world’s empty office buildings have become a debt time bomb

#198

Post by closeparen »

jupp0r wrote: post #191
closeparen wrote: post #150

Earlier quoted context omitted.

Sprawl is also a technology for balancing public order and civil rights. I don’t think there’s any way to square the circle of cities being nice places for middle class families to live while also having a right to camp on the sidewalk and urinate on the train.

I still have to see any super dense city that is actually a good place for families with small children. This is for the reasons you mentioned but also for others like like lack of living space, nature, transportation for the purpose of travel/vacation, etc.

How about any of the cites in The Netherlands?

Re: The world’s empty office buildings have become a debt time bomb

#200

Post by triceratops »

mlyle wrote: post #82
triceratops wrote: post #75

Earlier quoted context omitted.

I don't understand this "SVB bailout" meme. If a company manufacturing lifesaving medication goes under and the government takes over its factories to keep manufacturing the medicine and prevent shortages, did all the patients get "bailed out"? Should they have known better than to buy their medication from only one manufacturer? Comments like this distract from real bailouts and moral hazards.

We had a longstanding regime and precedent for how bank defaults would be handled. Anyone with treasury experience knows about insurance limits and accordant risks. Then the venture capital industry and startups decided to ignore these risks and put massive amounts in one bank. Then they were made whole at 100 cents on the dollar, when it probably would have ended up at 85 cents on the dollar on the amount over $250k…

> Then the venture capital industry and startups decided to ignore these risks and put massive amounts in one bank.

Call me silly but opening a bank account with the 17th largest bank in the US is not risky or reckless behavior in my book. It's nothing like Wall Street in 2008. They're bank accounts ffs. People use them to run businesses to earn their money. They don't become rich off bank deposits. At best SVB might have given some discounts on other products for keeping large balances. If they did, they should also have advised splitting the deposits into $250k accounts or done it automatically.

> why diversify banking now?

Why do it at all? Is any value produced by doing that? If I have $25m in 100 accounts at one bank, it's unconditionally insured. But if I put it all in one account at that same bank, it's not. It's the same amount of money, and the same level of risk as I'm the only owner of all that money. How is that logical?

Public sentiment has colored this situation differently because SVB account holders are largely wealthy individuals and companies.

Bank accounts are a utility. They should just work.

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