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The death of the brick and mortar toy store

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Re: The death of the brick and mortar toy store

#181

Post by toast0 »

BrenBarn wrote: post #99
Arainach wrote: post #54

Earlier quoted context omitted.

No, because the mortgage companies' valuation is based on rent and does not consider any incentives.

Right. . . but isn't that just obviously stupid? If I say the rent is $3k a month but you get all 12 months free, why would anyone be fooled by that? Why would you base it on some hypothetical rent rather than the amount of actual money that the property takes in?

It is stupid, but every party involved benefits from playing by the stupid rules, so they keep doing it.

If the lender insists the property be valued based on actual collections rather than hypothetical collections based on the rate once discounts expire or the asking rate if vacant, then they will have a loan where the borrower is underwater and that's going to end up as a loss on the bank's books.

If the borrower values it factually, they will be underwater and likely have to sell for a loss or be forclosed on.

There's also portfolio effects. If rent drops are acknowledged in one space, nearby spaces may also acknowledge lowered rents and most banks have lots of loans and many borrowers manage several buildings.

Re: The death of the brick and mortar toy store

#182

Post by IAmBroom »

ghaff wrote: post #107
andrepd wrote: post #78

Earlier quoted context omitted.

A Georgist LVT would fix that is short order. Start making owners pay compensation for keeping a valuable space empty and crumbling, and you'll see them step to it pretty quickly or sell it to someone who does.

If it's empty and crumbling, I doubt it's all that valuable to be repurposed for housing or anything else. I did note the other day in the very small downtown of a nearby minor city that the the ancient travel agent is now a party supply store. But, really, there's not a lot in that downtown.

This is essentially saying "There's no hope; no one will ever return to downtown, no matter what!"... in a thread trying to find ways to prove that wrong.

Re: The death of the brick and mortar toy store

#183

Post by SoftTalker »

tardedmeme wrote: post #95
coldtea wrote: post #75

Earlier quoted context omitted.

> AFAIK Commercial is priced at a multiple of rent. So when an owner still has a loan on a building that was based off of multiple of 3000/mo and decides to rent it out for 1500/mo it effectively cuts the value of that building in half. Well, if the town is dying, the "value of that building" is effectively cut in half, or worse, anyway. Asking a lot for rent is not gonna magically make the building worth more - it w…

It's not just accounting, it means enough things that they're incentivized to manipulate it upwards. It impacts the loans they can get and the interest they pay, enough that it may be worth it to forego some actual income to keep the fake numbers up.

But at some point it has to collapse, it seems to me. You can't forever fake a high value on a property that is bringing in no rent. Unless the real value is just being a outwardly legitimate-looking place to park money.

Re: The death of the brick and mortar toy store

#184

Post by nothercastle »

com2kid wrote: post #172
sjducb wrote: post #96

Earlier quoted context omitted.

Loan to Value (LTV) is a percentage that tells you how safe a loan is. You divide the amount of the loan by the value of the building. So if I buy a building for 10 million with a 6 million loan and 4 million of my own money then I have an LTV of 60%. This means if I go bankrupt then the bank can sell the building and get its money back. If the value of the building halves because the rent halved then I have a 6 mill…

Sounds like a solution would be to average rent prices over some period of time to account for rental market fluctuations.

The commercial market is functionally frozen and illiquid. Owners can’t come down without declaring bankruptcy, bankruptcy is bad for lenders because they can’t move the property for the loan amount so you essentially have a mass delusion because accepting reality would bankrupt much of the existing players and start a crisis

Re: The death of the brick and mortar toy store

#185

Post by nothercastle »

IAmBroom wrote: post #170
BrenBarn wrote: post #97

Earlier quoted context omitted.

I hear people say this a lot but it doesn't make any sense. Why would the value be based on some imaginary rent rather than the actual amount of money taken in? It seems stupid for anyone to say that asking, say, $2500 rent with three free months (giving $27k for the year) is better than just asking $2000 with no free months (giving $24k for the year). If this is really what is going in then the system deserves to cr…

Your suggested alternative generates a need for massive accounting by the banks, tracking each loan's aggregate monthly rental income. A simpler rule that mostly covers today's problems, and adds very little overhead after the loan is signed, is often considered good enough.

It’s probably a bad rule in retrospect but to reprice now would be devastating

Re: The death of the brick and mortar toy store

#186

Post by [deleted] »

Arainach wrote: post #54
LPisGood wrote: post #50

Earlier quoted context omitted.

I’m not sure if the explanation in the second part holds water. Wouldn’t the reduction in property value be the same as the ammortized free rent?

No, because the mortgage companies' valuation is based on rent and does not consider any incentives.

[deleted]

Re: The death of the brick and mortar toy store

#187

Post by nothercastle »

colechristensen wrote: post #42
vasco wrote: post #39

Earlier quoted context omitted.

If the only way to be successful is to start by buying multiple downtown locations outright I think we know why the downtown is empty. Nobody is going to do that to open a shop. Not even the mega chains are usually buying anything.

The path to the return of main street is bullying your city council to attach ridiculous property tax penalties for any vacancies for whatever the central business district commercial zone is and not allow land zoned in that fashion to change. Force the rents and property values down until a competitive market rate is arrived at naturally. Punish the greed that attempts to store or preserve value by leaving things va…

Force taxes on average use. Force empty stores to subsidize existing ones.

Re: The death of the brick and mortar toy store

#188

Post by ff317 »

diogenescynic wrote: post #151
JuniperMesos wrote: post #100

Earlier quoted context omitted.

> Capitalism is strangling culture and making people more lonely and anti-social. They want us at home, buying subscription services, and getting taxis for our burritos so we don't have to actually go out and do anything or see anyone... People are choosing in large numbers to buy subscription services, order food online, stay at home, and avoid socializing with other people; and the market is supplying demand. This…

Agree, it's almost entirely about profit and convenience but I just think there's something false about modern 'convenience' in that it actually isn't 'convenient' when you think about all the other things you lost. The tiny bit of friction exerted to actually go into a store is now gone, but now you lose the opportunities to meet other people into the same things as you... get tips from retail workers on interesting…

I think this also speaks to the heart of the non-political spectrum between "conservative" and "progressive" societal evolution. It's progressive to enact these kinds of changes in the name of supposed convenience, efficiency, and modernity (whatever that means), and to do it quickly without sufficient thought as to all the unintended consequences. It's conservative to fear such changes and try to slow them down for the same reasons. Rapid societal changes are always risky, even if we suspect they may be net positives.

Re: The death of the brick and mortar toy store

#189

Post by ishouldstayaway »

ghaff wrote: post #107
andrepd wrote: post #78

Earlier quoted context omitted.

A Georgist LVT would fix that is short order. Start making owners pay compensation for keeping a valuable space empty and crumbling, and you'll see them step to it pretty quickly or sell it to someone who does.

If it's empty and crumbling, I doubt it's all that valuable to be repurposed for housing or anything else. I did note the other day in the very small downtown of a nearby minor city that the the ancient travel agent is now a party supply store. But, really, there's not a lot in that downtown.

The point of LVT is right there in the name: it is the land that has value. "Location, location, location" is an old cliche for a reason.

If you let your property go empty and crumble, the Land Value Tax is there to provide the incentive for you to either fix up the property and actually use it, or sell it to someone who will.

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