U.S. retailers plan to stop paying rent to offset virus closures • Hacker News Board

Re: U.S. retailers plan to stop paying rent to offset virus closures

#21

Post by lainga » Wed, Mar 25, 2020, 12:19 AM UTC

toomuchtodo wrote: post #12

x2f10 wrote: post #11

Is it the government's job to hold the proverbial hot potato in events like this?

Requires Congress to act, as they have fiscal policy authority (versus the monetary policy authority granted to the Federal Reserve). If neither are assisting, you have to play hardball yourself. Banks and commercial REITs have more to lose right now than retail tenants, hence why those businesses are firing the first shot and putting their offer to landlords on the table. “Pray I don’t alter the deal further” This d…

Did the recent money-market bailout fall under the Fed's remit? Yes, the mechanism was different, but they were basically acting like the FDIC in that they were rescuing household savings.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#22

Post by dandelo1953 » Wed, Mar 25, 2020, 12:20 AM UTC

Wowfunhappy wrote: post #20

Realistically, who else is the landlord going to rent the space to right now? Seems to me it's in the landlord's interest to corporate. All lessees are going to be in more-or-less the same boat. What surprises me is that they didn't just work this out quietly...

For that to happen there needs to be strong leadership from the top incentivizing standing down behavior with subsidies, not winner take all rock em sock em race to tragedy of the commons

Re: U.S. retailers plan to stop paying rent to offset virus closures

#23

Post by nostrademons » Wed, Mar 25, 2020, 12:20 AM UTC

Wowfunhappy wrote: post #20

Realistically, who else is the landlord going to rent the space to right now? Seems to me it's in the landlord's interest to corporate. All lessees are going to be in more-or-less the same boat. What surprises me is that they didn't just work this out quietly...

Possibly many did but the ones that didn't went to the press. The press is always on the lookout for stories that either demonstrate some new societal trend or generate outrage, and this is both. All it takes is a couple of disputes between major brand names and their landlords and they have a story.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#24

Post by naveen99 » Wed, Mar 25, 2020, 12:20 AM UTC

Real estate is next to fall. The bailout will need to be like 10 trillion there. Too much leverage out there on a useless resource (congested land) in a world of remote knowledge work and people scared of physical contact due to ubiquitous viruses. Let all the leverage / bags go to the fed and let it slowly deleverage itself over 10 years.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#25

Post by toomuchtodo » Wed, Mar 25, 2020, 12:21 AM UTC

lainga wrote: post #21

toomuchtodo wrote: post #12

Earlier quoted context omitted.

Requires Congress to act, as they have fiscal policy authority (versus the monetary policy authority granted to the Federal Reserve). If neither are assisting, you have to play hardball yourself. Banks and commercial REITs have more to lose right now than retail tenants, hence why those businesses are firing the first shot and putting their offer to landlords on the table. “Pray I don’t alter the deal further” This d…

Did the recent money-market bailout fall under the Fed's remit? Yes, the mechanism was different, but they were basically acting like the FDIC in that they were rescuing household savings.

In times of crisis, folks are going to argue any actions the Fed takes are within their remit [1] (accepting equity securities as collateral for short term cash through a primary dealer facility?). The vast majority of households do not use a money market fund; their savings are in FDIC deposit accounts or credit unions.

If you want government insurance, use a government insured account, or let’s do away with the idea that some types of assets will be allowed to fail; the Fed will simply step in and backstop the entire economy with “unlimited support”.

[1] https://www.federalreserve.gov/newsevents/pressreleases/mone...

Re: U.S. retailers plan to stop paying rent to offset virus closures

#26

Post by bpodgursky » Wed, Mar 25, 2020, 12:22 AM UTC

_bxg1 wrote: post #17

All rent should be suspended, across the board, for everyone. Rent is a passive expense that businesses and individuals alike who are not getting any income right now will have no hope of paying.

Do you consider property tax to be 'rent'? Because a large percent of rent is getting funneled right back into property tax, which isn't (yet) adjusted down.

(to be clear, I'm fine with a lot of rent deferment / freezing, but I do think there needs to be equivalent property tax forgiveness for at least retail space)

Re: U.S. retailers plan to stop paying rent to offset virus closures

#27

Post by NotAnEconomist » Wed, Mar 25, 2020, 12:22 AM UTC

charia wrote: post #19

I used to criticize the big tech companies for stockpiling dozens of billions of dollars instead of investing them into their businesses, but it's only now I can see why a move like that was wise. If at all possible, businesses, like people, should keep a rainy day fund. I wonder if all the companies that used their money for stock buybacks are kicking themselves in the foot right now.

Why would they?

They're not going to have to re-issue shares at a lower price; they're going to get bailed out by the taxpayers.

The conditions for government money should be:

1. All current debt is converted into shares, erasing payback preferences and on-going payments to creditors.

2. Companies must issue new shares as collateral to the government at current market rate, in exchange for the money.

3. Rather than repayment, the government will sell the shares on the open market in years 2-6 (a 5 year window).

4. All share buybacks at the company are banned for a period of 10 years.

It's okay to nationally support critical businesses, but make the shareholders take it in the wallet for their reckless business practices leading up to this.

They took a gamble by buying shares instead of saving -- let them take the hit for losing.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#28

Post by digitaltrees » Wed, Mar 25, 2020, 12:22 AM UTC

captncraig wrote: post #16

refurb wrote: post #8

I'm not sure how widespread this will be, but it will be interesting to see the impact on commercial real estate in SF and NYC where empty storefronts are already a major issue. I'm imaging a lot of businesses were barely scraping by before the shelter-in-place. We might see a huge increase in empty storefronts after this passes.

Hopefully the landlords realize there is not going to be anybody lining up to take over these leases if they evict. Forgiving a couple months so a business doesn't have to close is almost certainly the shrewd business choice as well as the moral one.

The problem is many REITs don’t care. They are so large and so far removed from any one property that they would rather it sit empty for years than lower prices and have that affect the market rate and pull their portfolios average price per square foot down.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#29

Post by JMTQp8lwXL » Wed, Mar 25, 2020, 12:22 AM UTC

henrikschroder wrote: post #13

“The court system is just going to get flooded with a million of these disputes between tenants and landlords,” I'm absolutely not a big fan of collectivism, but sometimes, individualism just doesn't work. Sometimes, you have to step in and solve problems collectively. No, it won't be fair, yes it will be one-size-fits-all, no you can't please everyone. Suck it up, buttercup. Whether you like it or not, we're in this…

What is the collective resolution? I'm assuming it's either everyone gets free rent, or nobody does, and I'm not sure which is being implied here.

Re: U.S. retailers plan to stop paying rent to offset virus closures

#30

Post by joe_the_user » Wed, Mar 25, 2020, 12:22 AM UTC

The economy is effectively frozen. But you have to distinguish the production process from the monetary, contractual and ownership relations that normally control the production process. We can continue to produce necessary, essential good during this crisis and let the rest of the economy stay frozen 'till the end of this mess.

The situation should be the equivalent of a war or a different natural disaster. Essentially, the processes of finance will need to just stop for a while and then be restarted in a reasonably orderly fashion.

I'm not even sure what everyone howling for immediate and potentially restart of the American economy is even thinking, obviously they aren't thinking much. The economy previous are essentially on life-supports but life supports for the only the rich. Now we basically need literal and metaphorical life supports for everyone but once the situation is stabilized, the negotiations begin.

Just think, a robust restart of the economy would be far easier once an entity to deal with the virus is constituted and can act effectively.

The US economy has recovered from war and terrorist attacks quite well (better than a lot of times). The government directed the lions share of production during WWII and things turned out fine. Come on folks.