Earlier quoted context omitted.
It’s all love and horses in Enumclaw.
The world's most tired comment.
It takes a lot of energy to love a horse.
As downtown Seattle offices empty, city facing years of 'zombie' towers
221–230 of 238 posts
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#222Earlier quoted context omitted.
The timeframe of regulatory changes here is not worth any investment. The turnover will continue to happen, it's too complicated to try to change, and you'd probably create nasty unexpected side effects.
Some could be fairly simple. Require banks to re-calculate collateral values after 6mo of vacancy, with a large requirement to reduce.
Can you think of two potential downstream effects that could have that you wouldn't want?
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#223Earlier quoted context omitted.
The financial instruments are commercial real estate loans. Those loans often do not allow the borrower to charge lower rent. Property taxes are not calculated that way. The property tax rate for a given year is backed into (a "mill rate") based on approved dollars of spending divided by total property value. If total citywide property value drops by 50%, the property tax rate doubles that year. So no, the property v…
>...If total citywide property value drops by 50%, the property tax rate doubles that year. This claim is simply not true. Even in a budget based system like Seattle, there are hard statutory limits on how much the tax could increase. If total citywide property value drops by 50%, the tax rate would hit its legal maximum ceiling, and the city would have to make up the money somewhere else or cut spending.
The only statute I'm aware of is a limit on revenue increasing more than 1% a year. Not a limit on percentage. Can you point me to this statute?
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#224Earlier quoted context omitted.
The financial instruments are commercial real estate loans. Those loans often do not allow the borrower to charge lower rent. Property taxes are not calculated that way. The property tax rate for a given year is backed into (a "mill rate") based on approved dollars of spending divided by total property value. If total citywide property value drops by 50%, the property tax rate doubles that year. So no, the property v…
Aren't same instruments being used in Bellevue as well? "No lowering rent" rules are making downturn worse, but the trigger is something else.
I tried to cover this in my original comment - Bellevue hasn't lost as many tenants because they're usually larger and have longer leases. They may yet have an increase in vacancy rate.
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#225Earlier quoted context omitted.
The financial instruments are commercial real estate loans. Those loans often do not allow the borrower to charge lower rent. Property taxes are not calculated that way. The property tax rate for a given year is backed into (a "mill rate") based on approved dollars of spending divided by total property value. If total citywide property value drops by 50%, the property tax rate doubles that year. So no, the property v…
>>> Property taxes are not calculated that way. The property tax rate for a given year is backed into (a "mill rate") based on approved dollars of spending divided by total property value. If total citywide property value drops by 50%, the property tax rate doubles that year. When the LLCs that own the commercial buildings declare themselves bankrupt, and walk away from the asset and throw the keys on the table, who…
I think you're starting from two flawed assumptions.
1. Most of our largest buildings are owned by large companies. For instance, Gaw Capital owns Columbia Center. Blackstone owned US Bank Center, until it was bought by Spear Street Capital.
2. You could delete downtown and citywide property value wouldn't drop by 50%. Nothing's moving that fast, I'm just using simple math to explain mill rate.
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#226Earlier quoted context omitted.
Yeah, when I hear about how the tax changes are going to result in a huge exodus of millionaires it's not backed by data. The data shows millionaires actually move LESS than the general population. Places that instituted high taxes didn't see an exodus. It turns out if you have a great city with great physical and social infrastructure, people want to be there. Seattle is building both. The physical infrastructure is…
The cross-lake rail is just amazing. I commuted to Bellevue up until my retirement recently and I really liked it the couple of times I took it. I don't want to pretend Seattle's perfect. It is very difficult to build new housing here thanks to well-meaning regulatory reform; as someone else noted, you used to be able to build fairly small apartments and that's not legal now. It'd also help a ton if the liberal centr…
If they can help figure out how to make turning office space into apartments attractive that will solve the vacancy problem and help keep housing costs at bay.
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#227Earlier quoted context omitted.
One of my regrets is not joining my area's design review board when it had an opening just so I could rubber stamp everything yes.
Oooh I would have appreciated you! Maybe you can do that where you live now!
The NE Seattle one has an opening a few years back that I should've tried applying for.
Thankfully the design review process has been neutered now and hopefully it doesn't get brought back!
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#228Earlier quoted context omitted.
>...If total citywide property value drops by 50%, the property tax rate doubles that year. This claim is simply not true. Even in a budget based system like Seattle, there are hard statutory limits on how much the tax could increase. If total citywide property value drops by 50%, the tax rate would hit its legal maximum ceiling, and the city would have to make up the money somewhere else or cut spending.
The only statute I'm aware of is a limit on revenue increasing more than 1% a year. Not a limit on percentage. Can you point me to this statute?
One big limitation is RCW 84.52.050 (Limitation of levies) which I think implements the 1% constitutional max allowed levy. I read somewhere that Seattle is at a levy of about 9.4, so that would be a hard limit right there.
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#229Earlier quoted context omitted.
> If they sign a lease at a new lower rent it basically triggers a re-check of "can they repay the loan based on their rental income?", which comes back as "no". That trigger _doesn't_ occur if you just leave the building empty, with _no one_ paying rent, because your last mark to market rent was high enough. Minimum DSCRs have long been used to monitor the current value of a property, and less income is less income.…
Yep, the issue is that recalculating DSCR doesn't happen on the right timescale to incentivize reducing rents, instead incentivizing keeping vacancies open and using a pro forma DSCR. The banks know this is a structural issue, but are likewise incentivized to keep "strong assets" on their balance sheet, rather than a bunch of troubled assets bound for default. The claim isn't that they can keep this up forever, it ju…
DSCR is calculated at least once per year. I don’t know what pro forma could mean here, it’s purely a cash flow calculation. The money came in, or it didn’t.
> The claim isn't that they can keep this up forever, it just needs to last another quarter, every quarter.
I don’t understand what this means, or what is being “played”, the lenders all have a near real time view into the business. The lack of cash flow can’t be papered over without engaging in fraud, but it’s also up to the lender to decide if they want to take action due to a failing DSCR.
Re: As downtown Seattle offices empty, city facing years of 'zombie' towers
#230Earlier quoted context omitted.
The only statute I'm aware of is a limit on revenue increasing more than 1% a year. Not a limit on percentage. Can you point me to this statute?
One big limitation is RCW 84.52.050 (Limitation of levies) which I think implements the 1% constitutional max allowed levy. I read somewhere that Seattle is at a levy of about 9.4, so that would be a hard limit right there.
That's a limit on total revenue, not percentage.