Commercial property owner deadbeats on the rise

[briansd1]

[quote=davelj]
The difference is that the “regular” CRE investor is generally an LLC with multiple LLCs (for each property) beneath it, each with different LPs. So, the “regular” CRE investor – unlike a REIT – can’t really make the decision to carry the property with the cash flow from other properties. Apples and oranges; not splitting hairs.[/quote]

Similarly in the family “business” if the husband won’t pay the bill anymore, the wife can’t make him. 😉 Each household member could be considered a separate LLC. 😉

[Arraya]

[quote=davelj][quote=sdduuuude][quote=davelj]CRE investors don’t stop paying simply because the price of the underlying collateral declines. They stop paying when the cash flow from the property declines to the extent that the debt can’t be serviced (which generally also coincides with a drop in the property’s value). [/quote]

For a residence, I consider “cash flow from the property” to be equal to what it would cost the owner to rent the same house. I see no difference.

You say the homeowners should use income from other resources to cover the mortgage on a property that is not longer servicing the debt based on equivalent rent.

Shouldn’t businesses then use revenue from other cash-flow positive properties, (or personal income in the case of individuals) to do the same – which is what you are saying with the REITs. Why is that different from any regular RE investor?

You are trying to split hairs and it isn’t making sense, as far as I can see.[/quote]

The difference is that the “regular” CRE investor is generally an LLC with multiple LLCs (for each property) beneath it, each with different LPs. So, the “regular” CRE investor – unlike a REIT – can’t really make the decision to carry the property with the cash flow from other properties. Apples and oranges; not splitting hairs.[/quote]

you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.

[Arraya]

[quote=davelj][quote=sdduuuude][quote=davelj]CRE investors don’t stop paying simply because the price of the underlying collateral declines. They stop paying when the cash flow from the property declines to the extent that the debt can’t be serviced (which generally also coincides with a drop in the property’s value). [/quote]

For a residence, I consider “cash flow from the property” to be equal to what it would cost the owner to rent the same house. I see no difference.

You say the homeowners should use income from other resources to cover the mortgage on a property that is not longer servicing the debt based on equivalent rent.

Shouldn’t businesses then use revenue from other cash-flow positive properties, (or personal income in the case of individuals) to do the same – which is what you are saying with the REITs. Why is that different from any regular RE investor?

You are trying to split hairs and it isn’t making sense, as far as I can see.[/quote]

The difference is that the “regular” CRE investor is generally an LLC with multiple LLCs (for each property) beneath it, each with different LPs. So, the “regular” CRE investor – unlike a REIT – can’t really make the decision to carry the property with the cash flow from other properties. Apples and oranges; not splitting hairs.[/quote]

you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.

[Arraya]

[quote=davelj][quote=sdduuuude][quote=davelj]CRE investors don’t stop paying simply because the price of the underlying collateral declines. They stop paying when the cash flow from the property declines to the extent that the debt can’t be serviced (which generally also coincides with a drop in the property’s value). [/quote]

For a residence, I consider “cash flow from the property” to be equal to what it would cost the owner to rent the same house. I see no difference.

You say the homeowners should use income from other resources to cover the mortgage on a property that is not longer servicing the debt based on equivalent rent.

Shouldn’t businesses then use revenue from other cash-flow positive properties, (or personal income in the case of individuals) to do the same – which is what you are saying with the REITs. Why is that different from any regular RE investor?

You are trying to split hairs and it isn’t making sense, as far as I can see.[/quote]

The difference is that the “regular” CRE investor is generally an LLC with multiple LLCs (for each property) beneath it, each with different LPs. So, the “regular” CRE investor – unlike a REIT – can’t really make the decision to carry the property with the cash flow from other properties. Apples and oranges; not splitting hairs.[/quote]

you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.

[Arraya]

[quote=davelj][quote=sdduuuude][quote=davelj]CRE investors don’t stop paying simply because the price of the underlying collateral declines. They stop paying when the cash flow from the property declines to the extent that the debt can’t be serviced (which generally also coincides with a drop in the property’s value). [/quote]

For a residence, I consider “cash flow from the property” to be equal to what it would cost the owner to rent the same house. I see no difference.

You say the homeowners should use income from other resources to cover the mortgage on a property that is not longer servicing the debt based on equivalent rent.

Shouldn’t businesses then use revenue from other cash-flow positive properties, (or personal income in the case of individuals) to do the same – which is what you are saying with the REITs. Why is that different from any regular RE investor?

You are trying to split hairs and it isn’t making sense, as far as I can see.[/quote]

The difference is that the “regular” CRE investor is generally an LLC with multiple LLCs (for each property) beneath it, each with different LPs. So, the “regular” CRE investor – unlike a REIT – can’t really make the decision to carry the property with the cash flow from other properties. Apples and oranges; not splitting hairs.[/quote]

you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.

[Arraya]

[quote=davelj][quote=sdduuuude][quote=davelj]CRE investors don’t stop paying simply because the price of the underlying collateral declines. They stop paying when the cash flow from the property declines to the extent that the debt can’t be serviced (which generally also coincides with a drop in the property’s value). [/quote]

For a residence, I consider “cash flow from the property” to be equal to what it would cost the owner to rent the same house. I see no difference.

You say the homeowners should use income from other resources to cover the mortgage on a property that is not longer servicing the debt based on equivalent rent.

Shouldn’t businesses then use revenue from other cash-flow positive properties, (or personal income in the case of individuals) to do the same – which is what you are saying with the REITs. Why is that different from any regular RE investor?

You are trying to split hairs and it isn’t making sense, as far as I can see.[/quote]

The difference is that the “regular” CRE investor is generally an LLC with multiple LLCs (for each property) beneath it, each with different LPs. So, the “regular” CRE investor – unlike a REIT – can’t really make the decision to carry the property with the cash flow from other properties. Apples and oranges; not splitting hairs.[/quote]

you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.

[davelj]

[quote=Arraya]
you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.[/quote]

Hey, I’m not letting the REITs off the hook even though they have the very “legal protection” that you’re referring to. It’s just a hell of a lot more difficult when you have different investors owning different properties even if the GP is the same. That’s reality. Yes, I’m sure that in some cases “they” could figure out a way to pay… and “they” still don’t bother. Which is unfortunate. But that’s the exception rather than the rule where CRE is concerned.

[davelj]

[quote=Arraya]
you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.[/quote]

Hey, I’m not letting the REITs off the hook even though they have the very “legal protection” that you’re referring to. It’s just a hell of a lot more difficult when you have different investors owning different properties even if the GP is the same. That’s reality. Yes, I’m sure that in some cases “they” could figure out a way to pay… and “they” still don’t bother. Which is unfortunate. But that’s the exception rather than the rule where CRE is concerned.

[davelj]

[quote=Arraya]
you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.[/quote]

Hey, I’m not letting the REITs off the hook even though they have the very “legal protection” that you’re referring to. It’s just a hell of a lot more difficult when you have different investors owning different properties even if the GP is the same. That’s reality. Yes, I’m sure that in some cases “they” could figure out a way to pay… and “they” still don’t bother. Which is unfortunate. But that’s the exception rather than the rule where CRE is concerned.

[davelj]

[quote=Arraya]
you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.[/quote]

Hey, I’m not letting the REITs off the hook even though they have the very “legal protection” that you’re referring to. It’s just a hell of a lot more difficult when you have different investors owning different properties even if the GP is the same. That’s reality. Yes, I’m sure that in some cases “they” could figure out a way to pay… and “they” still don’t bother. Which is unfortunate. But that’s the exception rather than the rule where CRE is concerned.

[davelj]

[quote=Arraya]
you’re equating a legal protection from such things as a commandment from god not to do them as well as making it a moral “safe-zone” because of such protections. While not extending the same courtesy to a borrower and their legal protection – non-recourse. Now, I’m sure they could figure out a way to pay if they really were so concerned with honoring debts.[/quote]

Hey, I’m not letting the REITs off the hook even though they have the very “legal protection” that you’re referring to. It’s just a hell of a lot more difficult when you have different investors owning different properties even if the GP is the same. That’s reality. Yes, I’m sure that in some cases “they” could figure out a way to pay… and “they” still don’t bother. Which is unfortunate. But that’s the exception rather than the rule where CRE is concerned.

[investor]

Putting morality aside, most commercial loans are non-recourse and have been for many years. further, most commercial loans baloon after 5-7 years which requires a newe appraisal and for the owner to cough up, in cash, the reduced appraised value of the property. Falling prices of commercial real estate combined with reduced cash flow from a recession is a double whammy that can result in millions of dollars needing to be coughed up just to hang onto an asset that is falling in value. This is why most owners of commercial real estate give the keys back to the lender in a market like we have now. Morality back in: if the game is non-recourse, is the owner the problem or the lenders the problem? As long as my tax dollars are not used to prop up the lenders,I say let them eat it.They knew the rules when they made the loan.

[investor]

Putting morality aside, most commercial loans are non-recourse and have been for many years. further, most commercial loans baloon after 5-7 years which requires a newe appraisal and for the owner to cough up, in cash, the reduced appraised value of the property. Falling prices of commercial real estate combined with reduced cash flow from a recession is a double whammy that can result in millions of dollars needing to be coughed up just to hang onto an asset that is falling in value. This is why most owners of commercial real estate give the keys back to the lender in a market like we have now. Morality back in: if the game is non-recourse, is the owner the problem or the lenders the problem? As long as my tax dollars are not used to prop up the lenders,I say let them eat it.They knew the rules when they made the loan.

[investor]

Putting morality aside, most commercial loans are non-recourse and have been for many years. further, most commercial loans baloon after 5-7 years which requires a newe appraisal and for the owner to cough up, in cash, the reduced appraised value of the property. Falling prices of commercial real estate combined with reduced cash flow from a recession is a double whammy that can result in millions of dollars needing to be coughed up just to hang onto an asset that is falling in value. This is why most owners of commercial real estate give the keys back to the lender in a market like we have now. Morality back in: if the game is non-recourse, is the owner the problem or the lenders the problem? As long as my tax dollars are not used to prop up the lenders,I say let them eat it.They knew the rules when they made the loan.

[investor]

Putting morality aside, most commercial loans are non-recourse and have been for many years. further, most commercial loans baloon after 5-7 years which requires a newe appraisal and for the owner to cough up, in cash, the reduced appraised value of the property. Falling prices of commercial real estate combined with reduced cash flow from a recession is a double whammy that can result in millions of dollars needing to be coughed up just to hang onto an asset that is falling in value. This is why most owners of commercial real estate give the keys back to the lender in a market like we have now. Morality back in: if the game is non-recourse, is the owner the problem or the lenders the problem? As long as my tax dollars are not used to prop up the lenders,I say let them eat it.They knew the rules when they made the loan.

[Author]

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