Commercial Real Estate Owners Beginning To Walk Away From Properties

[Ravi]

NEW YORK (Dow Jones)--Commercial real estate owners are walking away from properties that have become untenable as investments, just as homeowners have walked away from houses they can no longer afford to pay off or sell.
The latest commercial property owner to do this is Vornado Realty Trust (VNO), the $13 billion real estate investment trust, which warned last week that it would walk away from two loans totaling $235 million.
The trend is likely to escalate in coming months as more loans mature and refinancing remains difficult and costly.

Commercial Real Estate Owners Beginning To Walk Away From Properties - WSJ.com

 

[Paulie]

Shit, we just benefited greatly from the commerical real estate slump. We got a sweet ass deal on a building for our new business we're starting.

Where some lose out, others will benefit. I know it's painful to see someone losing out, but nothing in life is a guarantee except death. People losing out on an investment is an inevitability. The market eventually levels itself out though as new money comes in and grabs up whatever was liquidated.

 

[Ravi]

I thought you were opposed to people walking out on their mortgages?

 

[Paulie]

I don't think I've ever specifically said that around here. If you can't pay a bill, you can't pay a bill. Money doesn't grow on trees.

What I'm opposed to is not having a comprehensive plan for paying back a loan before you actually take the loan. Things like having a nice savings, a good down payment of at least 20%, and a well thought out plan for how you would deal with this bill in the event that you happened to lose your job for, say, a year.

Plan FOR such a thing to happen, and make sure you can still pay the bill even if you lost your job for a while. If those things aren't possible yet in your budget, then that loan isn't for you.

 

[Paulie]

I said a year, but I think optimally, a 6 month cushion in your savings is respectable.

 

[Ravi]

I don't think I've ever specifically said that around here. If you can't pay a bill, you can't pay a bill. Money doesn't grow on trees.

What I'm opposed to is not having a comprehensive plan for paying back a loan before you actually take the loan. Things like having a nice savings, a good down payment of at least 20%, and a well thought out plan for how you would deal with this bill in the event that you happened to lose your job for, say, a year.

Plan FOR such a thing to happen, and make sure you can still pay the bill even if you lost your job for a while. If those things aren't possible yet in your budget, then that loan isn't for you.

Apparently this company didn't follow your advice.

 

[Paulie]

I don't think I've ever specifically said that around here. If you can't pay a bill, you can't pay a bill. Money doesn't grow on trees.

What I'm opposed to is not having a comprehensive plan for paying back a loan before you actually take the loan. Things like having a nice savings, a good down payment of at least 20%, and a well thought out plan for how you would deal with this bill in the event that you happened to lose your job for, say, a year.

Plan FOR such a thing to happen, and make sure you can still pay the bill even if you lost your job for a while. If those things aren't possible yet in your budget, then that loan isn't for you.

Apparently this company didn't follow your advice.

I was talking more about personal residential mortgages, since that's the only mortgage I've ever opined about here, and I had to answer your question.

As far as business mortgages, obviously your financial ability is subject to your business' performance. But still, as far as walking away from it...if you don't have money, you don't have money.

Let's just be glad we don't have debtor prison in this country.

 

[Ravi]

I don't think I've ever specifically said that around here. If you can't pay a bill, you can't pay a bill. Money doesn't grow on trees.

What I'm opposed to is not having a comprehensive plan for paying back a loan before you actually take the loan. Things like having a nice savings, a good down payment of at least 20%, and a well thought out plan for how you would deal with this bill in the event that you happened to lose your job for, say, a year.

Plan FOR such a thing to happen, and make sure you can still pay the bill even if you lost your job for a while. If those things aren't possible yet in your budget, then that loan isn't for you.

Apparently this company didn't follow your advice.

I was talking more about personal residential mortgages, since that's the only mortgage I've ever opined about here, and I had to answer your question.

As far as business mortgages, obviously your financial ability is subject to your business' performance. But still, as far as walking away from it...if you don't have money, you don't have money.

Let's just be glad we don't have debtor prison in this country.

I don't understand...why would it be different? A personal mortgage is also subject to your personal performance. Companies can overextend themselves just like individuals can.

 

[Paulie]

Apparently this company didn't follow your advice.

I was talking more about personal residential mortgages, since that's the only mortgage I've ever opined about here, and I had to answer your question.

As far as business mortgages, obviously your financial ability is subject to your business' performance. But still, as far as walking away from it...if you don't have money, you don't have money.

Let's just be glad we don't have debtor prison in this country.

I don't understand...why would it be different? A personal mortgage is also subject to your personal performance. Companies can overextend themselves just like individuals can.

I guess the difference is, if you work for someone you might never lose your job and will always have that income. But if you're in business for yourself, a recession could very well end up shutting your business down.

This is all neither here nor there, though. You asked if I was against walking away from a mortgage, and I'm not.

 

[Toro]

This is has to happen. It follows a pretty predictable script. Soon, banks will start blowing out their commercial real estate inventories for cheap.

 

[Neubarth]

This is has to happen. It follows a pretty predictable script. Soon, banks will start blowing out their commercial real estate inventories for cheap.

Soon, banks will start blowing out. Oops, I think that is already happening.