Commercial Mortgages on Brink of Collapse

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Commercial Mortgages on Brink of Collapse

Bob Malecki
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes

This is an interesting article which I think we all hope does happen so that our loan portfolios don't all default. Buy hey, if it does, some great bargains in a year or two....

https://finance.yahoo.com/news/real-estate-billionaire-barrack-says-230309693.html

“To keep people employed, you have to support the employers,” he said Monday in the interview. “The biggest part of employer expense is rent. When commerce stops and they can’t pay rent and they can’t pay interest on the debt, and then the banks and the intermediaries can’t pay their investors, it all collapses.”

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Mike Hartzog
Lender · Redmond, WA · Member since 2014 · 553 posts · 490 votes
6y

@Jacob Sampson agreed that normally payroll is much larger.  However, once you close your doors due to lockdown and lay off all of your employees as a result of that, rent moves up on the list.

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  • Mike Hartzog
    Lender · Redmond, WA · Member since 2014 · 553 posts · 490 votes
    6y

    Thanks for sharing Bob.  Fortunately the Fed has had some practice in stepping and and supporting the financial system from the 2008 financial crisis.  Let's hope for the best...

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    6y

    @Bob Malecki

    It may be a wild ride. I do know (personal experience) commercial lenders have reached out to borrowers in the past week or so and are already started dialogue on workouts / modification / forbearance plans

    Let’s see where this goes, it’s just the beginning of the movie

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  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    I saw the interview, fairly interesting.  I call a little BS because an employers biggest expense is usually not rent it is usually payroll.  In fact for most businesses rent is probably not even in there top 3 expenses.  So while interesting, I do think he was being a little disingenuous/self serving.  Which the interviewer did call out.  Further he could not stop throwing out several names over and over again.  It felt a little scripted.

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  • Mike Hartzog
    Lender · Redmond, WA · Member since 2014 · 553 posts · 490 votes
    6y

    @Jacob Sampson agreed that normally payroll is much larger.  However, once you close your doors due to lockdown and lay off all of your employees as a result of that, rent moves up on the list.

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  • Patrick Desjardins
    Real Estate Investor · Amherst, VA · Member since 2015 · 386 posts · 400 votes
    6y

    One green day and they're talking about reopening everything. Brace yourself..

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  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    6y

    Hopefully, we won't see huge waves of defaults in residential or commercial paper. Yes, we'll see turbulence during the period of adjustment. Hopefully, the moves by the federal reserve and the federal government will help.

    I think we'll see a lot of forebearance agreements, especially for those who were paying just fine before the lockdowns.

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  • Sean Mcintire
    Phoenix, AZ · Member since 2018 · 103 posts · 18 votes
    6y

    @Patrick Desjardins  YEP!

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