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I debated on whether to post in The Great Commercial Real Estate Bailout of 2023 or start a new thread. Latisha James, NY Attorney General is engaged in a highly publicized fraud trial against Donald Trump. My own views on Trump are strictly neutral. I feel that Mar a Lago (sp) is not the only overvalued real estate in the country. My guess is that almost all high-end property is way overvalued.
The only way these properties change hands is in highly complex, highly leveraged transaction. Only a lunatic or eccentric would pay real money for most commercial or high-end resort properties such as Mar a Lago.
If Latisha James wins, it would expose the fact that most real estate is highly leveraged and their titular "owners" have little or no equity. If the values dropped to fair salable values, the properties would instantly have huge negative equity and face foreclosure. There would be no cash market for most of these properties. If Latisha James wins, could she trigger a depression by winning?
Unfortunately so are most such real estate evaluations. Just about every building in the core of major cities such as New York are "worth" nine-figures. Mind you, no one would pay that amount in hard cash. What I'm worried about is what happens if those values are forced to face reality? The answer is that it puts a lot of financing under water as well as the LLC's or partnerships that are their "owners." Are any of the institutional financing entities going to have to "mark to market" the paper they are holding?
Last edited by Lizap; 11-04-2023 at 08:55 AM..
Reason: Edited out deleted post
Unfortunately so are most such real estate evaluations. Just about every building in the core of major cities such as New York are "worth" nine-figures. Mind you, no one would pay that amount in hard cash. What I'm worried about is what happens if those values are forced to face reality? The answer is that it puts a lot of financing under water as well as the LLC's or partnerships that are their "owners." Are any of the institutional financing entities going to have to "mark to market" the paper they are holding?
I was thinking about this overnight, with a parallel with art.
I could have a Picasso print that might have an objective "worth" of $2000. If a fancy Madison Avenue gallery was selling it, they might price it at $3000 (although they would likely come down). If it were at auction, it might only fetch $1000. I might be advised to claim an insurance value of $3000, which would be fine. I could likely even get away with $4000. But if I tried to claim it was worth $50,000...
Also, getting back to real estate, when I was looking at apartments, the previous residents cited a square footage which I later found was wrong. I suspect they were deliberately lying, but it was still only a difference of 50-100 square feet. Trump, on the other hand, reportedly had an apartment of 11,000 square feet and claimed it was 30,000.
I think it's a matter of what you could plausibly term a matter of error or opinion. When it's too, too, flagrantly extreme, it's seen as a patent lie.
If Latisha James wins, could she trigger a depression by winning?
Why would a depression happen?
What will happen is big real estate honchos will not grossly overvalue their assets when applying for loans, using those assets as collateral. Banks will probably look at those valuations more closely because now they know those borrowers can be held accountable.
Once a loan is made I've never heard of a bank coming back later saying "send updated appraisal."
FUTURE loans may require more due diligence by all parties.
Lots of real estate moguls in NYC are probably peeved by Trumps egregious valuations hurting their own loan apps.
Depression? I don't see it even if lots of loans get called in and bankruptcies happen.
I was thinking about this overnight, with a parallel with art.
I could have a Picasso print that might have an objective "worth" of $2000. If a fancy Madison Avenue gallery was selling it, they might price it at $3000 (although they would likely come down). If it were at auction, it might only fetch $1000. I might be advised to claim an insurance value of $3000, which would be fine. I could likely even get away with $4000. But if I tried to claim it was worth $50,000...
Also, getting back to real estate, when I was looking at apartments, the previous residents cited a square footage which I later found was wrong. I suspect they were deliberately lying, but it was still only a difference of 50-100 square feet. Trump, on the other hand, reportedly had an apartment of 11,000 square feet and claimed it was 30,000.
I think it's a matter of what you could plausibly term a matter of error or opinion. When it's too, too, flagrantly extreme, it's seen as a patent lie.
The Picasso analogy is good but there are fewer "painting loans" than real estate mortgages. They are similar in that eccentricity plays a role in valuation. With investment real estate the "owner" is often playing with other people's money, or "OPM."
Quote:
Originally Posted by twinkletwinkle22
If Latisha James wins, could she trigger a depression by winning?
Why would a depression happen?
What will happen is big real estate honchos will not grossly overvalue their assets when applying for loans, using those assets as collateral. Banks will probably look at those valuations more closely because now they know those borrowers can be held accountable.
Once a loan is made I've never heard of a bank coming back later saying "send updated appraisal."
FUTURE loans may require more due diligence by all parties.
Lots of real estate moguls in NYC are probably peeved by Trumps egregious valuations hurting their own loan apps.
Depression? I don't see it even if lots of loans get called in and bankruptcies happen.
Non-residential real estate is often funded with five year, interest-only loans. The problem comes when those loans come up for renewal, or it a capital expenditure is needed.
NOPE, it looks very much like most of the population is good with the selective-use
of the legal-system...as long as it is hitting people they dislike/hate.
Getting public-opinion on their side goes a very long way in protecting the ruling-class.
Please keep comments related to the posed question: "If Latisha James wins, could she trigger a depression by winning?" Other political comments will be deleted and should be made in the Politics forum. Thanks.
It’s actually a pretty straight forward math exercise.. you take recent comps and get a price per square foot and price per acre. You then adjust for internal upgrades that trump has done then adjust for additional amenities like pools. You then do a discounted cash flow analysis of his business assets on site. You at the two together and get a net present value of the asset. There some variability value on Ana set that belongs to him but it’s like +/- 10%. This **** is basic math at that any competent financial can do. Yet our legal system and media are complete idiots and don’t understand any of this.
Over a year ago I remember business news saying Trump businesses only were able to get loans from a few banks, can't remember what was the reason stated. Does anyone else remember that? Perhaps related to this over-inflation of assets.
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