Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Louis Rossmann has a good break down of why NYC real estate is so overpriced. TLDR: CMBS packages that were securitized, syndicated, chopped up, and then re-sold by Wall Street all over the world. This process makes renegotiation of leases very difficult to the point that any rent accepted under the contract price will trigger an automatic acceleration of the remaining loan. His focus is on the COMMERCIAL real estate sector in NYC. Thoughts?
This the equivalent of subprime mortgages with the triple A tranched ratings, or whatever gimmick finance term they invented to use as talking points during the sales pitch or when people start asking questions
When the bankers/financial gurus can just expand the money supply, they need something to throw it at to make it look like they are doing something legit, helpful to society. Bankers/financial gurus dont want the rent lowered because the perceived value of their asset needs to stay high for the eventuality someone someday will just come out with the higher figure and exchange it for. And the cycle continues full circle. Maybe they will shut down one corp, or two, but the people are the same. They just move around companies or start one.
All the different packages, and security sales, and secondary markets, blah blah blah is just a way to hide the paper trail. Its like laundering cash only for contracts.
The basic problem with CMBS (commercial mortgage backed securities) is that they can reduce the risk for the original lender because they sell off all or part of a big original mortgage -- but also spreads the risk because so many other parties now own a piece of the original debt. That makes it that much more difficult for the servicer -- the guy who collects the mortgage payments -- to renegotiate the original loan terms, like rents, when things head south. So rents may stay high even when the market softens. (Basically what the guy in the video says). Its's hard enough to renegotiate terms on a basket of commercial mortgages, but as we saw, renegotiating terms became nearly impossible when those bundles were sub-prime residential mortgages.
The thing is that IDK what share of offices and stores here have mortgages that are held under CMBS structures. I'd guess that during a downturn individual, smallish owners would find it easier to renegotiate rents than huge commercial landlords with mortgages in the CMBS structure. I'm not sure I would call CMBS a Ponzi scheme or fraud or anything, But it is one of those financial structures that works pretty well when it works -- but is hellish when it doesn't.
Last edited by citylove101; 09-21-2020 at 10:31 PM..
Once the underlying Mortgages goes into default it is transferred from the master servicer to the special servicer. These groups are staffing up like crazy But luckily there are a ton of people with experience from dealing with this from 2008-2011. There is money on the sidelines to pick up these assets at a discount. I would argue that on the whole the tenants of properties in trouble with CMBS mortgages will be in no worse shape than those with other types of financing.
Really? Where are they staffing up? I used to work in a related sector - doing LTV ratios for loans secured by stocks. No experience in real estate. This quarantine has resulted in me being out of work for 7 months now. Any tips?
EDIT: I do want to say that his story is believable b/c the more expensive a piece of property is the higher the likelihood of having to borrow from multiple lenders to raise the money to finance it. Throw in multiple tiers of lenders - junior, senior, middle, etc. and it gets complicated real fast.
Really? Where are they staffing up? I used to work in a related sector - doing LTV ratios for loans secured by stocks. No experience in real estate. This quarantine has resulted in me being out of work for 7 months now. Any tips?
EDIT: I do want to say that his story is believable b/c the more expensive a piece of property is the higher the likelihood of having to borrow from multiple lenders to raise the money to finance it. Throw in multiple tiers of lenders - junior, senior, middle, etc. and it gets complicated real fast.
Midland Loan Services
LNR Partners
Rialto
Situs (your best bet - lowest barrier to entry)
Torchlight
KeyBank
Trimont
Greystone
CW Capital Asset Management
ACRES Capital
Yes, it seems reasonable, but as it would not be the sole factor, it's thus difficult to figure out how large of a role this plays. This has been discussed a lot on various forums I've been on and there are multiple theories put out about the "screwiness" the video mentions. It's pretty obvious that supply and demand in regards to actual use of these commercial spaces is incredibly distorted. It also has a knock-on effect where these high rates in certain areas held by CMBS potentially cause other, smaller landlords to potentially adjust their prices upwards as well. The comments for the video are good, too, with parts of it similar to what's been repeated on the NYC forums here over and over though it's really hard to get a grasp of the overall picture aside from "funny stuff" happening.
Last edited by OyCrumbler; 09-22-2020 at 08:45 PM..
I've watched a handful of this guys videos after coming across them on this forum. Seems like a very knowledgable and successful average joe who spits it straight and doesn't beat around the bush like a couple of real estate buddies of mine. I'm all aboard his way of thinking and think this place is screwed for the next handful of years minimum. Wfh is going to be the death of this city. It's almost as if it's unsustainable if a gazillion people don't come here m-f to buy $5 hot dogs. I've always thought nyc would never go the direction of Detroit, philly, Baltimore due to the diversity of our economy but I may have been wrong. I hope I still am. Rough times ahead for sure. Bronx is burning part 2.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
