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In the 1980's people wrote about malls as cultural centers, as temples to shopping. Now, they're dying.
Many observers are speculating about the growing trend of so-called dead malls: once-flourishing, large retail spaces that now have a high vacancy rate, low numbers of pedestrian traffic, or the lack of an "anchor" store (typically a department chain). Is it because of economic recession, or stagnant middle-class wages and growing income inequality? Or has the death of these malls been hastened by the rapid growth of online shopping?
It's difficult to say, but the dead mall phenomenon is becoming a cultural item of interest -- for retail historians, urban explorers and documentarians alike. We may read about dead malls in The New York Times or The Atlantic, but film footage can say much more than words.
Is Amazon to blame?
(Score: 2) by VLM on Tuesday April 25 2017, @08:05PM (4 children)
Without early foreclosure, its like 3B, 1B, 500M, 100M finally the landlord can't make a payment and the bank gets 100M back on their 2B loan
With early forclosure its like 3B, 1B whoopsie the bank forecloses and gets 1B back on their 2B loan.
Its a difference of some 900M bucks in this made up example.
In real world another curious issue is rate of decline vs payment of revenue stream, if the property is dropping in value by 10M/month but the mortgage is 15M/month then yeah the balance sheet screams bankruptcy but they are technically paying it off quicker than its depreciating and in theory foreclosing later would result in lower loss than foreclosing soon in that weird scenario.
(Score: 2) by Grishnakh on Tuesday April 25 2017, @08:32PM (2 children)
Yeah, but you're not answering the question: where are they going to find someone to take out a $1B mortgage on this place, who isn't going to also fail like the current mortgage holder?
Basically, if you're a bank lending to people for real estate, you're basically letting them manage property that you technically own (sorta). If you foreclose, that means you no longer believe they'll manage it profitably (they're going to default on your loan), so you want to find someone else who will manage it more profitably (they'll pay more over their loan's lifetime than the current mortgagees). But if the property is losing value anyway, that's just not going to happen. The current mortgagees can only do so much; they're subject to market conditions just like anyone else, so the only reason you'd want to give up on them is because they're incompetent.
I'm not saying the banks are really making the best decision here, or that they're not thinking the way you describe, but it sure seems stupid to me. If someone buys a Pontiac Aztek at full price, and then wants to pay less because they had to take a lower-paying job, does it make sense to repossess it, knowing that you'll probably not find anyone willing to pay anywhere remotely near the outstanding balance for it because it's such an eye-sore?
(Score: 2) by migz on Tuesday April 25 2017, @08:40PM
That's easy. It's called QE. Uncle Sam will loan them the money, and the taxpayers will pay for it. Win! Win! Win!
(Score: 2) by VLM on Tuesday April 25 2017, @09:00PM
so the only reason you'd want to give up on them is because they're incompetent.
Yeah that was kinda my last paragraph.
Note that real estate is interchangeable cog as is property managers, and about half the property managers out there are below the median in performance, so maybe we only hear about the bad half where the bank pulls the trigger and not the other half.
Also if the property can be turned around, its not even a median / on average thing, if the bank can find a prop mgr who can sweet talk them into pulling the trigger so they can take over...
(Score: 2) by sjames on Tuesday April 25 2017, @08:46PM
The bank doesn't get 1B back because they have to sell the thing first. But since they foreclosed, it is no longer a going concern, so it devalues even faster. By the time they get around to selling, it isn't a slightly out of date mall with a 50% occupancy, it's a ghost building featuring a rat condo. That is, if they don't neglect it to the point that it has actual negative value (since it will cost to tear the thing down).
OTOH, if they just deal with it when the rent is lowered to get shops in, so long as the mortgage is still being paid, it might just make it as the economy improves. If not, it still defaults to the rat condo, but at least they got more payments out of it.