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Commercial real estate loans are interest only? I had never heard of that before, but it makes sense with the buried lede:
Which is what happens whenever a company has an asset they don't own and no longer want. Shrug and handover the keys. Seems to me like the lenders are going to be the ones taking the haircut, despite what the article asserts.
The lenders are the banks...sounds like an '08 again.
Yep and it will end in massive public giveaway in free loan money to retrofit buildings to something useful, like residential(yes I know of the challenges but there is no better option). Even progressive cities are fucked because their downtown cores that they sold gladly sold out or allowed to be developed out from under their constituents have almost all their tax dollars coming from CRE so they are levered to pro up CRE.
There is at least one other option: Vertical Farming. I saw one of these in San Francisco go up, but there's quite a few cities trying it out:
https://www.smithsonianmag.com/innovation/empty-office-buildings-are-being-turned-into-vertical-farms-180982502/
Also it would require changing commercial buildings to industrial. I'm not an expert on this but soil weighs a lot so unless these are plant nurseries I would expect its a more expensive transition than than residential as we're talking adding like forklift elevators and drains to everything.
I hope they'll do retrofits. I wonder what that would do to the housing market. If it actually made housing affordable a huge chunk of investors and home owners would be royally pissed. Great way to decrease homelessness, and I might be able to afford a house, but I doubt they'll do it for that and previous reasons.
The other sad part is it answers many problems on traffic and congestion by doing what most countries do to enable density; build up not out with incredible efficiency gains. There are many social benefits as well and in a society that struggles with depression and loneliness as much as America, hard to think of a solution that solves as many problems as taking empty buildings and adding affordable housing.
They're called balloon loans. They're pretty common for mortgages anywhere outside the US. Instead of paying principal plus interest each period, you only pay the interest. At the end of the term, you pay the principal itself.
They also can't just hand the keys back unless it's in the original contract or the bank agrees. If a lot of companies are choosing to ditch their properties, the banks will choose to refuse this option.