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Good business people know how to strike a deal that benefits all parties, and in the time of COVID-19, renegotiated #realestate deals will require everyone to share the pain. https://www.houstonchronicle.com/business/columnists/tomlinson/article/kind-bargaining-real-estate-coronavirus-recession-15182811.php #txlege @HoustonChron
The Coronavirus Recession has made it impossible for many businesses to pay rent. When cash doesn’t flow from tenants to building owners to banks, loans are not repaid to the companies that service those mortgages.
Mortgage servicers are not the end of the line, though, because they have packaged those loans into bonds and sold them to investors, many of whom have taken loans using the bonds as collateral. If too many businesses fail to pay their rent, it can trigger much bigger problems.
The threat is real. The U.S. economy will likely contract 7.8 percent in 2020 due to what Deutsche Bank calls the largest decline in consumer and business spending since the Great Depression. Most commercial tenants are service businesses that rely on consumer spending.
Value destruction in the $16 trillion commercial real estate debt market could drag down all financial markets. The industry hopes the Federal Reserve will step and buy bonds soon, but billionaire investor Carl Icahn told CNBC television last month he’s betting on a collapse.
If business people all along the credit chain practice some common sense and innovation, though, they can avert a crisis.
“If you have overreaction, you’re going to have bigger and deeper problems,” Brad Freels, chairman of Midway Companies, a Houston developer. “If everybody just sits still and doesn’t panic, we can get through this.”
No one is going to make as much money as they were expecting, and many will lose money as restaurants, retailers and other businesses never come back. Now is not the time to get aggressive, only cooperation will cushion the blow for the economy as a whole.
With stores closed, revenues halted, and the future uncertain, people all along the #RealEstate credit chain will need to practice kind bargaining to keep the #coronavirus #recession from turning into a #depression: https://www.expressnews.com/business/columnists/tomlinson/article/kind-bargaining-real-estate-coronavirus-recession-15182811.php @ExpressNews #txlege
