Originally published at: https://boingboing.net/2018/10/10/debooking-the-city.html
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O noes! And so soon after opening a store In Williamsburg, which is the best store ever after the flagship. If Wburg closes I’m a riot.
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Namedropper!
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i went there by happenstance, didn’t know it was famous (until I read this article), bought a book, had a pleasant experience…thought it was a little quiet and airy for a typical crunched up ny retail space…but then I’ve seen plenty of waldenbooks back in the day that didn’t look dissimilar…I don’t know man…is it tragic that some good things go? I guess … but would I prefer this over a world where I can get any book ever any time (or thereabouts) digitally or thru amazon or ebay or etc…no, no I wouldn’t. back in the day you had to hunt and hunt for things and keep lists of things until you ever, if ever, have a chance to find them (much like hunting for obscure music labels)…now if it isn’t in print usually you can get it on ebay. I think the world is better now. and all those people who would be up in arms about this…how much did you really spend there? an occasional book and a regular coffee I’m thinking?
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Wow, that sucks.
I really hope this doesn’t happen to the Housing Works bookstore.
But I bet it will.
Bummer.
Now the space will remain empty for a few years until a much-needed Duane Reade or Citibank location decides to pony up whatever insane rental rate the landlord is asking for.
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Not true. They’re moving from the current space because of a rent increase and hope to stay in the same area in their relocating.
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If there is anything good or interesting in NY, it will disappear.
Called it: another greedy and short-sighted landlord.
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The store owners blame the landlords. The landlords blame the banks. The fact is that the landlords overpaid. They made investments that looked like a good idea at the time, but don’t look as good now. Now they are trying to wait it out and hope to get a magic tenant to make the numbers work.
We saw something like this with newspapers in the 1990s. They were minting money, so newspaper chains bought newspaper after newspaper. Ten or fifteen years later, newspaper ad revenue dropped, and the newspaper chains had to write off their purchases. They all bitched about being in the red, except that the newspaper operations were all making money. They had just paid too much for all those acquisitions.
I’m wondering how many of these landlords got into the easy credit of the 2000s and mortgaged themselves to build small empires. It was easy in the early 2000s. Banks would lend to anything to anyone, and prices were soaring. It was easy in the 2010s. Interest rates were near zero. I can see how a landlord might be making payments just fine, but basically be overextended having paid more to build their empire than it is now worth.
The newspaper chains were SEC registered, so they had to report frequently. That meant they had to write off bad purchases. Most real estate groups are private, so they can keep going as long as the banks play along. If you paid $1M, you told the bank what you expected in rent. If you settle for less, particularly in the lease, not as a promotion, the bank might not lend you the full $1M when the commercial mortgage had to be rolled over after five or ten years. This could go on for a while, but it meant that lowering the rent could take a real estate firm into bankruptcy. It’s like those cartoons where the character can walk off the edge of the cliff and not fall as long as he or she doesn’t look down.
The real squeeze is rising interest rates. They’ve been rising for a while now, but slowly. If you have to roll over a loan, you can’t just claim the old rent on the loan form. You have to raise it. If you can’t get that rent, you’ll just wait and hope you can cover the payments from your other rental income. When a firm owns 300 properties with 230 rented, it can hold out for a fair while. If there are partners, they know that lowering rents means taking a big hit. Waiting means a smaller hit.
Now that rates are really rising, I’m expecting some of the smaller landlords to break and sell. I get the impression that the accounting makes selling at a loss, or perhaps selling an older property at break even, more attractive than lowering rent. This will be invisible to the public, possibly for years. I’m guessing that we’ll start seeing changes when someone develops a proper subterfuge to hide what are effectively lowered rents from the banks, at least until things really start falling apart.
P.S. Maybe property values should be assessed on the basis of rental asking prices rather than recent sales prices. It wouldn’t solve the problem as well as a special “policing” tax on shuttered retail space, but it might get the accountants working on that subterfuge mentioned above.
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