> and if it goes on the books then the mortgage on the property gets reevaluated and the then the merry-go-round comes to a screeching halt, because most commercial property is mortgaged up to the eyeballs.
No, the leverage isn't the problem. The article is very explicit about this: the bank makes a $16M loan at interest of $640K / year, and the building operator is so good for that loan that he pays it off indefinitely out of his personal funds. The operator doesn't want to be foreclosed on, because that leaves him worse off (assuming the market eventually picks back up), and the bank doesn't want to foreclose, because that leaves it much worse off (whether the market picks back up or not).
The reason for the pretense is that lowering the rent legally requires the bank to foreclose despite foreclosure being terrible for the bank.
No, the leverage isn't the problem. The article is very explicit about this: the bank makes a $16M loan at interest of $640K / year, and the building operator is so good for that loan that he pays it off indefinitely out of his personal funds. The operator doesn't want to be foreclosed on, because that leaves him worse off (assuming the market eventually picks back up), and the bank doesn't want to foreclose, because that leaves it much worse off (whether the market picks back up or not).
The reason for the pretense is that lowering the rent legally requires the bank to foreclose despite foreclosure being terrible for the bank.