Okay, local movie theater lease runs out, tenant asks for rent reduction, Moronic owner doesn't want to hear of it,....tenant leaves, monthly rent collection drops to $0 per month for almost 1.5 years.
What is the market rent on such a place? I mean who even goes to movies anyway?
Well the place is about to finally be re-rented for somewhere between $20,000-$25,000 a month, maybe.
I always do the math on these things. Essentially they have to make near $1,000 in PROFIT PER DAY, just to cover the rent. Then there's the enormous cost of air conditioning and heating a large space. Paying staff. The cost of the films and projectors. Insurance. Accounting. Cleaning costs....
Oh yeah, there's a movie theater 1.5 miles away, and another 3 miles away - both of which are BETWEEN this theater and the mass population of Long Island.
I told my wife how much the market rent was and she too was incredulous, calling anyone who would take on that lease a (bleeped) Moron.
But like a good joke, I had to interrupt her clamoring to tell her something even more incredulous.
It turns out, the previous motion picture theater owner was paying an astounding $52,000 per month.
So, for one thing, how stupid was this 'old coot' owner to not come to some type of deal with the exiting tenant?
And in macro terms, realize that this example is indicating that NYC-metro area commercial rents are looking at a 50% drop ALREADY. And this drop is occurring WITHOUT higher interest rates - which are inevitable.
I almost titled this post - "Screaming Bull Market In An Empty Theater"!
4 comments:
I checked out a house in Bedford, NH last weekend for my in laws. Bedford is one of the well to do towns in NH. Apparently they have "great" public schools. It is approved for a short sale and the bank is asking $185k. It was a $hit hole! Turns out it sold in 2006 for $370k. I would not let my dog live in the house. I asked the realtor if it was BAC who owned the title. He said he was not at liberty to tell me but did state that 80% of these homes are owned by BAC in this area. The legacy of Ken Lewis still lives on!
Kfell
Ken Lewis - 2008 Banker of the Year!!!!
Similar issues here in Silicon Valley CA. Commercial buildings everywhere are vacant. Seems like the two biggest companies around here are "For Lease" and "Available".
Of course it's uneven: Google just shelled out big bucks to expand its office space.
Residential real estate still seems to be sounding for the mythical bottom although high end housing has held up remarkably well.
Maybe things aren't getting worse but they sure aren't getting better ...
Anon,
But in NYC, as opposed to FL, CA, etc....
This the crash is only incipient.
And NYC's decline will have a bigger macroeconomic impact.
The high end is holding up only because the stock market is bubbly.
And these rich 'old coots' are too stupid to sell their investments now. They aren't too excited about .3% interest rates and whatnot.
I can't wait to remind them all that they had plenty of chances to cash out.
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