As I've learned sometimes businesses are unable to properly value something that, intuitively, has a clear nonzero value. Classic example would be selling something with an ongoing royalty of e.g. 10% of future profit.
The UK has huge swathes of empty commercial property.
The book value of the property is related to prospective rental income. It is - bizarrely - sometimes more profitable for owners and investors to maintain the fiction of high rental value without any income than to drop the rental value to something realistic and take a realised loss. Even if that's generating real income.
I would guess it's the same in the US.
This leans suspiciously towards subprime-all-over-again, where the nominal value and security of investments is being wildly overstated.
At some point it's going to have be unwound, which will create some interesting readjustments.
Yeah I think the world collectively needs mark-to-market rules for real estate quite urgently. This "we will give you 6 months free rent but never lower the rent rate" scam is pretty toxic.
The book value of the property is related to prospective rental income. It is - bizarrely - sometimes more profitable for owners and investors to maintain the fiction of high rental value without any income than to drop the rental value to something realistic and take a realised loss. Even if that's generating real income.
I would guess it's the same in the US.
This leans suspiciously towards subprime-all-over-again, where the nominal value and security of investments is being wildly overstated.
At some point it's going to have be unwound, which will create some interesting readjustments.