Landmark Links October 29th – Fallout

Must Read: WeWork got its bailout but there are investors who may have substantial exposure to the flailing co-working company without knowing it: buyers of CMBS bonds that have a substantial number of WeWork buildings as collateral.  This has the makings of a brewing shitstorm – from Fortune (emphasis mine):

During a review of Securities and Exchange Commission filings, Fortune identified at least nine CMBSs issued through banks such as Credit Suisse, Bank of America, and JPMorgan Chase in which at least one of the pooled mortgages was on a building where WeWork leased between 25% and 100% of the available space. Should WeWork cease operations in those buildings, that could be significant income to replace. And the lease income pays the mortgages that fund payments to bondholders.

See Also: Every word of this Wall Street Journal feature article about the collapse of WeWork is more absurd than the last:

As he was preparing for an IPO that would make him a billionaire many times over, Mr. Neumann was surfing in the Maldives when executives in New York called to go over the all-important document that would be released to investors. Reluctant to cut his trip short, Mr. Neumann summoned a WeWork underling to the Maldives for an in-person briefing, according to people familiar with the episode.
Back in New York, Mr. Neumann spent much of the summer working on the document, known as an S-1, in the Hamptons, regularly helicoptering employees out from the city to help. His wife, Rebekah, WeWork’s chief brand officer, insisted it be printed on recycled paper, then rejected early printings as low-quality, according to people familiar with the matter. The process was set back by days and the printing shop originally hired for the job refused to work with the company. WeWork gave part of the job to a small New York paper company that rents space in one of its offices.

It’s a good thing that the Neumanns were banning meat and using recycled paper for the S-1 to save the environment while ferrying around employees on private jets and helicopters to meet so as not to inconvenience them.

Last but not least, The Onion has gotten into the WeWork piling-on party with an incredible headline: WeWork HR Invites Employees To Sign Goodbye Checks For Departing CEO


Beneath the Surface: The yield curve may be back to normal but the economy most definitely is notSee Also: An un-inverted yield curve is not a blanket all-clear for the economy.

Rorschach Test: The post-crisis economy has reached the point in the business cycle where the evidence for both continued expansion and downturn are fairly balanced meaning that one can find whatever it is in the data that they are predisposed to see.

Dark Clouds: Many American companies gouged on cheap credit via CLOs or Collateralized Loan Obligations during this expansion.  However, the search for yield has led to CLO pools with riskier loans and the whole thing could come crashing down when the cycle turns and defaults explode, cutting off cfunding for many companies.


Slowdown on the Horizon? Industrial users are expected to absorb about half as much space quarterly over the next two years as they did in 2018 and 2019, when quarterly absorption averaged 60 million sq. ft., according to the semi-annual Industrial Space Demand Forecast from the National Association of Industrial and Office Properties (NAIOP).  Will this decrease in demand be enough to bring equilibrium to a market where it has exceeded supply for years?

Barrier to Entry: Finding and leasing warehouses close enough to population centers to pull off one-day delivery has proven more expensive than Amazon projected, leading to much larger-than-expected investment on warehouses and corporate profits dropping 26%.  See Also: E-commerce’s addiction to speed is hitting a roadblock in that much of the best-located existing product is quite outdated and ill-suited for modern technology.  However, prices are so high that redevelopment is not often economically viable.


Blurred Lines: Gentrification and the housing crisis are not the same issue, even though they are often confused as such.

Falling Behind: Some large landlords are missing payments on their loans against Manhattan properties that were due to be renovated thanks to a new rent control law.


Send Help: As California burns and millions go without power, Governor Gavin Newsom is asking Warren Buffett’s Berkshire Hathaway to make a takeover bid for bankrupt utility giant PG&E Corp.  Personally, I would have asked SoftBank instead as they appear to have a thing for throwing billions into raging fires.  See Also: Power lines are starting some of the fires but it would take 1,000 years to put them all underground at the current rate, at a cost of $3MM a mile.

Different Approaches: Walmart is pushing to put more robots in its retail stores.  Target is not.

Doo Doo Doo Doo Doo Doo: How the toddler hit ‘Baby Shark’ became the Washington Nationals’ theme song in their Wold Series run.

Charts of the Day

Median new home sales price is falling.

The good news is that it’s not happening because the market is crashing but rather because there has been a massive drop in sales of $400-$500k homes and an uptick in starter homes.

Source: The Daily Shot


That’ll Team Him: A mother was arrested for dislocating her son’s jaw after he refused to stop playing Fortnite and take a shower because Florida.

Daisy Chain: Hitman hires hitman who hires hitman who hires hitman who hires hitman who tells police because China.

This Has Gone Too Far: A woman was killed by debris that resulted from an explosion in a gender reveal gone wrong because millennials.

But Did It Work? An Indian man was arrested for eating several sloth bear penises in a bid to increase his libido.  His wife was unavailable for comment.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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