Elon Musk’s Twitter hasn’t paid his rent, now one of his landlords is in default on his loans
Twitter owner Elon Musk’s newfound reputation as a troublesome tenant is beginning to have an impact in the real world as his social media company’s troubles spill over.
One of his landlords who is suing for $136,250 in lost rent, Columbia Property Trust, is now in default on loans tied to its offices at 650 California Street in San Francisco, where Musk leases the 30th floor of the Hartford Building, one mile from his headquarters.
But Columbia’s problems, a real estate investment trust (REIT) owned by Allianz asset management unit PIMCO, extend beyond the monies Musk owes.
Loans related to another six office properties are also in default, although the Hartford Building was valued at almost half a billion dollars as the most valuable of the properties.
“We have engaged with our lenders in a restructuring of our loan for seven properties in our larger national portfolio,” a spokesman said Bloombergwhich describes the current challenges in the commercial real estate market as “unique and unprecedented”.
Twitter’s problems have now become its own as the social media platform struggles to meet expected $6.5 billion in cash commitments this year on expected revenue of just $3 billion, according to a forecast by Musk to meet US dollars.
To manage his remaining cash reserves and raise valuable cash, Musk has terminated his janitorial contract, eliminated free employee lunches and auctioned off a trove of office supplies, including an oversized bird-themed statue of the company’s logo.
He has also notably refused to pay a number of his bills – whether for air travel for employees he has fired or rent he owes Britain’s monarch King Charles.
Jim Chanos is betting there will be more defaulting tenants like Musk
Musk, who owed the company $13 billion in debt as part of the October 2022 acquisition, has defended his controversial approach to restructuring Twitter’s balance sheet.
“This company is basically in a plane that’s heading for the ground at high speed, the engines are on fire and the controls aren’t working,” he said during a December Twitter Space.
Columbia REIT’s current $1.7 billion loan default, affecting well over a third of the 18 properties in its portfolio, indicates a broader strain in the commercial real estate market since the COVID outbreak.
Employees simply refuse to return to the office — even Musk claimed in November The average utilization of his Twitter headquarters did not even reach the 10 percent threshold: “There are more people who prepare breakfast than eat breakfast.”
According to a report released Wednesday by Cushman & Wakefield, vacant office space could reach 1 billion square feet by 2030, with nationwide vacancy rates rising in half above pre-pandemic 12% levels.
The industry’s poor outlook has seen shares of commercial REITs like Vornado Realty, Boston Property, and SL Green Realty fall between 40% and over 50% since last February, well behind the decline in the Dow Jones US Select REIT Index lagged behind by 13%.
That blood in the water has attracted short-sale legend Jim Chanos, who has opened a bearish position against SL Green, New York’s largest office rent collector, and has joined other defaulting tenants like Musk in refusing to pay their bills as well.
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