The following is
my answer to a Quora question: “Why do banks, insurance companies,
and pension funds, own or control the ownership, of most of the high-rise
buildings in America?”
Whilst it is arguable if they do own most
of the high-rise buildings in the United States, it is true that they own many
of them, particularly in major metropolitan areas. In the right areas, these buildings are a
constantly appreciating asset. The land
they are on is valuable, and the property itself has intrinsic value. This makes them excellent hedges when the
market drops, as well as collateral when there is a liquidity crunch. For example, a bank owns a building. Due to a major upheaval in the market, and
unwise exposure, there is a loss of leverage. It is a relatively simple matter to sell the
property in order to lease it back to quietly address that liquidity issue.
These building also have prestige value,
which enhances the stock value. They are
an excellent means to garnish the balance sheet. Additionally, these assets also generate
income through office rentals. Financial
institutions do not often use the entire building’s office space. Space is rented to shops, for offices, and
even for events. They bring in a healthy
revenue stream.
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