So it begins?

"18M in debt, filing bankruptcy." Bulletin, 4/8/10.

Pat Gisler was never my landlord, but he was the landlord of Pegasus Books for the first 3 years when we were still on Greenwood Ave. And he was my boss for awhile.

He started a little video game parlor between Pegasus and the pizza parlor (this was before they built the underpass and the building was still at street level.) I would work at Pegasus for part of the day, and then go over to the video game parlor for a few more hours. This was when there were video games everywhere.

I always felt that Pat treated me fairly, (his brother was another matter....) though I had always heard that he was a 'hard-ass.' I liked him; he trusted me with cash and the counts and I appreciated that.

He was more the 'adult' in the room, while I was a bit of the 'kid,' though I see from the article he's really only 7 years older than me. I doubt he ever would've taken advice from the likes of me, but it sure appears he got overextended.

Notice two things.

1.) Part of the 18 million debt is to Bank of the Cascades. This may be the first commercial loan that has hit the headlines, but I suspect it won't be the last.

2.) Gisler partly blames his moderating of rents to his tenants for his lack of cash flow.

There is a correlation here that is inescapable and is going to impact on every commercial property out there. Lower rents keep viable tenants. Higher rents drive them out. Lower rents keep the vacancy rate low, but make it harder to pay the debt. Higher rents drive up the vacancy rate, which also make it harder to pay the debt.

Most new commercial developments are going to be facing this dilemma -- higher rents, lower occupancy; higher occupancy, lower rents. And I'm sure that many of these CRE's were penciled out with both high rents and high occupancy. The banks are going to need to "moderate" these loans -- much like everyone was hoping they would "moderate" the home loans. And we all know how that's been working out....