Is walking away from your loan now Socially Acceptable
In this economy, where many individuals and businesses bought at the peak and are now under water on their loans, is it now Socially Acceptable to walk away from those loans? Are we to the point where a “strategic default” – as this has come to be known – is simply idle water cooler banter amongst investors.
Today Bloomberg announced that Morgan Stanley is doing just that for the second time in 2009. And the Wall Street Journal has had a series of articles on single family home owners and the epidemic of strategic defaults in home loans
More on Morgan Stanley …
Back in the boom days Morgan Stanley made a series of purchases of commercial property from folks like Sam Zell that turned heads because everyone in the industry knew they had over paid. Now the stuff is hitting the fan and Morgan Stanley is simply handing the properties back to the bank and walking away – even though the loans are still current!
- Last month they agreed to surrender 17 million square feet of office buildings to Barclays Capital after acquiring them for $6.5 billion in 2007 from Crescent Real Estate Equities.
- Now they are announcing plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.
From Bloomberg: “San Francisco prime office rents fell 37 percent in the third quarter from a year earlier, the biggest decline since 2001, as companies cut jobs, Colliers International said. The vacancy rate rose to 14 percent, the highest since 2005. Almost 1.4 million square feet of space was returned to the market in the first nine months of the year. ”
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