Orrick Partners Say Restructurings Now Predominate

[IMGCAP(1)]When a real estate market starts to turn, the perception of changing market conditions may depend on the beholder. More to the point, observers in different disciplines will offer differing perspectives on the changes. A broker might see a downturn in terms of fewer or smaller transactions, or in terms of more sublease space to work with. A lender might describe a period of watchful waiting for the capital markets to start shaking off the doldrums. A real estate attorney might tell you his or her practice is as busy as ever—just not with the same types of work the firm was doing a year ago. Marc S. Shapiro and Jill Block, partners in the firm of Orrick, Herrington and Sutcliffe LLP, tell Real Estate New York that the real estate practice’s emphasis lately has been on restructurings and workouts, a shift they began seeing during last summer’s subprime meltdown.

RENY: This recent demand for restructuring- and workout-related counsel—will it intensify as we go forward into 2008?

Shapiro: The lack of liquidity in the marketplace creates certain inevitable consequences. You have loans that are maturing and cannot be refinanced, and there’s no other source of capital to repay those loans. You necessarily find yourself in a restructuring scenario. The only alternative to refinancing is foreclosure, and most financial institutions know that the last thing they want to do is to go into a business that is not their core business—real estate.