A complicating factor in workouts is having to deal with more than one entity; a developer may have an investment partner and a money partner on a particular project. While it's tempting to negotiate strictly with the money partner, Stein warned that leaving out the other parties may incur the risk of lender liability.

The panel's other attorney, Richard Fries of Bingham McCutchen LLP, called the lender liability issue "scalding hot stuff," but said that allegations of liability often boil down to "creative word-processing" on the borrower's part. Another "hot button" issue in the current downturn is "material adverse changes" in the borrower's situation that threaten the viability of a loan, but Fries cautioned against seeking foreclosure simply because the lender's confidence is shaken.

Fries counseled paying attention to detail at every step of the process, starting with insisting that the borrower sign a pre-workout agreement. He also advised lenders to fix any defects in collateral or loans, even those as elementary as missing signatures on the documents. He noted that non-judicial foreclosure--originally intended in 1998 as a temporary law but now on the verge of being extended for the third time and possibly becoming permanent--represents "a very compelling remedy on the borrower's and lender's side."

David Genova, who recently formed Cygnus Development Consulting LLC, pointed out that there's no one factor that can bring a workout to a satisfactory resolution. Rather, it comes down to the interrelationship between issues and parties.

Moreover, "information is the most critical part of this," said Genova, who focused on construction projects. For example, he said, a lender should not take a project over without having all of the relevant documents in hand, including change orders.

Taking over a troubled project may also mean inheriting claims against the developer by subcontractors, and Genova said it's important to understand how valid those claims really are. It's also important, he said, not to underestimate how much work is entailed in taking over a project. "Just dealing with liens and subcontractors is a full-time job."

Panelist Mark Iannone noted that commercial real estate has been in a workout-prone environment before--notably the downturn of the late 1980s and early 1990s. "In many ways, I feel like I'm watching a rerun of an old movie," said Iannone, who has handled workouts for a variety of institutional investors as principal of Heritage Realty Advisors LLC.

When it comes to devising a workout strategy, Iannone said, the amount of capital the borrower has "will drive the bus." He emphasized that working the loan out is the bottom line. "The first loss is the cheapest loss," said Iannone, adding that a lender "would be blown away" by how much more is lost in taking possession of the property.

Iannone advised lenders to differentiate among borrowers with problem loans. Some, he said, are "the good guys" who are always ready with the necessary information, while others "have an excuse a minute." Either way, it's important to sit down with borrowers, listen to them and gain as much insight as possible on their ability to deal with the situation.