Just as there's no free lunch, there are no free loans. That's the essence of the effort that borrowers and lenders have been making for several years now to cope with troubled commercial real estate loans. As attorneys who have been on the front line of distressed debt tell DAI, restructurings-no matter how creative or inventive they may be-always come at a price. In the words of Gordon Gerson of Gerson Law Firm in San Diego, the best and simplest way to restructure a distressed loan permanently is with new capital, either from the borrower or from another source. Otherwise, the restructuring is almost always a temporary measure like the extend and- pretend approach that has become an industry clich é. As Dennis Russo of New York City based law firm Herrick, Feinstein LLP sees it, "there's no one-size-fits all solution for borrowers who are struggling with debt. A solution that works for one borrower may not work for another, and many solutions come at a price. In that sense, there's rarely a silver bullet or magic wand." Nonetheless, "if you're analytical and reasonable, there may be maneuvers worth trying," says Russo, who is co-chair of the commercial real estate department at Herrick, Feinstein. As an owner-developer, Russo gained real-world perspective on borrowing in the late '80s and early '90s. He cites a number of approaches that may or may not work, depending on the borrower, the specific loan documents and the property itself. These include forgiveness of debt, lowering the interest rate, having the lender take a back-end piece of the deal, finding another lender to take out the original lender, putting the project into bankruptcy or finding a third party to take pay down the debt in exchange for equity.

On forgiveness of debt, Russo advises: "Be careful of the tax implications if part of your debt is forgiven. If the forgiveness isn't structured properly, you'll have to recognize the forgiveness as income and incur a tax liability that you can ill afford."

A lower interest rate will lower payments now, but such an approach may involve the unpaid interest accruing on the back end of the loan when, the lender and borrower both hope, the borrower will be in a better position to repay the loan.