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The beginning of the end or the end of the beginning?

And I say that with apologies to devotees of Winston Churchill.

Most people will say that Tishman and BlackRock walking away from Peter Cooper Village and Stuyvesant Town is the end of the beginning, and that the [insert cliche - shoe drop, train wreck, yadda yadda -- here] is now going to go into full force. This should be a major league equity write off on the equity side-- say a cool billion?  And, given the huge drop in value of the complex, the lenders are in deep too. This happened, by the way, after some weeks of negotiation between the parties.  But then let's also not forget this deal has been is trouble almost from the get-go; what, two years or so now?

Others are going to say, there's blood in the streets, so buy. I hope so and that they can find the money to do so. It has been suggested that we need some FDIC type shared loss agreements to get the debt markets moving again. Not a bad idea.

What I found interesting from the legal side is that this deal will be a deed in lieu, three ugly words that are nonetheless usually better than foreclosure.  Rather than go through the expense of foreclosure proceedings, the borrowers are simply deeding the property back to the lenders through the special servicer. With the property that under water it makes sense, and the lenders seem willing not to go through the exercise of foreclosure, meaning they have negotiated a deed in lieu agreement or you have a largely non-recourse deal, or both.  Remember, most commercial deals that go this way will have a deed in lieu agreement talking about the rights and responsibilities of the parties, and a default this size...well, you get the picture. This is where good dirt lawyers earn their pay, and try to make the best out of a tough situation.