Jolted by September's avalanche of bad news that included bank busts, buyouts, and the federal government's takeover of Fannie Mae and Freddie Mac, real estate pundits who pointed to the resiliency of property fundamentals changed their message almost overnight to warnings of sinking demand and rent rolls in jeopardy.

“It was like a capitulation of the bulls,” Bach says. “Suddenly there is an expectation within our industry that there is medicine to be taken.”

Let's make a deal

There is no fast cure for market cycles, but there are treatments to ease the pain. Diligent property management and leasing can help maintain occupancy and stave off declining rental income. Bringing in equity partners to pay down the principal owed can lighten the debt-service load. If default seems imminent, workout specialists may be able to help the borrower avoid foreclosure while minimizing losses for the lender.

No one feels the credit crunch more acutely than borrowers who face a loan maturity at a time when replacement financing has all but dried up. Yet even those owners have a few options from which to choose: Consider the example of Sheffield57, a 900,000 sq. ft. luxury condominium and office project overlooking New York's Central Park.

Last month, owners of the incomplete project announced an 18-month extension of their construction loan to April 2010. Jon Estreich of Estreich & Co. negotiated the loan extension for the joint-venture owners, YL Real Estate Developers, SH Equities and Swig Equities.

“In a world where many things are broken, it is heartening and uplifting to experience a truly collaborative effort on the part of all our lenders and my partners to insure the continued success of Sheffield57 through this loan extension,” says Kent Swig, president of Swig Equities and the operating partner for Sheffield57.

How deep will recession cut?

Specific start and end dates for each recession are determined by the National Bureau of Economic Research, based on gross domestic product (GDP), employment, industrial production, retail sales and other factors. Those determinations are often made more than a year after the fact, however. A commonly used alternative definition of a recession is two consecutive quarters of shrinking GDP.

If the falling GDP that began with the third quarter's 0.5% decline continues in the current quarter and into next year, as many economists predict, that will meet the working definition of a recession (see economists grid below).