Editor’s note

In his novel “A Man in Full,” Tom Wolfe painted a classic scene (among those who work in the bankruptcy field, anyway) from the early 1990s real estate meltdown, of one of the workout sessions between a distressed developer and a lender that was prevalent at the time.

Things have come full circle since the 1990s, and it’s worth taking a peek behind closed boardroom doors to see Wolfe’s portrayal of what happens during one of these sessions when a developer is trying to hold on to his prized buildings by restructuring his debt, while lenders are likely asking insistently — and in a pissed off tone — “What did you do with my money?”

It’s known as the “saddlebags” scene (as in sweat forming on the developer’s shirt, under his arms and then spreading across the back, in the shape of a saddlebag), and since the start of the downturn several pundits have noted its relevance to the current market situation. It centers on Atlanta developer Charlie Croker and his crumbling real estate empire, during a meeting with his bank. Croker, a larger-than-life egomaniac, needs to be brought back down to earth, and one of the bank’s lawyers is brought in to make him sweat. Here is a snippet:

“They were all settling back and eyeing the mark, the quarry, the prey, or whatever you should call the butt of a practical joke involving half a billion dollars. It was the old man at the other end of the table, the Croker Global Corporation’s end.

…Obviously Croker did not realize he was it. He was reared back confidently in his chair with his suit jacket thrown open. The fool seemed to think he was still one of those real estate developers who own the city of Atlanta.

… There were a dozen men at the PlannersBanc end of the table. But the show was all Harry Zale’s … [Zale] was a workout artiste, and the workout artistes were the Marines, the commandos, the G.I. Joes of commercial banking.

… [Zale said,] “Think of this as an AA meeting, Mr. Croker. Now that the spree is over, we wanna see some real self-awareness here. You’re right, we called this meeting, but I want you to tell me why. What’s it all about? What’s the problem here?”

… [He] noticed that the first little dark crescents of sweat were beginning to form on Croker’s shirt, beneath his arms.”

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And so on, until Croker starts sweating profusely and tries to figure out a reasonable business plan to repay the bank instead of bluffing. It’s a situation many developers likely find themselves in today.

I recently had the pleasure of meeting Phil Rosen of Weil Gotshal & Manges, who is knee-deep in workouts and restructurings himself these days as one of the top real estate lawyers in Manhattan. His firm is handling the disposition of Lehman Brothers’ $43 billion real estate portfolio, the bankruptcy of General Growth Properties and the debt restructuring for many unnamed Croker-size developers.

He wouldn’t comment on whether he’s seen any saddlebags, but he said some New York property titans are, of course, fighting tooth and nail to save their buildings.

“Some people might say, ‘I bought 22 buildings. If I’m left with 11, that’s still 11 more than I had before,'” Rosen said, adding, “For others, it’s ‘Every single building I lose is a dagger to the heart.'”

Banks have mostly been reluctant to thrust that dagger into the hearts of building owners so far; many are playing a game of “extend and pretend” with problem loans instead. But banks are nonetheless a ubiquitous presence in real estate these days, and are the focus of many stories in this issue.

In her series about “How to Succeed as a Broker Today,” reporter Candace Taylor looks at how many banks are hiring residential brokers directly to work on the failing new projects they’ve taken back. Working directly with the banks was a key source of business for brokers in the 1990s in the city, and it’s becoming one again.

Meanwhile, buying a building from the bank can prove to be quite a deal, as reporter David Jones shows in his profile of George Comfort & Sons. In buying Worldwide Plaza for $590 million, an amazing 65 percent less than Harry Macklowe paid for it at the height of the boom, the firm scored a major coup. It’s the biggest deal since last fall’s meltdown, and we explore how it’s moved the firm into a higher echelon of Manhattan real estate players.

There will no doubt be more distressed sales like Worldwide Plaza. It’s probably the greatest period for buyers since the time of Charlie Croker’s meltdown. That’s a good reason to attend The Real Deal’s fifth annual forum, on “Distressed Opportunities,” at Lincoln Center on October 14. For more information, check out the banner at the top of TheRealDeal.com.

Enjoy the issue.