This series delves deeper into some of commercial real estate’s most compelling personalities: the dealmakers, game changers, city shapers, and larger-than-life personalities who keep CRE interesting.

A lawyer whose workload has shifted almost entirely from representing clients in commercial real estate transactions to handling loan difficulties and negotiations between lenders and borrowers could easily have a pessimistic view of the industry.

But this is not the case for Michael Lefkowitz.

Courtesy of Michael Lefkowitz

Michael Lefkowitz

Lefkowitz, managing member of the New York-based law firm Rosenberg & Estis, has seen several real estate cycles come and go during his 35-year tenure.

During this time, he has been involved in litigation, appeals and administrative law, generally specializing in assisting lenders and borrowers in consummating financing transactions at all levels of capital. Now the focus is on restructuring loans on distressed assets.

His experience has led him to avoid mantras such as “lay out and pretend” and remain confident in a soft landing, he said.

“I don’t think anyone is faking it,” Lefkowitz said. “Oftentimes when you make loans, you do so in the best interest of the asset, in the best interest of the stakeholders involved.”

By prioritizing communication and honesty, Lefkowitz said it is unlikely that most buildings will need to be returned to lenders through foreclosure despite a lot of ink spilled on the next “maturity wall”. But with billions of dollars of debt expiring in the next couple of years, it will likely stay busy.

This interview has been edited for length and clarity.

Courtesy of Michael Lefkowitz

Michael Lefkowitz (right), with his friend Harvey Uris

Bisnow: How did you get into the real estate law industry?

Lefkowitz: My family. My grandfather worked in the real estate industry. My father was an acting justice of the New York State Supreme Court. So I took my career and merged real estate and law, and 35 years later, this is what I’m doing.

Bisnow: Was there a specific point in time, such as when interest rates were skyrocketing, where you noticed a sharp increase in the number of people seeking solutions due to their distress?

Lefkowitz: Yes, you have undoubtedly noticed that the market has become less dynamic and less active in terms of debt availability. So there has certainly been less trading of assets.

The appraised value of these assets has been greatly hampered by the fact that you can no longer bring housing (in New York) up to market rents as you could before the changes in the law (Housing Stability and Tenant Protection Act of 2019). So, absolutely, there was a dramatic effect on values, and you started to see it through a slowdown in the sales market.

Bisnow: To what extent has your caseload shifted toward handling distress situations rather than more traditional transactional cases?

Lefkowitz: Rosenberg & Estis has existed for 50 years. I have worked at Rosenberg & Estis for 35 years. Although I haven’t seen all the cycles, I have seen quite a few. As transactional lawyers, we must reinvent ourselves based on market conditions.

I’ve had several occasions throughout my career where I’ve had to focus more on exercises, on helping clients negotiate with lenders, with investors, with tenants, frankly, commercial tenants , when we have markets that are not favorable. to owners and landlords. We are currently living in one of these times.

Courtesy of Michael Lefkowitz

Michael Lefkowitz

Bisnow: How do you prepare to help customers in these situations? Have there been any past cycles and experiences that you think have been helpful to you in dealing with the current environment?

Lefkowitz: Real estate has a history of going through business cycles, just as general economies go through certain cycles. What is important for owners is to be able to maintain control of their assets, to have enough courage to navigate these difficult times knowing that the asset class they are in – that this is multi-family, industrial, retail office – will see better debt.

There will once again be a time when lenders lend and interest rates, as they relate to income, find a better balance. And the general economy supports real estate as a key part of the economy in a positive way, which helps our clients hold on. This is truly the most important thing for surviving a period of distress or economic downturn.

Bisnow: What is one of the most creative solutions you have helped implement for struggling lenders or homeowners?

Lefkowitz: There are no tricks in the business. There really isn’t one. What I try to advise my clients on is communication, whether it’s communication with your lenders, communication with your tenants, communication with your investors.

By making it clear to everyone that you are committed to this asset, you are committed to making it happen. However, given the cash flow and the current situation, there may not be enough liquidity to support the debt, to support the investment, to fund the leasehold improvements as you normally would have done and as it was part of your original business plan. Make it clear to all parties that you are engaged as the owner.

When representing a lender, the question is: “What is your plan of action?” What is the bottom line for you in terms of assets? » Is this an asset that a lender wants to own and manage, or is it an asset that the lender wants to operate and try to mitigate losses as best they can by working with the owner?

The key is to communicate, ask the right questions and commit to moving things forward in the best interest of all parties involved.

Bisnow: The Federal Reserve finally recently cut interest rates. Has this had an impact on negotiations between lenders and borrowers?

Lefkowitz: (Some have reported) that there has been an increase in foreclosure filings. There was a rate cut from the Fed, but the mortgage interest rates, the Treasury rates, didn’t really reflect that cut in a positive way. Part of this could be due to the uncertainty surrounding our presidential election. This is partly due to forces beyond our borders and perhaps what is happening globally. There are so many varied reasons.

You really haven’t seen an increase in the amount of loans granted, or a significant drop in interest rates that have given rise to all of these new opportunities for real estate players.

Bisnow: Are lenders and banks approaching loan maturities differently today than they did six months or a year ago?

Lefkowitz: Of course. You have more debt due dates. Trillions of dollars of debt will mature in the next 12 to 24 months. What do you do with all this if you can’t find a place to refinance it?

You can’t find a buyer because this buyer can’t find a loan. We almost find ourselves in a situation of musical chairs. I think that in this cycle, as in other cycles, the music will not stop completely. This idea that more assets are going to end up in the hands of lenders, I don’t think that’s going to happen, nor would I want to predict what a market would look like if that were indeed the case.

Courtesy of Michael Lefkowitz

Tracy Dolgin and Michael Lefkowitz

Bisnow: Some have said that the era of “stretch and pretend” is over. Really ?

Lefkowitz: It comes down to what are the objectives of each of the stakeholders in any particular type of training? There have been a number of stories reporting an increase in the number of commercial real estate foreclosure actions. Sometimes these complaints are filed to protect rights and remedies, but with the idea of ​​continuing to address the issues and resolve them.

I don’t particularly like the phrase “lay out and pretend” because I don’t think anyone pretends. A lot of times when you make loans, you do it in the best interest of the asset, in the best interest of the stakeholders involved, to get to a point where the lender can realize as much as they can on their investment. the investment or its debt, and anything it might have accumulated during difficult times, as well as so that the borrower does not lose the asset.

One of the things that is very difficult for borrowers is that if the basis of their building is very low and you lose that building, you end up with a debt forgiveness problem. This therefore becomes an important tax consequence.

Nobody pretends. I think bankers and landlords resolve problems in good faith. I hope this continues. There will be many cases of foreclosure, of borrowers handing over the keys to the deeds in lieu of foreclosure, of investors taking and fighting control of a sponsoring partner because they don’t like the way the asset is managed or managed. During these times there will be many, many, and I still think there will be more to come. But the majority of these situations will not resolve themselves with these types of disputes, they will resolve themselves if there is some cooperation and understanding.

Bisnow: Give us a bold prediction for the rest of the year.

Lefkowitz: The bold prediction is that we will see a civil and orderly change in leadership at the national level. This is one. Secondly, all of us in the real estate world are capable of surviving until 25. And if we do, I think we’ll be in a much better, different, good place in the real estate world.

Bisnow: Since this is the weekend interview, what do you like to do on the weekends?

Lefkowitz: Play golf.