It was March 2017. I was leaving a role as in-house counsel for a global asset manager and investment bank in midtown Manhattan. I had been on a kick for the last four years of really settling into and advancing my career as a real estate attorney in the New York City market. To facilitate my ability to excel, I lived in the city during the week while my wife and children lived, worked, and went to school outside Manhattan, where I lived on the weekends. I had just celebrated my 40th birthday. I was experienced as a real estate attorney, I felt like I had a few bucks in my pocket, and I had a desire to spend more time with my family and do something entrepreneurial. So what made the most sense as a next step?
The answer was clear. I would launch my own real estate boutique law firm in a smaller market, and I would at the same time become a real estate developer. Onward! Well, at least I would develop one property to start. With that, The Lazovitz Firm was born just outside Philadelphia, in the town of Conshohocken (pronounced kon-shi-HOCK-in, an Unami word from the Lenape people). Through the firm, I was able to put to work the years of experience I have gained practicing law.
For example, real estate clients need litigation services in a variety of areas. Commercial landlords generate revenue by owning buildings and having tenants occupy those buildings, for which the tenants pay landlords rent. This arrangement is documented in a lease agreement. When the landlord or tenant breaches a term or terms of the lease, litigation ensues. Litigation can be necessary or an effective strategy in the real estate business for a myriad of other reasons as well. I started my legal career as a litigator defending physicians, health care providers, and health care facilities against primarily malpractice claims. Later in my career, I represented landlords in their disputes with tenants, and in other business litigation. Although I am inviting an abundance of varying opinions from my fellow attorneys by saying so, I believe the following statement to be true: All litigation is the same in many aspects. So, I am able to take this broad-based skill set I have as a litigator and serve real estate and other clients.
Most recently, I gained interesting and enjoyable experience representing a lender in larger commercial real estate transactions. The game in commercial real estate lending is to take money on deposit and make money with that money. As has oft been said, “Real estate is a leverage play.” That is to say, for reasons which could be reflected in an Excel or Argus model of a commercial real estate project, real estate owners almost always borrow money to finance the ownership of their property. Why? In short, if a property is performing (i.e. if there is healthy net income because gross rental income is healthy and expenses are managed well, and therefore the gross income minus expenses equals a nice positive number), return on investment will generally be a higher percentage if money is borrowed, and the cost of those borrowed funds is reasonable. (Most people in the commercial real estate business could expand for hours on the prior sentence; I’ll keep it simple here).
When lenders make these loans, they have all sorts of concerns that attorneys address. Lenders are taking their money and handing it to someone else—that’s always a little scary. They want to know that they’ll be paid back, what their security interest is (i.e. what is their collateral) if they aren’t paid back, how they can enforce remedies against the borrower if they aren’t paid back…and a list of at least 100 other concerns which lenders want to make sure are addressed before they hand over the money. With my experience, I represent commercial real estate lenders as well.
Real estate assets are often traded, and investment real estate is, if the landlord is accomplishing his or her goals, leased. As I have experience in those areas, I knew I could bring value to clients at The Lazovitz Firm there as well.
Having my own law firm, rather than working for a larger institution, would also allow me to try doing what my clients have been doing for years—investing in and developing commercial real estate. That’s not so easy to do while working for a firm where doing something entrepreneurial “on the side” when billable-hour requirements must be met is not exactly considered consistent with the firm’s mission statement. This was a great time in my life to be a real estate developer too, so I took the plunge. I bought a building in Center City Philadelphia and am in the process of converting it from a single-family building to three apartments that I intend to rent this summer. And I look forward to doing another.
This combination of starting a law practice and becoming a first-time real estate developer was a real conundrum for me. I had questions. If I started a real estate business at the same time as I started a law firm, what would my clients think? Would they think I was prioritizing my projects over theirs? Would I be dealing with emergencies at the development project on a regular basis in a way that would distract me from focusing on my legal work? I had concerns, but there was only one way to find out if those concerns were valid, and that was to just go do it.
So, what have I learned? First, the good. Obviously, in my own firm, there is no confusion about which attorney gets credit for a client who hires the firm. I have found out how a law firm runs, and I have learned how to run a business, as a law firm owner and real estate developer. I’m not an asset, or revenue stream, or expense within a larger organization of income and expenses. Instead, I see all the income and expenses and what makes them increase and decrease, and whether expenses generate more revenue or not. Having my own firm has allowed me more flexibility around my children’s activities and to play more of an emotional role in their lives, beyond just being a provider. And I am thrilled that I have started the learning process of being a real estate developer. Having my own firm has allowed me the flexibility to learn the development business, and sharpen areas I already knew, such as real estate finance. That has meant spending time taking classes in building construction, learning how to read a set of architectural plans, bidding out my job to contractors, taking a drive to my property when I want, and much more.
What’s been tough? First, I have been a team player throughout my career, and I do enjoy collaborating with peers. Because I wanted so much flexibility at this stage, I have chosen not to work with other attorneys or join an existing firm, as each day has been different than the last, and only clients and my family can really rely on my responsiveness for the time being. When the right opportunity to partner with others in a meaningful way arises again, I’ll know it. And I have worked with professionals outside my firm to supplement the knowledge I lack at this stage, so I have not been entirely on my own. Next, starting a law firm, along with a real estate development company, entails an amount of administrative work that can amount to hours per week, if one isn’t careful. I think about and manage things I’ve never had to manage before. Where will my office be? Where’s the IT support team? Oh wait, that’s me. Where’s the janitorial staff to take my trash and recycling out every night? Oh wait, I do that (for the most part). Isn’t there someone to set up my phone for me and take me through orientation? Oh wait, that’s my job.
It has overall been a great experience and a great time in my life to make this transition. I’ve learned a ton and am really looking forward to where this road leads.
About the Author
Joel Lazovitz is the founder of The Lazovitz Firm, a real estate law firm based in Conshohocken, PA. Contact him at joel@lazovitzlaw.com or 484.368.3854.