Leading Questions: Herrick’s Belinda Schwartz

Lawyers are great at asking questions, but how are they at answering them? Bloomberg Law is talking with lawyers and other legal industry players at the top of their fields to find out what makes them tick, what challenges they face, and how they do what they do.

Belinda Schwartz, who has chaired Herrick’s Real Estate Department since 2014, sees the market during the coronavirus pandemic as a “tale of two cities.”

“On the one end of the market, investors and developers are looking for new deals and are bullish on recovery,” she says. “The other side is focusing on distressed deals, workouts and restructurings.”

The market is seeing more “percentage rent” in which landlords take a percentage of the gross revenue businesses collect. “It’s an attractive model for both tenants and landlords,” she says.

Schwartz, a 30-year veteran of New York City’s commercial real estate market, has advised on several of New York City’s largest development projects, including Brooklyn Bridge Park’s Empire Stores complex, and downtown Brooklyn’s 1.8 million-square-foot City Point project.

Bloomberg Law spoke to Schwartz about the importance for lawyers to think like businesspeople, her encounters with sexism early in her career, and why it’s critical to create more opportunities for women in commercial real estate.

This conversation has been edited for clarity and length.

Bloomberg Law: What legal question keeps you up at night?

Belinda Schwartz: For me, there’s not one legal question. Rather, it’s “what are the questions I’m not asking?”

Especially for a transactional lawyer, the challenge, particularly in the current environment, is to try to view things from the perspective of a businessperson.

Another challenge comes from the fact that every client is an individual and has their own set of concerns and goals on each transaction. I’m constantly reminded that lawyers do more than simply answer legal questions; we are counselors. We need to handle each circumstance appropriately.

BL: The New York City real estate market has been hit hard by the pandemic. What types of challenges are facing lenders and developers, and how are you helping them?

BS: It’s the domino effect: The tenant is having a challenge selling the product, so there is trouble paying the landlord; the landlord isn’t receiving rent, so has trouble paying the lender; the lender looks at each situation and needs to assess its best path forward. Everything is related; it’s a “trickle-up and trickle-down” situation, with each group impacted.

We help our clients by listening to them, providing wise counsel and keeping them aware of any pertinent changes to the law. We make sure to introduce them to other clients and contacts of ours with the hope that we can be helpful in solving any challenges.

BL: What trends are you seeing, including subleasing? What impact are they having on the market?

BS: When it comes to larger trends in real estate, we are seeing almost a “tale of two cities.”

On the one end of the market, investors and developers are looking for new deals and are bullish on recovery in both established urban centers and newer U.S. markets. Meanwhile, the other side is focusing on distressed deals, workouts and restructurings—sometimes of their own assets.

This dichotomy is so apparent that we are even seeing these two different strategies playing out at the same company, where one division is investing and leveraging opportunities with distressed assets, while another is looking for opportunities to deploy capital and continue to execute existing growth strategies.

Regarding leasing and subleasing specifically, there is a lot of space on the market, and it is creating some challenges. Until there is higher occupancy in these buildings, the subleasing market will remain strong and offer tenants lots of options for high-quality space. Hopefully, we’ll begin to move to higher occupancy and take some of the pressure off the primary leasing market sooner rather than later.

As a result of the pandemic, we’ve also seen a move to more percentage rent, where the landlord takes a percentage of the gross revenue the business brings in. It’s an attractive model for both tenants and landlords—the tenant has nothing to lose and the landlord is able to keep their tenant. Percentage rent isn’t a new concept, but it works for both parties especially in challenging times for retail.

Belinda Schwartz

Photo courtesy of Herrick

BL: What’s the biggest challenge to attract and retain clients?

BS: The biggest challenge for us is not being able to see our clients and collaborate in person.

In May of 2020, our 60-person department began having weekly meetings over video. These started first as a way to stay connected, and as the weeks went on, we shifted the focus to learn more about the impact of the pandemic on CRE from a legal and business perspective.

We have continued these meetings into 2021, inviting current and prospective clients, as well as referral sources, to attend and speak. We come together to hear from different industries, create connections, and hopefully get new work—all while also learning more about our clients and friends.

BL: What’s your best war story from your legal career?

BS: When I began my career, I found it challenging to find my first job, even though I was a very capable young lawyer. One interviewer at a major law firm asked me why I deserved the job over a male candidate, who had to provide for his family. I told him I didn’t. I got up and walked out of the office.

Times have changed, and hopefully will further evolve for the better, but sometimes I’m still asked to bring a client a cup of coffee during a meeting—but I really don’t mind doing that!

BL: Does the firm have specific diversity targets, is the firm meeting those targets and what does it still need to do to improve diversity?

BS: Herrick strives to promote diverse leaders—and we are proud to have women leading our real estate, employment, litigation, family office, and international practice groups. We are focused on recruiting diverse talent at all attorney and staff levels. To achieve these goals, firm leadership has been implementing initiatives to mandate training on implicit bias, sponsor and mentor diverse junior attorneys, and enhance Herrick’s culture of belonging and inclusion even when we are remote.

It’s important to develop opportunities for women in commercial real estate, specifically, and while things continue to advance, there are more limited opportunities to flip business and become a rainmaker. Women still need more of the “everyday” type of connections, where the opportunity to generate business is routine and typical.

BL: I’m a new associate, fresh out of law school, what should I do to stand out and advance my career in the best way possible?

BS: Don’t take too long to think of yourself as someone who develops business. Be willing to embrace the possibility that it takes time to build relationships and you will likely have a number of “no’s” before you get to “yes.” And it doesn’t hurt to have a sense of humor either!