Even the mighty and successful make mistakes — and theirs can be larger than most. Those mistakes require a very specialized type of help.
Just shy of 36 years old, attorney Leo Jacobs, CEO and founder of Jacobs P.C., is building a firm on helping those who have dreamt, executed on their dreams and lost big find a way forward based on empathy, tough negotiations with lenders (and sometimes his clients), a wartime-like focus on decision-making and an expert knowledge of New York bankruptcy and commercial litigation law. His goal — to give them a second chance in their bet-the-real-estate asset litigation.
“When someone is down and out, it’s important to lift them up and keep them there,” he said. “There are many attorneys who focus on the lender side. I focus on the individual, the debtor, the borrower, the over-extended lender.”
Bankruptcies with high-net-worth individuals and major companies aren’t the same as smaller companies. Jacobs’ clients include Joe Chetrit, Michael Stern, Jacob Frydman and Toby Moskowitz, to name a few who’ve built the skyline of New York City. Helping them think strategically has helped Jacobs rapidly expand his practice since launching Jacobs P.C. in 2020.
“I’ve grown my firm exponentially in a very short amount of time, focusing on two practice areas: bankruptcy reorganization and commercial litigation,” he said. “I’ve done well ever since.”
He knows something about taking risks. The son of Bukhari Jews who emigrated from Uzbekistan when he was a toddler, Jacobs saw his father become an entrepreneur while his mother was a nurse. An early interest in medical school turned into an interest in law. Earning his J.D., he served as an associate attorney at a preeminent Wall Street firm.
He later became general counsel at New York Equity Management LLC, a privately held real estate investment company that focused on real estate litigation finance investments (acquisition, construction, development, management, leasing and sale) and held a portfolio of distressed and other commercial and residential properties. His role at NYEM straddled legal and business issues, from advising management on commercial matters, litigation, real estate and compliance to spearheading efforts that increased the value of the firm’s properties upon sale.
Quite quickly he saw that there was a burgeoning business in resolving real estate assets in bankruptcies that were in distress and founded Jacobs P.C. Essentially, his practice is based on finding an answer between two conflicting forces — the lenders who want to be paid, and the debtors who simply can’t pay it in this new environment. Figuring out the answer is the raison d’etre of Jacobs P.C. — helping the risk-takers work through their high-flying real estate legal issues so they can survive to build again. It isn’t always easy as builders fight their own visions and nature to accept the need for change in an environment they are not accustomed to.
“There are lawyers for the debtor and lawyers for the lender,” Jacobs said. “The lawyers for the lender are acting on documentation that was created before the pandemic, before interest rate rises, before the actual value of the development has materialized. The debtors are dealing with the post-facto world that does not mirror the terms to which they agreed.”
Jacobs strives to find the path between the two, balancing responsible professional development of these real estate developers and the treatment of their multiple asset classes. In the post-pandemic world, that isn’t so easy, as interest rates have doubled to refinance failing as- sets, leaving owners unable to pay the new sums.
“Attorneys have to come up a way to accomplish three goals: staying in line with the objectives of their clients, staying in line with the mar- ket, and staying in line with the objectives of their adversaries,” he said. “This is very tough to do.”
Sometimes, money isn’t the prime motivation. For some owners, it’s about a family legacy. For others, it’s all about the deal, and for yet another group, it’s about a flashy lifestyle.
“I understand the motivations of my clients,” said Jacobs, a self-described big personality. “It’s always personal. They have their have pride, ego. It’s not only about the numbers.”
To resolve this, however, numbers are critical. To determine the current value of a property, attorneys not only need to know the law, they must engage accountants, advisors, consultants, forensics, brokers and even professors to work with the other side to extract the real value of to- day’s asset in the market, he observed.
For Jacobs, it also entails assessing his counterparts, whom he refers to as “adversaries” on the other side of the table.
“Adversaries sometimes listen to their clients too much, and sometimes they don’t listen to them at all,” he said.
Both are problematic. Those who solely listen to the clients become stubborn, resulting in vexious litigation. Those who don’t listen at all rarely find the practical answer.
“A good adversary is an adversary that works with you, not against you,” he said.
New York real estate is in for a challenging time, he said. Interest rates have doubled from the pre-COVID-19 era when many deals were struck. The result is that property prices have decreased dramatically solely because of the selling power, not because of the intrinsic value of the asset.
For example, Jacobs P.C.’s client Michael Stern of JDS Development has defaulted on the Brooklyn Tower, the tallest building in the borough. At press time, the company was to be sold to Silverstein Properties on June 10. The problem that still must be negotiated after the sale, if there is one? The tax bill. The forgiveness of Stern’s debt incurs a tax liability of hundreds of millions on an asset he no longer owns, if sold.
The federal government has proposed a Housing Resolution attempting to combat what amounts to legislation that will forgive “phantom gains”, but the bill has not yet passed the House or the Senate.
“What does it say about the government if the government too is going to become a creditor of its own people?” he asked. “They must come up with a way for a creditor and the borrower to be forgiven.”
Ironically, that can help create even more success.
“Government wants to invest in the future of their skyline in a way that’s productive,” Jacobs observed. “If the government fails to constructively and responsibly make phantom gains disappear, development may come to a screeching halt and the developers will implode from the government’s tax bill alone. It becomes the government’s own cannibalizing of the New York real estate market.
To do that, you need someone who understands how the current crisis has come about. The situation has come in three phases, Jacobs related. The first was the pre-pandemic era when financing was flowing and affordable, and no one saw a storm on the horizon. In the second phase, during the pandemic, the storm was clearly visible. Now, in the last phase, the storm is here and hurting those who took the risks in Phase One.
“In the second phase, you don’t know what to do — you’re basically anxiety driven,” Jacobs said. “Then, depression forms because you knew what was coming, and it didn’t work out. We’re seeing levels of high to extreme anxiety to enormous amounts of depression.”
What’s required, he continued, is a wartime general — or a wartime Prime Minister like Winston Churchill, willing to make tough decisions regardless of politics and guide those decisions in a tempered but emphatic way.
“That’s who I am to my borrowers and debtors — a wartime general,” he said.
Yet he’s also the person who offers counseling at the lowest points of his clients’ lives — it’s tough after years or decades of success to face massive failure or seemingly immeasurable challenges. With his first degree in cognitive psychology (with honors) from Queens College, Jacobs has a knack for listening and empathizing with his anxious and depressed clients.
Dealing with the stress of others can be stressful. Jacobs relies on the love of his wife, two children, his Bukharian community and Jewish faith to keep him grounded and able to support his clients.
“I pray, I eat well and try to exercise, but that’s peripheral,” Jacobs said. “What you need is a vision for your clients, a vision of your clients crossing that bridge. You must be goal oriented, not for yourself, but for them, because their axis is at times broken.”
The result is that his firm has moved from a 1,000-square-foot WeWork to by January 2025 a nearly 12,000-square-foot office space on Billionaire’s Row located on Park Avenue, where he can see the buildings owned by several of his clients. Jacobs foresees his firm growing to about 100 lawyers in the next five years.
“Billionaires and millionaires don’t rely on their lawyers when times are good because when times are good the business informs the law,” he said. “In tough times, the law informs the buisness. The tough times are here, and this is the time to bring about the most impactful decisions of my clients that affect my clients’ futures.
“I endeavor to be that collaborative wartime decision-maker for my clients,” he said. “Not every attorney is baked out to be that way. Thank hashem, I have been so.”
