Building the future

real_estate-Nov16,ph01
Building the future
November 2016
By Paul Dailing
Editor

When Oak Brook-based real estate lawyer Viki Katris started getting more and more questions about transactional work, she decided her estate planning and property tax reduction practice could be bolstered.

“I realized people were contacting me for closings, so I thought, ‘Oh, I should get into that,’” she said.

But Katris, who got her law license in 2014, wasn’t at a large firm with senior partners to help her professional development. Instead she turned to her personal network of mentors — one who shared an office with her, one she knew through a friend of hers from church.

With the older attorneys’ aid and advice, the Law Offices of Vasiliki Katris has since done 75 closings and expanded with an office in Chicago.

“Honestly, a lot of attorneys aren’t willing to help, especially when they’re in the same market with you. It was like a breath of fresh air,” said the 30-year-old sole practitioner.

In the years since the real estate crash of 2007, young real estate lawyers like Katris have had to build careers in a changing marketplace.

While some of the downtown firms maintained the deep real estate benches more common before the crash, Eric Greenfield, vice chair of Polsinelli’s national real estate practice group now sees other firms running smaller operations, keeping a smaller team on staff and farming out work as needed to project lawyers.

And all the firms are dealing with the decreased flow of new lawyers — both across the board and in real estate in particular.

Minding the gap

When the real estate crash of 2007 hit, Greenfield was four years out of law school. It was that critical point of a young lawyer’s career where he or she is building a practice and a reputation.

But with the crash, firms that had invested in a deep real estate bench were reshuffling, cutting or just not adding to the roster. It was an unprecedented environment for young real estate lawyers.

“You had shareholders who trained my generation who went their entire careers without a downturn. We saw that right away,” Greenfield said.

Larger firms didn’t have enough work for their real estate associates, moving some of Greenfield’s peers to bankruptcy work, he said. Other firms gave their real estate lawyers more general corporate work, giving them larger skill sets down the road.

“Those are the associates and partners who made it through the downturn,” he said.

By 2008, large firms were laying off associates or deferring promised hires of recent grads, said Skokie-based real estate attorney Erica Crohn Minchella, chair of the Illinois State Bar Association’s Real Estate Law Section.

The connections young attorneys forged that serve them their entire careers simply weren’t being made, she said.

“In order to get a solid real estate practice, you have to have some solid contacts in the real estate industry to get referrals,” Minchella said.

After the recession subsided, there was a gap in the practice, Greenfield said. Many of the real estate practitioners of his age either found happy homes in other areas of law or found it difficult to find positions in the practice. They hadn’t worked in real estate in five or six years.

This gap has effects beyond that generation, Minchella said. In a practice built on conventional wisdom and referrals, young practitioners just don’t have the generation ahead to help them up.

“How do you start a practice without conventional wisdom when there’s no one there to mentor you?” she said.

Fewer lawyers overall

“I don’t think there are fewer real estate lawyers,” said real estate attorney Jimmy Sarnoff of Sarnoff & Baccash. “There are just fewer lawyers in general.”

Sarnoff, secretary of the National Association of Property Tax Attorneys, joined his father’s real estate practice full time while the real estate market was still in a lull. His wife just had their first child, and he was seeking a better work/life balance than his job as a sports agent offered.

He said he and his father’s work in property tax law wasn’t hit by the crash. Developers might not build during a downturn, but they’ll always want to lower their real estate tax bill.

Greenfield also sees the slowdown in young real estate attorneys as part of a trend, but not one limited to real estate.

When Greenfield was a summer associate, there were about 25 to 30 people in his class, he said. About half of them wanted careers in real estate law.

“Today, you don’t see classes that big in general, but also with that big an interest in real estate,” he said.

Part of that decline in new lawyers is a decline in bar exam passage rates. Illinois’ rate dropped for the third consecutive year in 2016, down to 72 percent, numbers from the Illinois Board of Admissions to the Bar show.

The passage rates varied between schools. While 97 percent of University of Chicago Law School students passed the bar, only 53 percent of Southern Illinois University School of Law students made the cut.

Although part of that decline may have to do with Illinois raising the passing score by a few points last year, it mirrors a national trend. The nation’s 76 percent passage rate in 2008 was down to 63 percent by 2015.

Faced with dropping passage rates and rising tuition, students aren’t enrolling in law school.

After a record-setting 52,488 new law students in 2010, the first-year student enrollment started dropping, according to American Bar Association figures.

By 2014, 1L enrollment at the 204 ABA-approved law schools was at its lowest since 1973. It should be noted, however, there were only 151 ABA-approved law schools in 1973.

Last year’s 1L enrollment of 37,058 students was even lower.

Minchella doesn’t blame students for not flocking to law as jobs vanished and student loans didn’t.

“Law schools were selling kids on the idea that there would be these great salaries and opportunities and positions if they just plunked down their $100,000 in tuition,” she said.

The future bar

In terms of the current crop of law students — the ones who were in high school when the housing market crashed — there’s not much indication either way whether they’ll seek careers in real estate.

“I would say historically, as well as currently, about 50 percent of our students are interested in the transactional practices,” said David Diamond, assistant dean, Center for Career Strategy and Advancement at Northwestern Pritzker School of Law.

Northwestern doesn’t break out subcategories in their records, meaning there’s no way to tell how much of that 50 percent is headed to real estate versus other transactional practices like private equity or M&A, Diamond said.

Similarly, DePaul University College of Law data going back to 2011 lists business law as the top specialization among applicants, admits and students, but doesn’t say how many want to someday walk into a building their deals helped create.

Loyola University Chicago School of Law and The John Marshall Law School do not collect records that particularly relate to real estate.

But even if a student has his or her heart set on a career in real estate law, that doesn’t mean it will happen, Diamond said.

“To some extent, the tail wags the dog. One question is if students are interested in it, the other part is if there are opportunities in that field,” he said.

There’s a hunger in the practice for new, young talent, said Tony Licata, partner-in-charge of Taft Stettinius & Hollister’s Chicago office. Thanks to that declining law school enrollment, there aren’t always enough recent grads to hire and cultivate, leading to increased wooing of the other firm’s team.

“What tends to happen is we start robbing each other,” Licata said.

But with the traditional job pathways gone and firms readjusting how they find and maintain new talent, Minchella said the need for one-on-one mentorship is as pressing as it has ever been.

“My personal opinion is that once an attorney has reached a point where they’re confident in their career, they have an obligation to mentor younger attorneys,” Minchella said. “For the good of the profession, we should not let younger attorneys fail.”