Eric Stern, the longtime real estate chair at Morgan Lewis & Bockius, has joined Tactix Real Estate Advisors and will team up with several former law firm partners there to represent tenants in lease negotiations.
Stern retired from Morgan Lewis last September when he reached its mandatory retirement age of 65 after 24 years with the firm. Between 2005 and 2021, he served as head or co-head of the firm’s real estate practice. He still serves as counsel to Morgan Lewis but said that is only in the capacity of consulting on the firm’s headquarters relocation to 2222 Market Street, for which he negotiated the lease agreement with Parkway Corp.
Stern had been practicing law since 1981, starting at Cohen Shapiro Polisher Shiekman & Cohen and Pepper Hamilton before joining Morgan Lewis in 1998. When contemplating what was next for him, Stern knew he wanted to do something different but continue to use the skills and experience he obtained over the years.
Tactix Principal Glenn Blumenfeld made a similar move in 2003 from Dechert, where he also chaired that firm’s real estate equity group. The two men had known each other for years.
“I thought that affiliating with Tactix would give me an opportunity to leverage what I had learned about deal making,” Stern said. “I’m not practicing law in that position. I’m a business advisor, and it’s a way to keep a foot in the game but to do it on terms that really work for me at this stage of my life.”
Stern said he will consult with Tactix and its clients on developing deal terms and reviewing and commenting on lease transaction documents.
Blumenfeld said he has known Stern for three decades, largely from opposite sides of a negotiating table for their respective clients. But the two became friends, especially after Blumenfeld left Dechert and was no longer a competitor. The two have had mutual clients, with Stern as the lawyer and Blumenfeld as the broker, and other situations where one represented a tenant and the other a landlord.
As he was winding down his career at Morgan Lewis, Stern remarked on his friend’s transition from Dechert to Tactix, Blumenfeld said.
“And I said to him, you have all this knowledge about real estate, you know more about negotiating leases than 99% of the brokers out there. Why don’t you do what I did? And you also have a great Rolodex and a lot of people respect you, given that you’ve been so active for the last 40 years.”
Blumenfeld said Stern wanted to decompress and enjoy retirement for about six months or so. And the work Stern will be doing — preparing documents and negotiating terms as opposed to space tours — can be completed remotely, which is important because he has homes in Colorado and Florida in addition to the Philadelphia area.
Stern said the fact that Tactix has several lawyers among its 20 employees makes it unique for a brokerage.
“It equips those people with the ability to look at transactions with the experience of having negotiated as a lawyer,” Stern said. “The other thing that makes them qualitatively different from other brokerages is that they only represent tenants, or if they’re representing a buyer, they only represent the party that’s using the property. They don’t represent owners. And as a result of that, they don’t have the conflicts that many of the brokerage firms are presented with.”
Tactix was formed in 1998 by Sal Ambrosio and Judson Wambold, a former Dechert partner. When Blumenfeld joined in 2003, the firm had six employees. Wambold, Blumenfeld, Doug Simon and Ryan Conner are now its four partners but the firm has 20 total people. The other former law firm partners at Tactix are Martin Bond (Montgomery McCracken Walker & Rhoads) and Gary Iozoff (Askot Weiner & Cohen). Simon was an associate at Montgomery McCracken.
Tactix is located at Two Logan Square but also works out of co-working space in Radnor and Wilmington. Blumenfeld declined to provide a revenue figure for Tactix but said that 2022 was actually higher that pre-pandemic numbers and 2023 is pacing at a similar level.
Like everyone else in the real estate world, Stern has watched the storm clouds gather around the city’s office towers as vacancies have swelled post-pandemic with tenants taking much less space due to hybrid working arrangements. Though some employers are increasing the number of days they require employees to work from the office, Stern said he does not see work arrangements ever reverting back to five days a week in the office.
“As more senior people step away and the more junior people move up to the mid ranks of organizations, I think their expectations in terms of how they want to live their lives and develop their own careers will look different than it was for me or someone from Glenn’s generation,” Stern said. “But I’d be lying if I told you I knew what was going to happen.”
Stern said there appears to be an insatiable appetite in Philadelphia for apartments, and that could lead some troubled office towers to undertake conversions to residential — including Morgan Lewis’ current home at 1701 Market, after the law firm moves to its new headquarters later this year.
For Tactix and the brokerage industry in general, he said all this means there are going to be assignments to represent tenants in negotiating with landlords either to reduce the size of their footprint or to bake more optionality into the lease than they would have thought to negotiate pre-pandemic.
“I think we’re in for a rough period because I think the lending environment is exceptionally tough and in every building you have leases rolling kind off all the time and lenders are going to certainly have a harder job underwriting the income of various properties based upon who’s in it and what the expectations are,” Stern said. “And I think that the people that own these buildings are going to have to figure out how to sustain them as viable real estate properties.”
Blumenfeld said tenants are playing the reverse of musical chairs now and “no one wants to be stuck with the vacancy when the music stops playing.” He said when there is an excess supply of office space like there is right now, there is a flight to the city’s top office towers — leaving other towers such as the Wanamaker Building and Center Square with more vacancies.
“I think we have too many office buildings and some of them are going to have to go away and there are others that in order to attract tenants, they’re going to have to reduce their rents,” Blumenfeld said. “But for that to happen, the lenders are going to have to adjust the debt on the property.”
Full article can be found on The Philadelphia Business Journal