By Andrew McIntyre

Law360 (March 19, 2021, 5:38 PM EDT ) Transactional activity in the New York affordable and middle-market residential sectors has remained strong during the COVID-19 pandemic, while regulators have been aggressively enforcing government pandemic-related orders, one of Nixon Peabody's real estate leaders recently told Law360.

Erica Buckley, a partner at Nixon Peabody LLP and leader of the firm's co-op and condominium practice, said she's seen ample investment interest in the affordable housing and middle-market spaces and less interest in the high-priced luxury residential market, and has also seen investors looking to upstate markets.

Meanwhile, on the regulatory side, Nixon Peabody recently set up a state attorneys general practice group in response to regulators ramping up enforcement of pandemic orders. Buckley is co-leading that group.

This is the fourth in a five-part series of interviews with female real estate leaders during Women's History Month and a year into the COVID-19 pandemic.

This interview has been edited for length and clarity.

We're about a year into the pandemic now in terms of when the World Health Organization declared COVID-19 a global pandemic. How would you describe where we are right now in the real estate cycle?

I think, believe it or not, the real estate markets are continuing to show resiliency, and we're very busy, very active, even if a lot of what's going on is the marketplace trying to make corrections and trying just to figure out what's next. But overall, everything is very busy. ... Of course, there are the pros and cons of working from home. Sometimes it's noisier than you want.

I know that you specialize in condo and co-op work. What are you seeing right now in the condo and co-op markets?

At the beginning of the pandemic, everything was really touch-and-go. I think the for-sale market was really impacted by some of the early executive orders. Developers weren't able to show properties. So there was definitely a period of time where everything seemed like it was on pause ... and it was almost unclear whether or not projects were going to resume. I would say as soon as the real estate market opened up and showings were able to resume, a lot of our clients' projects, especially middle-market projects and affordable projects, resumed a high level of activity. So what we have seen overall is that ... the middle market and the affordable for-sale market [have been] very active. The luxury market is definitely cooler. I'm still seeing some struggle in the luxury market. ... Again, it kind of comes in fits and starts there. It's not like it's completely dead. There is activity, but it's strongest in the middle-market and affordable [areas].

Why do you think that we've seen more activity in the middle-market and affordable spaces and less in the luxury spaces?

Let's take the middle market, for example. I think that you have a lot of millennial buyers, first-time homebuyers, that are seeing an open opportunity to purchase in New York City. I think they have a lot of optimism about New York City. They think that what the city is dealing with right now is temporary. They see themselves remaining in the city, and they think it's basically their time to become homeowners. The same thing in the affordable housing space — we're talking about sometimes people who have been on various waiting lists for years on end. If they finally are given an opportunity to purchase an affordable apartment, it's just not something that they are under any circumstances willing to pass up, or at least that's not what we're seeing.

I wanted to ask you about the financing piece of this. What's your sense of the financing markets right now? [In terms of] access to capital, whether it be bank lenders or nonbank lenders. Maybe we'll talk about it in terms of these middle-market and affordable projects.

With the middle market, it seems like access to capital is still very strong, and we just represented a sponsor in a new construction project in Brooklyn. They were able to go into contract and close on almost all of the units within a couple months' span ... [with] financing from conventional banks, and there weren't any issues. So we were quite pleased with that. I will say in the affordable housing space, those deals are trickier. And COVID has made it even a little bit more strained. For whatever reason, it seemed like a lot of the conventional lenders were struggling with providing financing on these heavily restricted deals, and COVID seemed to make it even more difficult. That's something that, again, we're keeping a close eye on. We do see these deals happen, it's just that some of the lenders are pulling out, [lenders] who would previously almost reluctantly lend. But that's something that I think, again, we've got to continue to keep a watch on. And then in the luxury end that's just a whole other space.

Last year, during the pandemic, you got an appointment on the New York State Bar Association. ... What was it like taking on that new role during the pandemic, and what sort of work did you do in that role?

It was very interesting. The co-op condo committee of the bar association is one of the committees under the Real Property Law section, it's the largest committee, and it has been historically for years. We have hundreds of members and it's an incredibly vibrant, active group, and they love meeting in person. It's funny, our meetings are incredibly animated and entertaining. It's an incredibly collegial group of attorneys. So I think that first and foremost, everyone has really missed meeting in person. We just held our first virtual [continuing legal education]. I have to say, it went incredibly well. We had about 150 attendees, which was a little less than what we normally get — we normally will get about 250 in person. But it's a resilient group. And I think we have a lot of issues to talk about. Again, one thing that's really interesting to note about the co-op condo market is that it's been an incredibly almost antiquated industry, from dealing with the attorney general's office that's been paper-driven for so long to dealing with in-person closings, nobody using electronic signatures. Overnight, all of that transformed. Now you're able to submit everything electronically to the AG's office. You make payments electronically, make submissions via cloud. We did on one transaction, 421 remote closings with electronic signatures and virtual notaries. So, I'm personally incredibly proud of how quickly our industry really rose to the occasion and essentially transformed itself. And I think ... those trends are going to stick. They're going to stay. I think the days of trekking to law offices to attend an in-person closing are probably in the past. And I think it's been good for our industry, too, and I think it's helped developers deal with this unprecedented pandemic.

It sounds like that deal with 421 remote closings is an example of an efficiency that's been achieved during the pandemic. Is that right?

Yeah, absolutely. ... Cutting-edge technology and just really stepping into the 21st century as they say. ... It wasn't just attorneys like those of us at Nixon doing closings. It was also the regulators. They did a great job, too. And we can talk a little bit about that as well, because the AG's office has remained very, very active.

Let's talk about the regulators and the AG's office. What are some of the key things that you've seen in the last year?

Notwithstanding the fact that we're all grappling with the pandemic and we're all working remotely, we have seen basically an unprecedented amount of enforcement activity coming out of state attorneys general. Not only the New York State Attorney General's Office but other state regulators as well, so much so that Nixon did just form a state attorneys general practice group, which I'm one of the team leads of. In New York in particular, the AG has ... remained incredibly aggressive in the enforcement space. And even starting at the beginning of the pandemic, my clients were receiving calls from the AG's office about potential violations of the executive orders regarding methods of rent collection, showing up apartments, you name it — they were really aggressively enforcing all of the pause mandates and the executive orders related to protections for tenants as well as continuing their enforcement work over developers and sponsors of condominiums. They've remained incredibly active. For example, we're handling some cases involving construction defect issues. Historically, the AG's office oftentimes would require site visits to buildings. They obviously aren't doing that, but that doesn't mean that they're not continuing to keep tabs on how negotiations are going. So it's been a very, very active year in the enforcement space — even though the AG isn't pulling people in to have face-to-face meetings, they're still very aggressive. We've been assisting a number of clients in that regard.

You mentioned construction defect issues. What are some other matters that you're handling for clients right now? What are some of the key questions that you're fielding from clients?

I would say that at the beginning of the pandemic, a lot of the issues involved compliance with the pause order and the various executive orders as they relate to real estate. That's something that continues to be ongoing to a certain degree, especially with the various eviction moratoriums. ... Obviously I'm not able to talk about detailed specifics, but the [AG's] office is keeping close tabs on making sure the sponsors are complying with the Martin Act [New York General Business Law Article 23-A] and other housing-related laws, whether it's 421a or the Multiple Dwelling Law. I would say that probably a lot of their work is very consumer complaint-driven, and they're not allowing the pandemic to slow down their enforcement activities, that's for sure.

Where do you see things heading over the next few months, in terms of the scope of work that you might be handling or what we may be seeing more generally in the real estate market?

I foresee it continuing to be very busy on enforcement matters before the New York Attorney General's Office. I think that, again, as I said, the middle market and affordable for-sale market is going to continue to be incredibly strong. We may see some repositioning, workouts, creative solutions for some of the other for-sale projects that may not be selling as quickly, whether it's a purchase by a successor sponsor or an investor. I would imagine we're going to see some repositioning of those assets. And then I think we're going to see a lot of creative pilots. So, for example, the governor's included commercial-to-residential conversions in the budget. I know that the crux of the conversation has been around affordable housing. I can't imagine that there won't be some for-sale element to that. That's kind of what I see on the horizon. ... Just looking at the political landscape in New York City, I do think that the pandemic has pushed some developers to look at opportunities outside of the city, in areas, for example, in upstate New York. We have an office in Albany and we're seeing a little bit more interest from some downstate developers doing business in upstate New York, which is very interesting. And I think because of the political winds that we've got going on right now, we're seeing an increased interest in public-private partnerships, for-profit developers working with not-for-profits — just trying to either include a not-for-profit in a project or create affordable housing, some element of social housing. And I think that trend is not going away anytime soon.

Has upstate New York seen an uptick in investment in part because maybe some people are looking for more space, given health concerns around the pandemic? Have you seen that play out in upstate New York?

Yes. We're seeing more and more interest in the upstate market. The Hudson Valley region is very active, and we're seeing increased interest in deals in the Hudson Valley region, but also the Capital District as well. And again, I think you're absolutely right that people are looking for more space, maybe some more affordable housing, close proximity to the city, while being able to enjoy some of the benefits of living outside of the city. ... I'm not saying every single New York City developer is seeing this as an opportunity, but some of them are. There are obviously some developers who were thinking about this before the pandemic. So we're aware of some investors that went into areas such as Albany, acquired historic buildings, did renovations, and now they have a waiting list of people that are interested in either buying or renting apartments. So whether this trend will continue remains to be seen, but we're obviously keeping close tabs on it.

--Editing by Alanna Weissman and Marygrace Murphy.

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