Weekend Interview: Real Estate Attorneys Tyng Patka And Danielle Ash On ESG And Their Impact Practice

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Adler & Stachenfeld, a New York-based law firm that prides itself on its exclusive focus on real estate, launched an impact practice to provide counsel to developers, investors and nonprofits on mission-driven and environmental, social and corporate governance-guided investments and projects.

Heading up the practice are two Adler & Stachenfeld partners and close friends: Danielle Ash and YuhTyng “Tyng” Patka.

Ash is a partner in the firm’s real estate group, as well as a member of various specialty practice groups, including ground leasing, opportunity zones, fund formations and real estate finance. Patka is the chair of the firm's NYC real estate tax and incentives practice group and co-chair of the firm's NYC Climate Mobilization Act task force and Property Assessed Clean Energy financing practice, which often counsels nonprofits on property tax exemptions.

They say the time is right for the new practice. Though impact investing isn't new, there is a heightened effort by CRE, including real estate investment trusts, private equity firms, pension funds and lenders, to seek measurable ESG impacts while achieving their targeted returns.

The interview has been edited for length and clarity.

Bisnow: Tell me each a little bit about yourself and how you got to this point in your career.

Patka: I represent city real estate developers on property tax and zoning incentives, along with additional New York City-focused practice areas. First, I did property taxes on Long Island, and then I moved over to New York City and represented owners and developers on property tax matters. Four years ago, I decided to join Adler & Stachenfeld to create a new practice group of New York City real estate tax and incentives.

Danielle, who is a dear friend of mine, is the main reason why I chose to join Adler & Stachenfeld. She'll tell you how the impact practice has always been our passion. Because she and I are good friends, it was a natural evolution to work together in creating the impact practice.

Ash: I've lived on the Upper West Side pretty much my entire life — always on the 1 train, even when in college and law school, 1 train for the entire time. So I've been surrounded by New York City real estate my entire life. When I was in college, I was actually an urban studies major. So I'm a weirdo New Yorker who majored in New York City, basically, as my college degree.

I worked at city planning for a little bit and at a couple of affordable housing developers as well. I knew from that beginning stage that real estate and urban planning or development were really important to me. I chose to move to Adler & Stachenfeld because it was a place that all they wanted to do is real estate. We are the pure play in real estate law. It was a place that I could see an opportunity for me to grow as a practitioner, try out new things and be a bit more entrepreneurial.

I met Tyng actually when we were on a deal together, the first client I brought in as an associate. She was specialty counsel on the deal. We just immediately hit it off. We just kept talking and really built a relationship out of that.

Bisnow: Why start this impact practice now?

Patka: I represent affordable housing developers, and so for the most part, my client base has always been very mindful of the S in ESG and more so the E now that PACE financing has entered New York City.

Even before we officially launched our practice, Danielle and I were already informally executing the practice, where my developer clients were seeking capital and her contacts were looking to invest in the impact space. So there was a lot of natural connections and synergies occurring on an organic basis.

Ash: In the last four or five years, and largely as a result of the pandemic, there's been a real uptick in interest among real estate professionals in the ESG and impact spaces. I think just in the last four years, it's gone from a $20B industry to a $1.1T industry. And it's something I've been interested in for a long time.

Now I interface with affordable housing groups in a variety of contexts. I've noticed that a lot of our existing client base, which has a lot of large institutions, high net worth individuals, REITs, all of the big players in real estate of every type, have been asking about affordable housing. They've been saying, "You know, office isn't necessarily what I want to look at right now. What about affordable housing?"

Patka: In comparison to my prior work environments, Adler & Stachenfeld has a lot of women in leadership, including our managing partner, at the very top of our firm. Having all these women in leadership, myself included, has put me in what I recognize now to be a prominent role when it comes to female representation in an industry that is otherwise white male-dominated. That the firm is so nurturing of the mission and goals that Danielle and I are trying to achieve has made me more passionate about the space.

Bisnow: What do you believe an impact practice should be?

Ash: I would just note that one of the things I love about this moment is that you no longer have to really explain the important synergies between ESG and impact investing. Previously, an impact investor was a mission-oriented investor. Someone who's investing solely in [Low-Income Housing Tax Credits], for example, is an obvious mission player. Then you had people who were looking at [diversity, equity and inclusion] efforts at a company or had some interest in racial and equity goals. They were kind of disparate.

There's been much more of a focus in the last couple of years of trying to make a holistic ESG policy in companies and the impact investing piece of it for fundraising companies like we represent. It's a piece of the puzzle of re-evaluating what kind of corporate citizens we can be.

Bisnow: You talk a lot to your clients, you hear them, you know their concerns. What are you hearing from them about how and why they want to meet their impact goals? What's on their mind in this regard?

Patka: Clients are becoming increasingly interested in green financing, commonly C-PACE financing, given the choppy capital markets. They are looking for alternative forms of financing, and C-PACE is still somewhat new, somewhat unfamiliar to many players in the market. The other concern is housing, housing, housing. My clients want to provide all of the housing, but there's so many market forces that are working against them right now, and our impact practice is trying to help them navigate through these choppy waters.

When it comes to housing in New York City right now, unfortunately, there is no silver bullet because of the expiration of an important tax exemption used by multifamily developers called 421-a. The state legislature let 421-a lapse without a new program to replace it, and that has frozen multifamily new construction in New York City. Without the exemption, land prices are so expensive that multifamily projects don't pencil. With existing products in the ground and a lot of lenders retreating, we're trying to introduce C-PACE into the capital stack. Historically, C-PACE wasn't welcomed by most traditional lenders, but we're seeing it become a more acceptable alternative.

Ash: Just in the last couple of weeks, I've heard from a lot of those traditional players — typical fund managers looking at real estate in value-add, core or core-plus metrics. They're looking outside. Things aren't fitting exactly into those metrics anymore. LIHTC has recently been outperforming a lot of other multifamily spaces. So just from an economic standpoint, a lot of those players like affordable housing and other things that have a little bit more risk and hair from an ESG standpoint.

Fee-based affordable housing developers, many for-profits as well as nonprofits, are finding real difficulty in the market right now in finding capital sources, and not just capital sources in the sense of debt and equity for a particular project but also because they're growing so much. There's so much demand for what they do, and they don't have the overhead support.

Huge players — TPG, Nuveen, Blackstone — are making these major announcements about new sustainable practices. RXR has a major impact fund now. There's a lot of those big players out there, and so the midmarket sort of groups as well are very much interested in positioning themselves to get access to that capital and learn how to achieve the goals that are going to be demanded of them by their investors.

Bisnow: This is a big picture question about the industry. Awareness of impact investing and ESG has obviously grown, and continues to, but in what ways will the industry actually follow through?

Patka: It's hard to say, to make a bold prediction about the entire industry, because even if you're just talking about diversity, 85% of senior level managers at real estate companies are white males. That said, there's a tremendous effort right now in a lot of different spaces, from the ground up, with the focus early on in education, and more access to opportunity for people of color and for women in the industry generally. All of that will have a tremendous impact. On the flip side of that, from the investor side, there's going to be a lot more flexibility in how capital is deployed in real estate. A lot of that will be driven by ESG principles.

Ash: I feel optimism for the industry. I think our practice within our firm is a perfect example. Our law firm and our practice are not anomalies. We've always been known as forward thinking, and the fact that we have formalized the impact practice that we otherwise had been practicing for last several years is a testament to a growing trend in our industry, of what the industry wants and needs.

Bisnow: This is the Weekend Interview. What do you like to do on the weekends?

Ash: I try to spend as much time as I can with my daughter and friends. We love the Natural History Museum and the Bronx Zoo and always love a drive out to a brewery or new neighborhood. My favorite summer activity is heading out to the Queens Night Market.

Patka: I recently took up golfing, so my husband and I have been spending Friday evenings golfing with various other couples who also golf, and we plan to regularly do so through the rest of the summer. On weekends I like to take advantage of the beauty and privilege of living in Saratoga Springs with my kids, so my family and I go hiking, biking, fruit and vegetable picking at nearby farms, have ice cream for dinner from one of several local freshly made ice cream stands that upstate New York is known for. Our kids love that activity.

CORRECTION JULY 5, 5:00 P.M. ET: A previous version of this story stated that Angelo Gordon has an impact fund. It does not, and the reference has been removed.