The housing market is not necessarily a bad one for landlords—unless you’re a landlord in New York City, where regulations and the legal system make it a headache and a drain on your pocketbook. The fact that interest rates are still high doesn’t help, either.
New York landlords, particularly those of multifamily buildings, are suffering. Many of them can’t pay their bills, and they are faced with the painful choice of restructuring their debt or even going into bankruptcy. It has been a bad situation for a while, and it’s steadily getting worse.
That’s why an interview with Ephraim Diamond is very timely. A legal expert in many aspects of debt restructuring and bankruptcy, he has also taken charge of a number of firms’ finances and helped them through a restructuring process, so he understands the concept at all levels. Here, he explains it to us.
Enjoy!
I grew up in Flatbush. My grandfather’s brother was the famous Dr. Diamond, who delivered half of the babies born in Williamsburg and Brooklyn back in the day. My grandfather went to Torah Vodaas, my father went to Torah Vodaas, and I went to Torah Vodaas.
“I went to Yeshiva Torah Vodaas high school as well, and then to Yeshiva Kol Torah in Eretz Yisrael, where I was zocheh to see, but not learn from, Rav Shlomo Zalman Auerbach, zt”l. He only came to yeshivah once a week at that time. I had the opportunity to learn with other great roshei yeshivah, though.
“After that I went back to Torah Vodaas, and I also attended Touro College, getting a degree in finance. After graduating, I was accepted into NYU’s law school, but I deferred starting there for a year to pursue smichah, which I ultimately received from Rav Pam, zt”l, while I was in law school. During that year, I also got married to my wife, Simi. I got summer jobs as a legal intern, but my first full-time professional position was at the famous New York law firm Paul Weiss Rifkin. I spent a year in their corporate group and then switched to their bankruptcy group, which I’d fallen in love with. I spent about six and a half years in total at Paul Weiss.
“That’s where I learned about bankruptcy, both from the perspective of the debtor—that is, the company—as well as from that of the creditor. I often represented debtors, but I also did a lot of work with creditors that helped me understand what it was that investors were looking for.
“Bankruptcy as a practice is wide-ranging. When you represent a company, you advise them in every aspect of their business: one day, it’s litigation; the next, it’s corporate financing work; the day after that, it’s tax work; and the day after that, it’s employee or regulatory work. You end up knowing a lot about a lot of different areas. You don’t become the expert, but you become the prism through which these issues have to be focused. You become what I would call ‘a real adviser.’ That’s on the debtor side.
“On the creditor side, I learned to read the documents carefully. It’s kind of like, l’havdil, when you read a gemara or a Rishon, and you’re trying to be madayek, very exact. Most of my clients were hedge funds and bondholders, who are sophisticated in their own right, and they spend a lot of time parsing the words for every possible meaning so they can understand their rights. As their adviser, you start to develop theories with them and for them so that you can protect or enhance those rights as you see fit.
“And of course, there’s always the litigation aspect. I liked the idea of not being buttonholed—of being able to do many different things within the practice of law.
“Around the early summer of 2007, a hedge fund reached out. They were looking for somebody with a background in bankruptcy and restructuring to join their investment team. I had an interview with them scheduled for the ‘summer outing.’ I don’t know if it’s still done, but at the time law firms would hold what was called the ‘summer outing,’ when they would take the entire staff out to a country club to play tennis or golf or have a meal. I figured it was a perfect day to interview because everyone would be out of the office.
Then at 8:30 that morning, as I was on my way into the city, all dressed in a suit and tie (because back then you dressed nicely for an interview; I planned to change for the outing afterward), I got a call from the senior partner in my group saying, ‘Ephraim, we have an emergency’—one of his clients, who had a big hedge fund, asked him to come in and do the analysis on a question on a credit document for them, and he wanted to send me.
“I’m thinking to myself, That’s fine, but how am I going to explain coming in a suit? I probably said I was coming from a bris or something like that, in order to save myself.
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