Debbie Kleban, Managing Partner, Applegate & Thorne-Thomsen, P.C.

In addition to overseeing the firm’s business operations, Kleban established and currently leads the New Markets Tax Credit (NMTC) team, which includes attorneys and paralegals whose sole or primary focus is representing borrowers, investors and lenders in connection with projects and businesses being financed utilizing NMTC allocations.

Outside of her work, she is a volunteer with Deborah’s Place, the largest provider of housing and supportive services for women in Chicago who are homeless or formerly homeless, contributing her time as a board president, volunteer and fundraiser.

Tax Credit Advisor sat down with Kleban to talk primarily about the leadership transition at Applegate & Thorne-Thomsen and the lessons she has learned from that experience.

Tax Credit Advisor: Congratulations on being made managing partner. Several NH&RA members have gone through similar leadership transitions over the past year, while others soon will be. I’d like to explore this in greater detail. How long did this process take?

Debbie Kleban: Truthfully, it seems like it took 23 years. Ben Applegate was our managing partner from our firm’s inception until now. When the firm was founded, we had five attorneys, one paralegal and two secretaries. I was involved on the business side, as all five of us were, from the beginning. We always had a partnership and a firm that was open, collaborative and supportive. What happens with a lot of law firms is there’s a void when somebody wants to transition out of leadership or retire. Since I was involved in business operations all along, the transition wasn’t that difficult. Formally, we started the process a few years ago. Ben was very open about wanting to move away from the role of managing partner. The Management Committee was very open about the state of the firm, the firm’s growth and what new leadership skills were needed to continue building on the firm’s success. During our 2020 partner’s retreat, I was elected as the next managing partner with Ben’s commitment to introduce me to the banking relationships, and other business relationships that he managed, for so many years, so that starting in January 2021, I could officially take the reins.

TCA: While some companies hire a consultant to assist them through a leadership transition, it sounds like everything was handled internally at your firm?

DK: It was completely internal. We have an incredible COO whose prior experience was as a law firm consultant. She was very involved in the process and provides continuity for the firm. This transition, in a lot of ways, will be easier than the next one. Since I have always been involved in the management decisions and processes, it was almost an organic and natural evolution. We’re not going to have that luxury next time, because I don’t plan on being a managing partner for the next 23 years! For that reason, I am already working with the partners to create an intentional leadership development strategy. We’re fortunate that we have a lot of talent within the firm, and I want to create platforms for full application of those talents in ways that are rewarding for each person and beneficial for the firm and its future.

TCA: You’ll have a lot more candidates to choose from. Your firm employs a lot more lawyers today than it did 20+ years ago.

DK: We have over 40 lawyers, nearly 20 paralegals, an incredible administrative team, a growing finance department, a talented group of project assistants and a tremendous office support team. We started out with eight people and now have 80, so it’s a significantly different business to manage.

TCA: Does that make the next leadership transition more challenging?

DK: Our law firm is very open and collaborative and still small by most standards. We all know each other at a personal level. We can have open and honest conversations, not only about what’s best for the firm or what people’s personal desires are, but also about our own shortcomings. As long as we can have open and honest communications, we can handle the next transition internally as well.

TCA: Was there a vetting process, or were you the only candidate?

DK: It was more of a collective agreement on who would best serve the needs of the firm at this time and a unanimous decision was made by the partners that it should be me. I’m an incredibly process- and efficiency-oriented person and given the significant growth that we’ve experienced over the past couple years, in which we doubled in size, the partners felt my skills would be beneficial at this stage of our firm’s development. It’s very helpful that Ben and I have worked so closely together for so many years and that he’s not retiring, he is simply shifting his focus. He’s still working at the firm and currently continues to serve on the management committee. In some companies, having the outgoing leader stick around could be a challenge for the incoming leader. For me, I appreciate that he isn’t going anywhere yet, have no concerns that he’ll support me, and I am confident that he’ll give me the space to lead the firm in my own way. After all, he remains a great leader and mentor!

TCA: How has your day-to-day job changed?

DK: I am still a practicing attorney and have no intention of stopping the practice of law. I sincerely love the work I do with clients to close transactions that improve communities and will continue to do that work. However, I now dedicate more hours in my day to the business side of running our law firm, but there is time for both because of our strong administrative team.

TCA: Being the female head of a law firm, do you anticipate this will help with recruiting? 

DK: Our partnership is half female. Most of our attorneys are female. We have a female COO. We have created a firm that respects self-direction and individual work/life balance choices.  We respect what each person can dedicate and contribute to the firm at varying times of their lives and only ask that they are open and honest with their intended contribution. We recognize that may change over time for everyone. The idea of flexible work schedules and allowing people to be self-directed has created more diversity in the firm and, I imagine, would make us an attractive workplace.

TCA: It may be too early to comment on this, but has the corporate culture changed under your leadership?

DK: The culture obviously has to change somewhat from when you’re a firm of five attorneys to one that’s now over 40 attorneys, but we make a conscience effort to remain guided in our decisions by the core values of the firm, which have not changed. It was important to me in preparation for this leadership transition to speak with every member of the firm before taking over. My goal was to meet one-on-one, in person, with everyone in our firm in 2020, but then COVID happened. I did meet one-on-one with each person, but we needed to do it via Zoom or Teams. We talked about their role in the firm, what’s important to them, how they see themselves fitting in, if they had any concerns with my taking over, if they were afraid of anything I might do, if they were excited about anything. I have to admit, my self-doubt kicked-in and I went into those meetings thinking that some people would be afraid of the transition and any change it may bring. Change can be scary, and Ben and I have very different personalities. I was pleasantly surprised at the positive response I received from everyone. Resoundingly, everyone is embracing the transition and confirmed their confidence in me as the right person for the job. That felt great!

TCA: What advice would you give to another company that’s contemplating a similar leadership transition?

DK: The existing leadership needs to be open to change and focus on succession planning well in advance of a leader’s retirement or change in career focus. What could be detrimental to any company is for a leader to hold on too long, or for a leader to make a personal decision very abruptly without allowing the company time to successfully implement a change. We were very fortunate in that we had open and honest discussions for years prior to a change in the managing partner. Ben and all partners at the firm are strategic in thinking about a succession plan for leadership at every level. The other advice I would give is to start early. You really need to have a long-term leadership development strategy for associates and newer partners. When I say succession planning and leadership development, I don’t just mean in terms of managing a firm. Look at your firm as a whole and consider the strengths of every person, not just the partners, but every single member and play to their strengths. At Applegate, some people are engaged in the community, others provide amazing client service. A team creates innovative activities that bring us together and support our culture, many have excellent business and management skills that we employ to manage the firm. Whatever those traits may be, it’s important to identify skills in people early and then have processes in place, which will cultivate, strengthen and further develop individual skills. By doing so, a company is poised for somebody to be able to take over as people retire and for the change to be accepted internally.

TCA: I’d like to switch gears and focus on New Markets Tax Credits. What attracted you to that program?

DK: I was the young dog and encouraged by my partners, in particular Ben, to learn the new trick. I picked up the Code and the regulations and dove right in. We were fortunate that a couple of our housing clients received NMTC awards in the first round and so I worked on those deals and became hooked. I really love the variety of projects and flexibility of the NMTC program. I like the complexity of the deals, especially in the early days when the industry was still collaborating regularly on creating industry standards in gray areas. I like the pace. NMTC deals tend to start and close at a much more rapid pace than housing deals. There’s also an educational component that I enjoy. Most borrowers in NMTC deals are not real estate developers, so you’re educating them on the program and how it works, whereas in the Low Income Housing Tax Credit world the developers know the drill.

TCA: Thank you for sharing those perspectives. One last question. How did COVID-19 impact the NMTC deals you were working on last year and what trends are you watching for in 2021?

DK: There were a lot of deals that closed and were trying to figure out ‘oh my gosh, what do we do now, because the deal can’t comply?’ For example, in NMTC transactions, if you have a mixed-use project with commercial and residential components, you need to maintain your status as a commercial building. When daycares and restaurants were shuttered, there was some concern that they would not be able to pay rent and the borrowers may fail the 80/20 test. Even with non-mixed-use deals, there were concerns over not being able to collect rent or make debt service payments. We needed to evaluate lenders’ desire to be flexible with borrowers as the industry navigated the COVID world with the complexities and requirements of the program. The firm spent a significant amount of time in the spring and early summer helping clients evaluate debt modification issues and impact on Qualified Active Low Income Community Business (QALICB) status and qualification. In some states, construction stopped, which was challenging, and transactions in the pipeline that were reliant on retail space had to be re-underwritten based on New World expectations. While there were a lot of challenges, they worked themselves out for the most part by late summer and people kind of found a groove again. Unfortunately, we’ve been living in this new world for a year and continue to do so. Fortunately, however, everyone has had time to sort of settle into it from a business perspective.