GREIT expectations fail to deliver for property lawyers
M&A teams leave real estate lawyers in the back seat as REIT conversions churn up market
June 28, 2006 at 08:03 PM
3 minute read
The introduction of real estate investment trusts (REITs) in the UK has had City real estate departments in a state of anticipation for years. Property lawyers could hardly utter the word 'conversion' without salivating at the prospect of major mandates coming their way.
But what was billed as property lawyers' big moment seems to be something of a let-down. For the time being, the bulk of the work is bypassing the property departments on its way to the corporate and tax lawyers.
Worse still, the area where property partners are supposed to be at their best – client relationships – is not helping them win the mandates. Some firms are finding themselves sitting on the sidelines while clients ignore longstanding relationships altogether by going to rival firms' corporate departments.
Then again, look at it from the company's point of view. They are simply trying to make sure their REIT conversion is receiving the best advice, even though each firm is currently as inexperienced as the next.
Take SJ Berwin, which has enjoyed its close relationship with British Land for many years but lost out on the corporate and tax elements of the property company's conversion to Freshfields Bruckhaus Deringer corporate partner Julian Long, who only started working with the company last year.
Missing out is particularly galling for SJ Berwin, considering the firm has advised British Land on numerous corporate issues in the past.
Similarly, while Nabarro Nathanson is advising Land Securities on the minor property elements of its conversion, the firm has not been entrusted with the lead corporate role, which has gone to longstanding corporate adviser Slaughter and May.
Even Herbert Smith's success in keeping hold of the Hammerson conversion will be largely attributed to corporate partner David Paterson and not the property department.
Property lawyers have not even been heavily involved in the current efforts – by corporate and tax lawyers – to create a stand-ardised approach to the conversions for the industry. Paterson and other corporate lawyers, such as Nigel Read at Lovells, are planning to work together, at their clients' request, to clarify some remaining conversion issues with the UK Listings Authority. While real estate partners have now started trying to get in on the talks, discussions will be driven by corporate issues.
Property partners admit the excitement of years ago was premature. One explains: "REITs are exciting for the real estate industry generally but I do not see any angle for the plain vanilla property guys. I do not see how it will be a gravy train for property lawyers."
So, with most real estate partners now acknowledging REIT conversions will not lead to massive amounts of work or fees for property teams, what was all the excitement about in the sector and where are the opportunities?
Some believe that if and when private companies and asset managers start to create new REITs, there will be more work for straight real estate lawyers, who will be required to carry out tasks such as conducting due diligence on property portfolios.
Then again, they said that before.
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