Whether you’re heading to a City, West End or national practice, a seat in property – now increasingly dubbed ‘real estate’ – will swiftly extinguish any preconceptions you may have that property lawyering is all about conveyancing and pretty dull to boot. Today’s real estate lawyers are working hand-in-glove with their corporate and finance colleagues like never before and are already well on the way to becoming one and the same thing.
A deal signed late last year epitomised a massive long-term shift in property, which has ensured that after the rot of the last recession, it is an area to be taken seriously, even by City firms renowned for corporate or finance. The deal was the creation of a 1.5bn property unit trust by Pillar Property and Schroder Property Managers. It was a giant step in the industry’s quest for a tax-efficient alternative to direct property investment. Pillar sold three retail parks into the Hercules Unit Trust (HUT), which it set up with Schroder in 2000 and which it advises on property. Gouldens acted for longstanding client Pillar. Gouldens is also a regular adviser to HUT, but was conflicted out this time. Linklaters, the top UK property firm, advised the trust.
The deal aimed to give outside investors indirect property access to big-ticket items, such as shopping centres in units that are easily tradeable and do not incur stamp duty. What all of this means is that property ownership and investment is now more sophisticated, with corporate and tax lawyers introducing new techniques and structures.
The development schemes that are changing London’s skyline, for example, have led the way in the transformation, not least with such seminal 1980s projects as Canary Wharf and Broadgate. They helped to change the whole market, breaking new ground in terms of scale, design quality, speed of construction and the complexity of the types of finance and sale-and-letting techniques, much of it imported from the US. The impact on the legal profession has been profound, helping to transform the role of property lawyers within the professional team and making the work more profitable.
The shift also helps to explain a flurry of niche West End property practices opting to be swallowed up by larger firms. Nathan Silman, McGuinness Finch and Higby Hargreaves all took this route during 2001. On their own, they couldn’t offer the corporate, finance and tax expertise that clients are demanding. However, clients are being tougher than ever on how they use their legal advisers. Against this backdrop, national and regional firms have been proving their worth. Eversheds, for example, replaced Linklaters as adviser to Lend Lease on its flagship Bluewater Shopping and Leisure Centre. Linklaters was seen as too big and costly for this day-to-day work. Prudential is another mega client rethinking how it uses lawyers. It decided last year to review its legal outsourcing for UK property investment for the first time in 10 years. Its key advisers at the moment are Berwin Leighton Paisner and Lovells.
With the pressure to curb legal costs certain to keep mounting in the New Year, national and regional firms will be snapping at the heels of City advisers in 2002 like never before.