Magic circle’s lost property mojo

What do you do with a practice area whose margins do not match the rest of the firm’s? As James Swift explores in this issue, nowhere is this problem more acute than at Linklaters’ real estate department – although given the current size of that team, perhaps we should call it the real estate unit.

For the last 20 years the group has borne the brunt of the various restructurings at the firm, while valiantly protesting to the rest of the world that it is not a support department at all.

Unfortunately, with the departure of high-regarded real estate funds partner Joe Conder to Goodwin Procter, the official line that the group is a standalone practice is more implausible than ever. It seems that nothing – not magic circle cachet or even stratospheric PEP – can keep a partner who feels his or her practice is unloved. Linklaters’ real estate group has always been the first place where management make cuts. Career progress is minimal; anyone qualifying into that department can only be applauded for their optimism.

Neither is this strategic black hole confined to London. In Germany, only Clifford Chance maintains any pretensions of having a top-flight real estate practice among the magic circle. If, as is predicted, there is a wave of real estate refinancings in Germany in the next few years, it won’t be Linklaters that picks up the work. No wonder BLP opened in Frankfurt and Berlin last September.

Does it matter? Real estate is fading throughout the magic circle, particularly at Freshfields. Yet it’s not like it’s disappeared as an asset class, and the lack of investment in pure real estate has provoked considerable internal disgruntlement. In the last few years Linklaters has made up no fewer than three partners who focus on the sector; in 2009 Andy Vickery in capital markets and in 2010 Steve Smith in banking and Matt Elliott in corporate. Listening to Linklaters sources who are critical of management on this issue, one is irresistibly reminded of the quote by former MP Geoffrey Howe when he staged his own rebellion against rigid leadership: it’s rather like sending your opening batsmen to the crease only for them to find, the moment the first balls are bowled, that their bats have been broken before the game by the team captain.

The bad news for Linklaters line partners is that real estate has been downsized too far now for a resurrection. The good news? It’s still big in Belgium.