Whoever you ask, Berwin Leighton Paisner‘s (BLP) real estate department is chugging away nicely. The practice is performing well and the revenues are up. But – and there is always a ‘but’ on these pages – are things on the inside as healthy as they appear from the outside? And more importantly for the firm, can the real estate group keep heading in the right direction, or will the management’s drive to refocus the firm on corporate and finance practices ultimately be at the expense of real estate?
At the half-year, BLP announced a 17 per cent growth in revenue, led somewhat predictably by the real estate department, which posted a 26 per cent increase on its 2004 figures. But the figures can be misleading – it is after all a highly buoyant market.
As one City real estate bigwig puts it: “If you can’t make money in this market, you’re a nutter.”
BLP managing partner Neville Eisenberg, re-elected for a third term in February, recently told The Lawyer: “I’d be very disappointed if people still thought of us as a real estate-led firm.”
Well, Neville, prepare to be disappointed. The Lawyer spoke to a raft of competitors in the real estate sector, and the verdict is clear. “I’d still say they’re a property firm. The big corporate and finance deals they’re doing are usually with property clients,” comments a source at a rival firm.
Another City partner says: “They’ve done well to get the other parts up and running reasonably well, but real estate is still the driving force behind the firm.”
Perhaps the most poignant comment of all was: “They’ve got to stop pretending they’re not a real estate firm or they’ll end up pissing off all their real estate lawyers.”
The push is on for the corporate and finance departments to grow, and the real estate partners know it. Real estate practice head Robert MacGregor admits that the firm is trying to shift its focus (with some success) away from real estate. But he is quick to point out that his third of the firm has kept pace with the growth in the corporate and finance thirds, despite where the emphasis is.
“I see it as evidence of our commitment to the market,” MacGregor says. “We’ve had a 15 per cent growth, and I’d be very surprised if any other real estate department in the City had grown by that much this year.” An analysis of the firm’s partnership since 2002 reveals where the growth has been. The firm made no lateral hires into the real estate division in 2002 and made just two in 2003. In 2004 the growth hit a spike, with four headline lateral hires, including David Battiscombe from Finers Stephens Innocent in March, Catherine Cook from
Freshfields Bruckhaus Deringer in October, Graham Lloyd-Brunt from Norton Rose in November and MacGregor himself in his headline move from Clifford Chance in December. The hiring spree continued in January 2005 when the firm added Stella Mitchell from Linklaters to the construction team, while in April last year Alan Wight joined from Clifford Chance.
In the same period, promotions to the partnership have numbered just five, compared with the eight laterals detailed above. Two promotions came in 2003 and three in 2004. There were just two pro- motions firmwide in 2005, neither in real estate.
Those five make up less than a third of the total of 17 promotions for the firm in the past three years. Laterals into real estate are eight out of 34 hires between 2002 and 2005. The hires, especially those made in 2004, have been quality, but clearly the priority has been elsewhere.
The firm has recruited heavily, but has it recruited smartly? Some of the choices are beyond reproach, but the jury is still out on many others.
One City rival claims: “There were some trainees here that we said no to which were taken on by BLP, and I’m not sure that’s terribly smart from their point of view. I wonder whether their quality threshold might have lowered.”
Another describes BLP’s recruiting as “hoovering up all the lawyers they can”, offering lawyers junior partnerships unavailable at other firms. “They took a lot of assistants from Freshfields, Clifford Chance and others and offered them partnerships. They have a small equity partnership and none of these hires are in equity. While technically they’re partners at BLP, it allowed them to really beef up the leverage.”
One rival partner says: “If you leave the magic circle and want to stay in the City, you look at BLP. If you’re coming the other way, from an Addleshaw Goddard or Eversheds, then you look at BLP. They have a good ‘A’ team, but they also have a lot of ‘B’ and ‘C’ teams.”
So they are a mixed bunch. But how do you keep them happy?
“The firm in the past has spent too much time fighting itself and not enough time fighting the world,” says a rival partner.
The lack of international reach is something critics are quick to point out. But it is something that’s not going to change anytime soon, with Eisenberg adamant that there will be no international offices, just international networks.
Problems at BLP post-merger are no secret and there is no shortage of ex-BLP partners floating around the City’s practices these days. But how much has changed since those days?
Stories of tensions and infighting between the real estate and corporate departments are historical, but is the corporate department pulling its weight?
Certainly it’s done spectacularly well on AIM work, but the corporate department seems to have missed the boat with the firm’s key client Tesco. While the real estate team handles the vast majority of Tesco’s property work, the firm has little involvement in its corporate transactions.
As one corporate partner at another firm says: “Tesco is not a property client. To it, property is just a place to put the baked bean cans that they really want to sell. They could have followed Tesco to world domination.”
With BLP’s attempts to shake off its image of being a ‘real estate firm’, MacGregor may have his work cut out to keep the management interested in achieving his plans for the property practice.