For the state of everyone’s mental health (as well as my own), I’ve decided not to write this week’s column on REITs, or PIFs as we now have to call them. Yes, they are going to be very important, but I suspect the last thing you want to be reading is a rehash of all the gumph your PR departments have been emailing me in the past 10 days. So no REITs or PIFs. However, I’ve still opted for an acronym. DLA.
Why DLA? Because one of the hottest topics of discussion at international property market, Mipim 2004 – aside from the usual 4am dalliances in the Martinez (which, no, we won’t be printing) – was the news that Herbert Smith’s David Taylor was leaving to head the property department at the rapidly expanding top 10 firm.
It’s not so much the impact that Taylor’s move will have on Herbert Smith. What’s of interest is what this move says about DLA’s intentions for the property market. Because when the firm decides to turn its mind to something, you can be sure it will give it a damn good shot.
DLA’s real estate department is something of a sleeping giant. Considering how much noise the rest of the firm makes, one could be forgiven for thinking that the real estate team had effectively been muzzled for the past five years.
So what few people realise is that last financial year, the real estate department brought in the largest chunk of DLA’s turnover, at around 20 per cent. This year, its gross will be around £42m, making it one of the UK’s five largest property departments by turnover.
(That figure includes construction, planning, property litigation, but not property finance, which would take the figure closer to £50m.)
And in the 2002-03 financial year, the firm had a whopping 62 real estate partners, making it second only to Eversheds in terms of partner numbers. Under the guidance of Philip Rooney, who has been at the helm for six years, the department now brings in two-and-a-half times what it did in 1998.
DLA is already getting its fair share of mid-sized work. For example, in recent months it has advised Prime Commercial Properties on the £80m purchase of Capitol Shopping Centre in Cardiff, acted for the Savoy Group on the sale of Lygon Arms hotel, and advised Mapeley on the sale of the Abbey headquarters.
In the past year, new clients included winning the former DJ Freeman place on the Carillion panel, acting for CIT, landing Irish developer Tiger Developments, as well as winning business for the Volkswagen Group.
What’s less impressive about the practice is the revenue per partner figure, which at around £710,000 was rather disappointing. While it’s worth making the point that this is in part because a large proportion of the department is actually based outside London, it still doesn’t compare that favourably with rival Eversheds or Birmingham-led firm Wragge & Co.
But judging by some of the comments down in Mipim, some of these firms are, if not nervous, then certainly very curious about just what DLA is up to.
So let me clarify a few matters. The hire of Taylor comes 18 months into a three-year strategy, which planned not only to raise the profile of the group, but also grow the group, particularly in London.
This strategy doesn’t just include the hire of one high-profile partner in London. On the business support side, Taylor has already wooed Andy Wansell from Eversheds, where he held the title of chief operating officer for the real estate department.
Wansell, a strategist and analyst, was Taylor’s right-hand man when Taylor ran the Berwin Leighton real estate practice. He departed to Eversheds after Taylor left Berwin Leighton for Herbert Smith in 2000. DLA is also to take on a full-time business development person dedicated solely to the real estate practice.
While the news of a couple of business support people may not have rivals quaking in their boots, don’t expect DLA to stop there. Over coming months expect some high-profile lateral hires, particularly in London. (Although there may also be some offers in the regions for the right people).
And now is a good time to be hiring. Unlike some City firms, DLA isn’t adopting a strategy that precludes anything but high-margin work because, of course, its regional offices can undertake some of this work at a lower cost.
Plus, its average profitability (last financial year £460,000) makes it rather attractive when you compare it with property specialists Berwin Leighton Paisner and Nabarro Nathanson (at £303,000 and £293,000 respectively).
So my guess is that you could see a bit of Chelsea-style cheque waving, for the property equivalents of, say, a Duff, Makelele, or Crespo.
Taylor is adamant that DLA won’t be targeting the clients of any particular firms. But watch for a push into more development work as well as an increase in the institutional investor client base.
Taylor himself comes armed with some nice clients including Amec, National Grid Transco, Burberry and Capital and Provident. He is also credited with building Berwin Leighton’s practice to one of the most high profile in the City.
Despite its size, DLA has some way to go in terms of becoming a top real estate outfit. But rivals should watch this space – and also, maybe, watch their backs.