Will throwing money at real estate partners pay off for US firms?
US law firms are desperate to break into the UK real estate market, with firms now understood to be offering upwards of £1.5m annually - guaranteed - to lure big-name laterals to kick-start their practices.
The money being offered around the market by US firms rivals that offered to market-shaking big-name private equity hires, and dwarfs Berwin Leighton Paisner's hire of Robert MacGregor, which raised eyebrows in 2004 after he scooped £1m.
But can a US firm sustain a fully fledged real estate practice in the City against fierce competition from UK firms? Are they even interested? Certainly the fear among many UK-qualified property lawyers is falling into a trap of endless property title checks while M&A partners reap the fees and the kudos.
Latham & Watkins is one firm dangling the big-dollar carrot. The firm currently has a small ex-Freshfields Bruckhaus Deringer associate team and is shopping for a high-profile partner.
London managing partner Andrew Moyle explains the firm's strategy. "As US firms in London are getting bigger, real estate becomes a necessary practice. But the strategy has to be for high-end work, which limits your options somewhat. We definitely won't be doing conveyancing," he says.
"You can't just adopt a lift-and-drop strategy, you've got to put it into the bigger context of having other links to the rest of the firm.
"We've put in place the building blocks of having a solid corporate and finance office, now we are turning our attention to real estate. Good people attract good work, but you don't want to rush into it and grab anyone to fill the gap. You've got to bide your time and focus on what you're looking for, and eventually you'll get the right fit."
But trying to lure a partner with million-pound offers is dangerous. Many questions need to be answered first - certainly a real estate practice and book of business is not as portable as M&A or private equity. And, most crucially, will the clients follow to a firm with little or no market reputation, and will they pay the rates?Gibson Dunn & Crutcher real estate partner Alan Samson has made the juggle an art form since moving from Nabarro Nathanson in 2000.
"It's certainly not everyone's focus," Samson says of real estate in a US firm. "Other US firms are starting to understand that premium real estate deals are a very successful and profitable piece of the business.
"We're upfront with clients and tell them they're better off taking their landlord and tenant work elsewhere. But you still get some clients who want you to do that work, and if they're prepared to pay full right hand, then ok. But we specifically focus on and target high-end real estate private equity transactions, including joint ventures, financings and acquisitions."
Gibson Dunn has put the deals on the table to justify its approach, advising on such transactions as the £3.3bn acquisition financing of Hilton Group, the £951m sale and manageback of 46 UK-based Marriott hotels and the £276m refinancing of Westbrook Partners property portfolio.
LeBoeuf Lamb Greene & MacRae is one US firm that has been successful in the real estate recruitment market, hiring Graham Prentice from Freshfields, along with three environmental partners.
The firm, which is known for not being shy about handing out big packages to get the laterals it wants, is scouring for junior associates to back up Prentice and is understood to be dishing out big 'golden hellos' to lure candidates.
LeBoeuf's London managing partner Peter Sharp describes the practice as a "specialist skill component, not unlike tax, competition or employment". He says: "We expect any quality practice to fulfil the function of support for colleagues as well as attract quality work on its own.
"What we're not is a leading firm in real estate and we don't pretend to be. But real estate is a skill set we absolutely have to have."
Other US firms understood to be active in the recruitment market for UK real estate lawyers include Cadwalader Wickersham & Taft, Cleary Gottlieb Steen & Hamilton, Hunton & Williams, McDermott Will & Emery, Paul Hastings Janofsky & Walker, Shearman & Sterling, Simpson Thacher & Bartlett, Skadden Arps Slate Meagher & Flom, Sullivan & Cromwell, Weil Gotshal & Manges and White & Case.
The market is awash with claims that Skadden is offering £1.5m to launch a real estate practice at a firm which currently outsources all its property work to domestic firms.
London managing partner Bruce Buck confirmed that the firm was hunting for "a top-notch partner to do real estate finance work, not property development".
"We're interested in it because we think it's synergistic with our current finance practice and especially with our US finance practice," he says. "Several clients have asked us to staff up in this area, and when clients ask you to staff up, you do it."
Several US firms already have some form of real estate capability to varying degrees, with the vast majority having associate-led and very small corporate support practices.
Jones Day with a 10-partner team led by David Roberts, Shearman with former Ashurst managing partner Ian Nisse and Gibson Dunn are three of the more high-profile US real estate practices that have made a successful run of it.
Paul Hastings rebuilt its practice with the promotion of two UK- qualified partners after losing both Jeffrey Bailey to DLA Piper and Nigel Heilpern to Fried Frank Harris Shriver & Jacobson. Mark Eagan, who is US-qualified, still leads the practice with three full-time partners.
White & Case made a second, and more successful, move into UK real estate in 2003 with a two-partner hire. An earlier attempt in 2000 failed when the CMS Cameron McKenna partner the firm had recruited quit the law within 12 months.
The recruitment net has been cast wide and comparing their US offers is a favourite topic for City property partners over a pint. And with the large sums of money on offer, it is inevitable that people will move, just as with the private equity partners.
As one City partner puts it: "With that sort of money guaranteed for a couple of years, someone is going to cash in."
Who'll jump next? Watch this space.
