Equity capital markets provide much-needed work in real estate

It would be an understatement to say that the UK real estate ­market has been suffering for well over a year. There is no denying that the buoyant market enjoyed by real estate lawyers during the boom is now a long way in the past.

But while big-ticket real estate deals remain thin on the ground, property companies have sought financing from the equity capital markets, throwing some bulky legal work to a select group of magic and silver circle firms.

Longstanding relationships with the UK’s established real estate groups have given the usual suspects a foot in the door and provided some much-needed work for their real estate partners.

Last week (7 September) The Lawyer reported on Ashurst and Slaughter and May scoring lead roles on the £836m recapitalisation of Canary Wharf Group owner Songbird Estates.

Songbird turned to regular adviser Slaughters, with partner Roland Turnhill leading a team that included partners Rebecca Cousin and Philip Snell.

The Ashurst team was led by corporate partner Nicholas Holmes advising banks JPMorgan Cazenove, Morgan Stanley and Rothschild.

Holmes has been a regular ­feature advising the banks on the recent spate of real estate capital raising deals. In May he advised the banks on Max Property’s £150m IPO, with Clifford Chance partner Adrian Levy leading a team advising the company.

“Max Property was an important deal. A lot of companies are trying to emulate this deal,” says Holmes. “It’s very interesting that the IPO market has opened up so quickly in this particular sector. We have, of course, seen capital raising elsewhere, but this area has been particularly active.”

This February marked the start of real estate rights issues. Hammerson, British Land and Land Securities all launched recapitalisation deals in February, with Freshfields Bruckhaus Deringer winning roles on all three.

Freshfields partner Simon Witty acted for the banks on Land Securities’ £755.7m rights issue opposite Slaughters, which advised the company. Freshfields advised the banks again on ­Hammerson’s £584.2m rights issue, this time with ­partners Monica McConville and Donald Guiney leading.

For British Land, Freshfields corporate partners Julian Long Sarah Murphy advised the ­company on its £740m rights issue. The firm had cemented its relationship with the company in 2006, advising it on its conversion to real estate investment trust (Reit) status.

“There are the main three or four firms that have advised on these deals,” says Herbert Smith partner Charles Howarth, who advised Hammerson on its rights issue earlier this year. “They’re interesting deals to work on and they quite often involve large teams. They’ve definitely been a good deal-generator for real estate teams and corporate partners.”

Due diligence on real estate groups is a time-consuming process, often requiring a large team of associates to work on the deal. While the immediate team includes one or two partners and a team of three associates, a typical real estate rights issue can include a team of 30 lawyers or more.

“The issue for these companies is that the boom period has been all about debt,” says Holmes. “The thinking was, why use equity when you can use debt? All of that’s being corrected now.”

The real estate market has ­clearly seen a transformation since the beginning of 2009, but recapitalising the largest UK real estate ­companies has generated a new kind of work for the lawyers focusing on the sector. The expectation is that, while the economy could be some way off recovering, there will be plenty more fund­raisings to keep the lawyers busy.

“It’s worked very well in the UK market and it’s likely we’ll see more to come,” says Holmes. “Real estate saw the shift at the beginning of this year and I think that we’re likely to see more throughout ­this year.”

Shifts in the real estate market have also led to consolidation. ­Earlier this year (10 July) The Lawyer reported that Lovells and Clifford Chance won lead roles advising on the takeover of Reit Brixton in July.

Lovells corporate partner Nigel Read led a team advising ­long-term client Segro on the £5.5bn acquisition of Clifford Chance client Brixton.

The firms with the close ties to real estate companies or ­established relationships with banking clients will be the ones to benefit.

Of the top-tier firms, Slaughters and Freshfields have both made their marks in this sector. ­Slaughters’ well-established corporate relationships have seen the firm secure a range of mandates, while Freshfields has done the same, mainly for banking clients.

Further down the food chain Ashurst and Herbert Smith are clear winners, leading for banks and corporates on a range of deals.

“In a strange way equity has become the true cyclical practice,” says Holmes. “Clearly litigation should be the cyclical practice, but equity raising has been a more prominent feature of this ­downturn.”



  • February was the month of real estate company rights issues. Herbert Smith secured a role ­advising ­Hammerson on its £584.2m deal, with Freshfields ­Bruckhaus Deringer advising the banks.
  • Slaughter and May’s longstanding relationship with property giant Land Securities gave the firm a role on the company’s £755.7m rights issue, with Freshfields again advising the banks.
  • Freshfields was instructed by British Land on its £740m rights issue in ­February, while ­Linklaters was instructed by the banks.
  • In May ­Herbert Smith and Allen & Overy (A&O) took lead roles ­advising on Great Portland Estates’ £175m deal in May. Herbert Smith advised banks Credit Suisse and JPMorgan Cazenove, while A&O advised Great ­Portland.
  • Later that month Linklaters was instructed by Liberty International on its £620m placing and open offer, while ­Herbert Smith advised the banks.
  • Last week (7 ­September) The Lawyer reported that a group of UK and US firms won roles ­advising on Songbird Estates’ £836m recapitalisation. Slaughters advised Songbird, while Ashurst advised banks JPMorgan Cazenove, Morgan Stanley and ­Rothschild. Weil ­Gotshal & Manges and Sullivan & Cromwell acted as co-counsel advising Songbird. Shearman & Sterling advised sovereign wealth fund client Qatar ­Investment Authority, which is backing the equity raising.