On a balmy July evening, 14 GCs and senior counsel working within real estate gathered at a roundtable hosted by The Lawyer and Bryan Cave Leighton Paisner (BCLP). The roundtable was chaired by The Lawyer deputy editor Matt Byrne and BCLP senior partner for EMEA Robert MacGregor, and centred on adapting to shifts in the real estate market and the impact of changing customer demands.
Round the table
- Matt Byrne, deputy editor, The Lawyer
- Robert MacGregor, senior partner for EMEA, Bryan Cave Leighton Paisner
- Louise Hill, senior legal counsel, Argent
- Richard Benson, legal director, Battersea Power Station Development Company
- Jai Bhakar, general counsel, BauMont Real Estate Capital
- Robin Macpherson, head of risk, Cromwell Property Group
- Natalie Brody, legal counsel – commercial real estate, HB Reavis UK
- Richard Gough, director, legal and compliance, Value Retail
- Shelley Peston, legal director, Landsec
- Catrin Powell, head of legal – property, Europe, Lendlease
- Sean Gray, legal counsel, transactional, Europe & APAC, Nuveen Real Estate
- Lindsey Elliott, general counsel, Savills Investment Management
- Tony List, senior legal counsel, Sky
- Sophie D’Ivangin, real estate lawyer, Apple
- Daniel Stengel, general counsel, Tyndaris
- Gesina Dybdahl-Ovesen, director and assistant GC, Barings
Matt Byrne: We think there is an accelerating mindset shift, where brand reputation and being a pleasure to deal with in negotiations is key to a harmonious long-term relationship. How much is this reflecting your experience and what are the challenges and opportunities this trend creates? What’s happening now that is different to five or 10 years ago?
Robert MacGregor: The past few years have seen a trend towards less hostility and more partnering. The terminology is changing from landlord and tenant to space providers/space occupiers – the borrower/lender relationship is another one signifying the degree to which attitudes have changed around what clients want to get out of these relationships.
Take banking – there is already a move towards relationship banking. It’s not about the one deal, it’s the multiple deals they want to do with clients.
The same is true with landlord and tenant. As it affects the way people want their brand come across, internal and external counsel are more involved.
Richard Gough: We predominantly own shopping centres such as Bicester Village in the UK and Suzhou Village in China, plus we have projects in New York and hotel developments scattered around the world. There has been a significant shift in terms of the hospitality element we offer – we have had a hospitality and guest experience executive in place for five years now at Dubai’s Jumeirah Beach and that’s changed the way we treat guests. Last Christmas we had a partnering deal with the V&A museum, where we combined an arts environment with retail shopping. Landlords are looking to provide a more multi-dimensional experience, combining arts and retail for example.
Jai Bhakar: Tenants have been looking for higher-specification offices and amenities, communal areas and shared spaces such as roof terraces. They care about the quality of restaurants and gyms. It’s led to a greater specialisation in terms of product – for example, a tech start-up will be after a very different space to what an institutional French company wants [BauMont has a Paris office] so we have to be much more attuned to the product we are delivering at a very early stage.
Louise Hill: We have to refer to our latest project in King’s Cross as a shopping district and not a shopping centre, which we are told sends out the wrong messages. ‘District’ suggests placemaking – tenants want to know what else is going on other than merely retail. We are also learning lessons from the US [in 2015, Argent partnered with US real estate firm Related, which has been developing Hudson Yards]. They are probably more driven and focused on technology – the tech they invest in for their buildings is extraordinary and they also pick up very well on hospitality.
Robin Macpherson: It’s all about the experience: customers who go to shopping districts want to have dinner there and be able to charge their phones as well. In our office buildings in Amsterdam there is a sustainability agenda – our Edge offices are in a ‘smart building’ enabled by sustainable technologies. Employees no longer have assigned desks and it allows them to work anywhere in the building, with varying levels of introspection or sociability as required.
Richard Benson: I have been at Battersea Power Station for five years, and it was just a building site when I joined. Now we have a thousand people living there and the residents’ needs are very different to those of the large corporate occupier we did a deal with the other week. As we move into the retail leasing space, placemaking is at the heart of it. To tempt people over to that part of London is tricky – placemaking helps to make it an interesting and special environment.
Sean Gray: It’s a very competitive tenant market at the moment. It’s now a requirement for landlords to go out of their way to show that they have something that tenants can experience. With the rise of alternative providers such as WeWork, the challenge I am seeing is if you let a large building to one of these providers and take a number of floors, they want exclusivity with no more serviced office providers in the building. What will the serviced office market look like in five years’ time? They are going to make up 90 per cent of the market that we are letting to. How will our investors feel if we continue to agree to such demands?
Byrne: What skills will you require over the next three to five years as this pace of change continues – which will be most valued in-house? Could you also talk a little about the relationship with external providers, particularly external legal ones, and how you expect that to change?
Benson: I am seeing a lot more project management. Everything we do is some sort of project, be it a leasing programme or financing.
When we came to set up our current leasing programme, as we were creating the documents, the instruction was to cut out the points we end up giving at the third stage. We decided to just give them at the first stage instead of a couple of documents down the line. For me it is flexibility, out-of-the-box thinking and working as close to the business as you can to truly understand what its needs are.
Shelley Peston: It is also about appreciating that you have to work with very different types of people, as well as different parts of the business. Sometimes the leases don’t fit what the tenant needs to do – at Landsec, we have been working with IT teams to understand how to change documents for a flexible office environment.
You need to include others in your in-house team, as well as your external law firms, and get them to speak to key people in the business, too.
Byrne: How difficult is it to get the right people and mindset you are looking for in the recruitment market?
Lindsey Elliott: Very hard. I take the technical expertise as a given. When I recruit someone I want them to explain where the asset market is, what my business is and how it is impacted. They need to have the ability to think on the spot and work something out, to bring in external lawyers and corral the business to get the best out of everybody. One of the worst things I’ve been asked by someone on secondment was: “I’ve not done this before so I need someone to tell me how to do it.” If this is the case, you probably don’t have a future in-house.
Byrne: What’s the sense you’re getting from your external lawyers – are they getting it and shifting?
Elliott: The legal market is very crowded. Any of the top 30 firms can set up funds and buy a building. When I’m appointing a law firm, it’s not just whether they can do the work and have the right track record – I care about how easy the firm is to deal with. I very much run an outsourced model – can the external firms work with my business teams? The number one problem my business teams struggle with is lack of commerciality. I want them to take the time to understand our business, our drivers on a particular transaction, where our risk assessment and tolerance is. It’s not all on them though – it’s also down to me to educate the business group on how to better instruct external lawyers.
Byrne: There’s a lot of talk about collaboration at the moment. Are you getting your external law firm providers to work together on transactions or precedents?
Hill: Increasingly. We have firms working on different aspects of a development. A lot of niche firms are springing up to challenge the bigger firms by offering something very particular.
Macpherson: It’s surprising to witness the lack of sophistication that law firms have around this, given that they are major commercial enterprises. I recently carried out a funds launch with three magic circle firms and what I got back was varying degrees of quality.
Benson: One of our deciding factors for choosing our lawyers is whether they are exposed to other transactions that we are doing. I want the benefit of their knowledge – I shouldn’t have to ask them or set up a special project to get them to collaborate with us.
Byrne: Will change continue to accelerate and how fundamentally different will your in-house teams look in five years?
Daniel Stengel: What will change is the way we communicate with law firms – fundamentally in the tools we use.
Fifteen years ago, we would send an email with a document attached and that was it. I am now encouraging law firms to set up a WhatsApp group to discuss a deal. The junior lawyers can use it as a tool – it’s quicker and more natural for them.
Also, there will be a point in time when the tools that law firms use, such as Legatics, will be useful to us as the ultimate client.
I may get a dashboard or an app which will be useful in showing me where the transaction is.
Gesina Dybdahl-Ovesen: That’s right. We are rolling out software targeting this, moving away from emails and creating platforms where you have not only data storage and filing, but also search tools. It works as a collaboration project because you manage work between different people such as property managers and lawyers, and all the information comes together.
If you upload a new lease contract, for example, it immediately gets sent to a property manager and you don’t have to type out an email any more.
Byrne: Can I please get a show of hands as to how many people here have used WhatsApp with their external firms? [Four people raise their hands.]
Gough: I used WhatsApp with my lawyers earlier today to ask them a quick question and they came back to me two seconds later. It saves filling up my inbox. But we have had challenges with our commercial team using WeChat in China. That’s the way it’s done there.
On our European and US side of the business, they are having to shift their mindset to the idea that commercial terms with our brand partners, who operate across the world, are being pumped through WeChat.
MacGregor: The speed of change is so dramatic. The other day we got a group of 12 very young people from Cushman & Wakefield [real estate services company] and mixed them with 12 people from BCLP. We split them into three teams and said: “If you are going to completely redo the way certain types of real estate deals are done, how would you do that?”
The chief executive of Cushman & Wakefield and I handed out the prizes and watched the teams’ presentations. What was interesting was that they came up with some epic ideas. They are not bound to the way things have been done. There’s an enormous value in looking at something in a completely different way – much of this comes with youth.