Lawrence Graham ain’t cheap – it’s just inexpensive

Lawrence Graham ain’t cheap – it’s just inexpensive” />The partners at Lawrence Graham must rue the day they heard the name Michael Fielding. Not only did the ex-partner do a runner with around £2m of a former client’s money, but now that same client, London & Regional, is bringing a £30m claim against the firm for a deal that Fielding allegedly botched. It’s certainly not ideal.

The notoriety of Fielding has somewhat outweighed any other work being done by the firm. But while he’s still hiding in Miami, the real estate team – tucked away in its none-too-flashy office on The Strand – has been making significant, if somewhat understated, headway.

Lawrence Graham has always had a strong focus on property, and that continues under the eagle eye of managing partner Penny Francis and Stephen Stephens, who took over as head of property when Francis stepped up to the big job two and a half years ago.

Real estate makes up around 35 per cent of the partnership (making currently 29 partners in total) and brings in approximately 35 per cent of fee income (£19.2m in the last financial year). The firm’s revenue per partner is significantly lower than a number of its City counterparts: The Lawyer 100 last year revealed the average revenue per partner at the firm was £640,000, making it bottom of our top 20 table.

Partners at Lawrence Graham say they are “value for money” – the most expensive charge-out rate of a real estate partner at Lawrence Graham is still lower than the fees charged by the likes of Nabarro Nathanson or Berwin Leighton Paisner (BLP). Partners outside the firm argue – rather snidely – that “you get what you pay for”.

Lawrence Graham partners agree their charge-out rate at the start of each financial year with Stephens, in a manner which seems somewhat more arbitrary than at most firms, but with rates that are lower than many in the City. The danger for the firm is indeed that it will be perceived as ‘cheap’. But sound financial management and efficient billing allows the firm to maintain profitability while offering lower rates to its clients – something that’s important when a large proportion of your client base is institutional investors, which are well known for squeezing firms on fees.

Indeed, astute management and low overheads mean that average profits per equity partner (PEP) for the last financial year were £373,000, which easily outstrips BLP, Nabarros and most of the national firms.

Two months shy of completing this financial year, the signs are positive for a strong year. PEP could be up to £385,000, with the real estate team already having surpassed its budget for the year.

This is in part due to some sizeable deals. Biggest of all was advising Scottish & Newcastle on the property matters for its £2.1bn pub estates disposal, which will certainly add a significant amount to the real estate team’s fee income. But there have been other highlights over the past 12 months.

Stephens, in conjunction with corporate finance partner Nicholas Turner, has been making a concerted push into building up finance clients last year, which resulted in new instructions from Bayerische Landesbank and JPMorgan Chase. 2003 also saw the firm advise on its first deal for GMAC, after a contact at HBOS took a job with the US finance giant when it launched its UK operation. No, the firm won’t be doing the complex property finance deals that you might see the magic circle on. But for a smallish London firm, it’s something to be proud of.

Other new clients include US casino chain Isle of Capri, which property partner Catherine Diggle also advised on its new operations in Coventry. Where the danger lies for Lawrence Graham (and other property-focused firms like it) is in competition from the nationals, which can easily offer cheap rates because of their ability to outsource work to the regions. Newly-appointed DLA real estate head David Taylor and his counterpart at Eversheds Cornelius Medvei may well be circling. It is going to be an uphill struggle for the firm to maintain its low overheads in London – especially as it needs to be out of its current office by 2006.

But, in its own quiet way, the firm has managed thus far. While it may not shout it from the rooftops, the management at Lawrence Graham knows what the firm is and what it needs to do to remain competitive. And with Stephens and Francis looking set to remain at the helm for some time to come, Lawrence Graham certainly isn’t going to be the DJ Freeman of 2004. Although it might just make a nice target for someone looking for a merger…

Lawrence Graham’s top 10 real estate clients (February 2004)
  • AXA Sun Life
  • Allied Dunbar Assurance
  • Centros Miller
  • Hermes Property Asset Management
  • J Sainsbury
  • Legal & General
  • mm02
  • NFU Mutual Insurance Society
  • Scottish & Newcastle
  • Universities Superannuation Scheme

Top 10 deals for the real estate team over the past 12 months
Deal Property partners
Advised on the £2.5bn property aspects of Scottish & Newcastle’s sale of its pub estate David Hayward and Andrew Wade
Acted for Kingfisher’s retail property company Chartwell Land on the £695m sale of 15 retail parks and five retail park development sites Catherine Diggle
Advised Topland Group on the £373m refinancing of its purchase and leaseback of a portfolio of 78 Marks & Spencer stores Roger Benson
Advised Legal & General on its involvement in the £500m Bracknell regeneration scheme Roger Benson
Advised Hermes Property Asset Management on the acquisition of a 40 per cent interest in the Brindley Place limited partnership Christine Jackson
Advised the Universities Superannuation Scheme and Grosvenor through a recently created limited partnership, Grand Arcade Partnership, on the development of a retail shopping centre in Cambridge with a value £167m Jon Lloyd
Acted for Debenhams on real estate due diligence undertaken by the bidder Permira, and successful bidder Baroness Retail, on its eventual £1.72bn sale Catherine Diggle
Acted for J Sainsbury Developments on its £180m disposal from its parent company Rabinder Chaggar
Acted for Centros Miller on the development of Fremlin Walk Shopping Centre in Maidstone Jon Lloyd
Advised Centros Miller on the redevelopment of a major part of Kidderminster town centre Jon Lloyd
Source: Lawrence Graham