Real estate survives potentially devastating 16-person exodus.
At the 2008 annual Mipim property event in Cannes SJ Berwin’s erstwhile property head Jon Vivian hosted a lunch for the great and the good of the industry.
Despite the uncertainty generated by the run on Northern Rock and the collapse of the subprime mortgage market, the mood among the guests was buoyant.
Vivian, who like David Taylor, the head of property at DLA Piper, and former Lovells (now Hogan Lovells) property head Bob Kidby, has networking in his blood, was in his element. In Vivian’s case, his enthusiasm was possibly emboldened by the knowledge that his practice was on target for over 30 per cent growth in the year. Work for cash-rich institutional investors such as the Crown Estate and Axa was underpinning a revenue of £52m – around 24 per cent of SJ Berwin’s £215m income for the financial year – while revenue per partner (RPP) for the practice stood at £1.9m, not far behind the magic circle average.
Real estate, along with private equity, was at the core of a profitable, relatively self-confident and entrepreneurial firm.
The events of the next two years and their impact on SJ Berwin have been well-documented. Between 2008 and 2009 SJ Berwin’s firmwide average profit per equity partner was slashed in half, and real estate also plummeted.
But the firm’s woes, and those of its property division, were by no means exceptional. What was relatively exceptional was the departure of a string of partners and many associates from a once critical practice as the country was coming out of recession and other firms were starting to hire.
And just when it seemed that things could not get any worse, Vivian announced that he would be leaving, along with three partners and 12 associates, for Irwin Mitchell, a firm with no City real estate reputation. Hardly a vote of confidence in where SJ Berwin’s practice was going.
But Vivian’s punt on Irwin Mitchell has yet to produce significant results, and the impact of the colossal level of exits on SJ Berwin may not turn out to be as serious as anticipated. In fact, the firm may even emerge in better shape.
It was Vivian’s opposition to the now-abandoned merger with Proskauer Rose that triggered his team’s departure, described by new head of UK real estate Simon Ricketts as a “real low point” for the firm. But Vivian has only been able to name one client that he has brought with him to Irwin Mitchell – Gazeley. Not one of SJ Berwin’s three largest property clients – British Land, the Crown Estate and Segro – have followed in his wake.
British Land does not operate a formal panel, but the corporate relationship has always been handled by partner Michael Goldberg in SJ Berwin’s corporate team, while fellow partner Bryan Pickup has dealt with real estate matters. Other firms to handle British Land work on the property side include Jones Day and Mishcon de Reya (the latter, it should be noted, was already acting for this client prior to the SJ Berwin hires).
A former SJ Berwin partner tells The Lawyer that he was doubtful the firm would be able to continue to service such a big client with half the original capacity. But the reality is that Goldberg, real estate partner Pat Jones, tax partner Heather Corben and corporate partner Delphine Currie recently advised the client on the Cheesegrater joint venture. Jones is one of the key relationship partners now on the property side, alongside Darren Rogers, who was newly promoted to the partnership.
Vivian tried to persuade Rogers, who he was close to, to join him at Irwin Mitchell, but SJ Berwin offered him partnership and he stayed.
Pickup and Vivian were joint relationship partners for the Crown Estate, but since that is a panel appointment it has remained with SJ Berwin. Pickup and real estate partner Helen Willett advised the company on an investment from Norges Bank in its Regent Street portfolio. Willett was due to retire from the partnership for personal reasons recently, but the firm has persuaded her to stay on in an operational capacity.
Ricketts claims the Regent Street and Cheesegrater deals are two of the most significant transactions for the firm in the past three months and serve as evidence of the continuing importance of the property department.
Segro, for its part, is thought to increasingly using other firms, including Nabarro.
There are, of course, smaller clients that have left SJ Berwin. Mapeley and London Newcastle are believed to have followed Minkoff and Hughes to Mishcon. However, Marks & Spencer and Axa have remained, while David Ryland, who is relationship partner for Hilton and Evans Randall, continues to be a high biller.
Vivian says he would not have wanted to poach SJ Berwin clients.
“I’ve acted for the Crown Estate for 20 years and have a good relationship,” he says. “There was no question that when I moved I’d be [taking the client from SJ Berwin]. I was keen for SJ Berwin to retain it – it did a good job.”
Some have pointed to the difficulty of persuading SJ Berwin’s City property clients to instruct Irwin Mitchell, a firm they have barely heard of, but Vivian thinks it has something unique
“There’s a slightly different cost base and I think clients will welcome that,” he says.
There is also a possibility that the firm could start targeting more commoditised work, a professed aim of former Nabarro property partner Geoffrey Lander when he was brought in early last year in a non-executive role to get the City real estate practice off the ground.
Despite initial fears, Ricketts says the departure of Vivian and his team “released” SJ Berwin.
“We saw it as a fantastic opportunity,” he insists. “More people went than work, and the return of activity means morale is really high.”
Ricketts, who is described by one former colleague as “a good, solid lawyer – sensible and down-to-earth”, engaged external consultants to look at the department’s strategy. They decided to collapse the previous organisation that involved subdivisions run by Ryland, Pickup, Vivian and Minkoff into one full-service practice. Pickup, who did not want to return to leading the practice, has taken a more ambassadorial role.
Meanwhile, on a firmwide level SJ Berwin decided to phase out the 10-member strategy committee, which had included all practice heads, and replace it with an eight-member partnership board, with no guaranteed place at the table for real estate. However, recent elections confirm that property will be represented in the form of German real estate partner Hans Thomas Kessler.
“It’s a fallacy to think the firm is anything other than committed to real estate,” argues Ricketts. “None of us would be here if it wasn’t.”
A former partner is scathing, however.
“Real estate’s never going to be successful because corporate partners don’t give a damn if there’s a property department or not. All they see are overheads and discounted rates.”
But another former colleague sees it differently.
“Real estate was possibly taken for granted but leadership is now bending over backwards to ensure those that remain are happy,” he says. “Overheads have been taken out and clients have remained. For the moment they’re being treated with kid gloves, but I’m not sure how long that will last.”
The reshaping of a real estate team
Those who left…
To Berwin Leighton
Paisner: partner Michael Metliss
To Irwin Mitchell:
partners Jon Vivian, Lewis Myers, Rob Thompson and
Jo Footitt, plus 12 associates
To Mishcon de Reya:
partners Nick Minkoff and Stephen Hughes, plus associates Jason Tann, Louise Tainton and Rachel Burns
To Shepherd and Wedderburn:
partner Michael Scott
… and the partners
Planning and environment
(head of the UK real estate department)