Real Estate

The last year was a great one for real estate teams across the UK, but it was Clifford Chance that maintained its position at the head of the table. The group recorded a turnover of £95.5m, generated by standout deals such as the sale-and-leaseback of HSBC’s Canary Wharf headquarters, where it advised new client Spanish property group Metrovacesa. It also advised on the purchase of London’s 13-acre Chelsea Barracks site for Guernsey-based Project Blue, a joint venture between CPC group and Qatari Diar.

Internationally, Clifford Chance advised project sponsors Al Sawadi Investment and the Blue City group on the construction of a brand new city on the coast of Oman, and acted for London & Regional on a £1bn joint venture to acquire the waterfront in South Africa’s Cape Town. Clifford Chance’s results are a healthy 16 per cent up on last year’s total of £82.4m, similar to, but slightly surpassing, the average firmwide revenue rise of 15 per cent.

“We believe we’ve done more than just rise with the tide and take the same proportion of the market – our strong sense is that we had good deals and new clients that were in addition to just a ‘fair run’,” says Cliff McCauley, head of real estate at Clifford Chance. “We set out an ambitious new target and a target for new relationships, and we hit both. In revenue terms, last year was our biggest ever, and that was despite being a member down.” (Partner Richard Margree left the firm for real estate business LXB in January).

However, when it comes to individual revenue, partners in every firm trailed those at Freshfields Bruckhaus Deringer.

Collectively the group posted a £59.2m turnover, placing it sixth in the table, but individually the partners generated a cool £2.37m each. Narrowly behind came those in the £71.6m real estate group at Linklaters, who brought in £2.31m per head. The two firms’ results are bad news for Herbert Smith and Ashurst. Partners at these two reeled in £1.54m and £1.53m respectively, but were squeezed out of the revenue per partner (RPP) league top four as a result.

Domestically, deal highlights for Freshfields included advising opposite Allen & Overy (A&O) and Clifford Chance on the HSBC side of the sale-and-leaseback of HSBC’s headquarters and helping Land Securities on its contested but ultimately successful planning application for Land Securities’ tower development at 20 Fenchurch Street in London.

Freshfields also benefited from continued investment in the German real estate market, widely seen as a late bloomer, where highlights including advising Blackstone Real Estate Partners on the €1.6bn (£1.08bn) sale of a
majority shareholding in the 31,000-apartment property firm Vitus Group to a consortium of institutional investors; Morgan Stanley on the acquisition of a €750m (£508.57m) real estate portfolio from Quantum Immobilien; and Morgan Stanley again on its €566m (£383.8m)acquisition of 10 Hilton hotels.

The real estate team at Eversheds slipped from the silver medal position it has retained for the last three financial years to third place. However, the firm’s real estate group still recorded a total revenue greater than those at magic circle firms Linklaters and Freshfields, albeit as a far greater share of the firm’s whole.

Unlike at the magic circle, where real estate accounts for less than 10 per cent of total revenue across all four firms, and as little as 6 per cent at Freshfields and Linklaters, Eversheds’ real estate team accounts for almost a quarter of total income – and it commands corresponding clout within the firm. Group turnover rose by only a modest 8 per cent this year, lower than the firm average of 11 per cent, but still amounting to a respectable £85.4m.

Deal highlights at Eversheds include advising Citibas Investments on the £1bn Holt Town development in East Manchester; leisure group Mitchells & Butlers on the £101m disposal of 102 of its community pubs to Trust Inns; and acting on deals with a series of regional development agencies responsible for transferring more than £240m of land from public to private ownership.

Eversheds lost its silver medal to DLA Piper, after an impressive year for the latter in which real estate turnover grew by 52.2 per cent, from £58.6m to £89.2m. The figure was well short of the £130m that real estate head David Taylor says the group would have achieved if the group’s revenue was integrated with its US offices’, but it still represents a considerable achievement. RPP in the team rose by a staggering 93 per cent, from £810,000 to £1.56m, far surpassing the firm-wide average turnover growth of 21 per cent.

A&O also enjoyed an excellent year. The firm’s property group saw turnover increase by 7 per cent to £59.7m. Deal highlights included advising Royal Bank of Scotland (RBS) on the sale of London’s Citigroup Tower for £1bn, the largest single-site property deal in UK history. It also advised HSBC on its £1.09bn sale of the HSBC Tower at 8 Canada Square, and on the sale of CityPoint, the London home of several firms, including Morrison & Foerster, Pinsent Masons and Simmons & Simmons.

A&O’s real estate RPP also grew, from £1.2m in 2005-06 to £1.24m last year.

Berwin Leighton Paisner (BLP) remained in fifth place in terms of overall revenue in spite of a healthy increase in group turnover of more than 16 per cent to £60.8m. Real estate is of core strategic importance to BLP and, despite efforts to increase the share of turnover contributed by other groups such as project finance, it accounts for exactly the same 36 per cent of total revenue as it did 12 months ago.

The group’s strategic importance was made clear by the firm’s statement hire of Herbert Smith real estate star Chris De Pury, believed to be joining BLP next January on a remuneration package of more than £1m a year, far clear of BLP’s average profit per equity partner (PEP) this year of £660,000.

RPP increased by a modest 5 per cent, however, and partners will be hoping De Pury ensures it stays heading northward.

Another real estate practice to be enjoying an upwards spurt was that at The Lawyer’s Law Firm of The Year Trowers & Hamlins,which grew turnover by an impressive 58 per cent. Although the new total of £34.7m remains short of many competitors’ totals, it has rocketed the group to fourteenth place, having entered the top 20 for the first time at nineteenth last year. Trowers is now ahead of Birmingham’s Wragge & Co, where real estate accounted for a full 30 per cent of a total firm turnover of £34m, and not far behind Herbert Smith and SJ Berwin (£36.7m and £37.9m respectively). RPP was pushed forward by a vigorous 32 per cent.

The real estate team’s success is welcome news for Trowers partners generally, as firmwide PEP is more dependant on the fortunes of the property group than at many of its rivals. The practice contributes slightly more than half of total revenue (51 per cent), a far greater share of the whole than at any other firm in the real estate top 20, including BLP.

Deal highlights for Trowers last year include advising private equity firm GI Partners on its £571m acquisition of 290 managed pubs from Punch Taverns and acting for Adeem Investments on the £250m acquisition of Grosvenor House Apartments, a company established for the purposes of operating the hotel apartments business at the Grosvenor House Hotel (from where the firm would collect its award from The Lawyer a few months later).

At Denton Wilde Sapte (DWS) real estate turnover leapt by 55.1 per cent, from £25.1m to £38.9m, helping the group to climb from sixteenth to eleventh in the table. The growth was in large part due to developments in longterm projects in which DWS was already involved. These included advising Cricklewood Regeneration, a joint venture company comprised of developers Hammerson and Multiplex, in connection with its proposed £3bn regeneration of the Brent Cross and Cricklewood areas of North London. The firm also finally defeated a protracted challenge from a residents group against its client the London Borough of Camden to kick off a £3bn regeneration scheme for London’s King’s Cross area.

DWS’s boom in real estate saw it nudge ahead of the team at SJ Berwin, which slipped two places from eleventh to twelfth, despite a respectable increase of 16.5 per cent to £38m. SJ Berwin’s partners were sanguine, however, as the budget for the year was a mere 10 per cent increase, placing the group well ahead of target.

Deal highlights included acting for new client Evans Randall on a total of £875m of acquisitions (including a £600m, 50 per cent stake in London’s Swiss Re tower – or the Gherkin); advising new client Westfield on the formation of a £1bn joint venture with Queensland Investment Corporation in respect of the Merry Hill shopping centre near Birmingham; acting for RBS on its £1bn sale of Canada Square, Canary Wharf; and advising on the £1bn purchase of Sheffield’s Meadowhall shopping centre by British Land.

The 2006-07 financial year was a reasonable one for real estate at Pinsent Masons, where turnover jumped by a healthy 14 per cent, from £26.8m to £30.8m. RPP also rose by 14 per cent in the same period, hitting £95,760 after last year’s £84,000. The growth can be attributed in part to the proceeds generated by having advised national regeneration agency English Partnerships on the strategic structuring of the First-Time Buyers’ Initiative, the Government’s low-cost home ownership initiative intended to increase the supply of affordable housing.

As well as the revenue generated from the initial structuring itself, the firm has since acted exclusively in connection with the monthly rollout of the initiative across England, acting for regional development agencies nationwide covering more than 30 development sites.

Head of real estate Arthur Lovett argues that Pinsents is not a volume firm, although he admits that the work “is a priority for us, but it wouldn’t be for the magic circle”.

City snobbery aside, this lucrative workstream is set to continue for the next four years as the Government aims to deliver as many as 15,000 affordable homes and will provide a solid platform on which the group will seek to build further growth, which will be essential if the real estate team is to keep up with its competitors. Stronger performances at rivals such as Trowers, have seen the firm drop from fifteenth place in the real estate revenue table 12 months ago to sixteenth.

Lovells also slipped in this year’s ranking, from eighth to ninth place, after recording a poor turnover growth of just 3.2 per cent. This was despite a 49 per cent increase in RPP, from £96,000 to £1.43m.

Only Linklaters recorded a lower turnover growth, pushing revenue up by just 2.7 per cent, from £41.2m to £42.2m. The firm’s significant lead on most of the competition last year cushioned it from a significant fall in the real estate revenue table, however, trundling only from third to fourth place, and should be viewed only as a slowdown after a remarkable 2005-06, during which real estate turnover grew by 35 per cent.

The real estate team at Addleshaw Goddard, which contributes a quarter of the firm’s total turnover, enjoyed unremarkable growth in the last financial year, boosting turnover by almost 10 per cent to hit £44.2m. This is a slowdown from last year, when real estate turnover rose by 13 per cent, and it also represents a failure to meet the group’s 2006-07 revenue growth target of 13 per cent.

Despite that the group is budgeting for 14 per cent growth for the 2007-08 financial year, reflecting confidence in its abilities despite real estate head Michael Reevey’s concerns about the future of the property market. The firm continues to account for a large share of turnover via regeneration work, but deal highlights included advising Travelodge on its £675m sale to private equity firm Dubai International Capital and acting on behalf of British Land on the £1.01bn refinancing of the Meadowhall shopping centre.