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Real estate attorneys, long known as “dirt lawyers,” are adopting more of the deal-making skills of their corporate counterparts as they get pulled deeper into the real estate sector’s surging mergers and acquisitions activity. Real estate attorneys say clients that are buying and selling high-dollar, multiproperty assets increasingly want a lawyer who not only understands how to assess properties, but can also play a role in crafting a transaction. “The lines have blurred between a real estate and a corporate lawyer because there’s so many financial concepts that are used more and more in the real estate world,” said Jay Neveloff, a partner at Kramer Levin Naftalis & Frankel in New York. “Clients need more than a scrivener, they need a strategist.” Increased real estate mergers and acquisitions activity, both higher volume and bigger-dollar deals, are behind the stepped-up role of real estate attorneys, the lawyers said. The buying and selling of real estate investment trusts (REITs), especially those that are publicly traded, is at the heart of the added activity. The National Association of Real Estate Investment Trusts said that 2006 has been the biggest year ever for mergers and acquisitions activity, valued at $117.2 billion. That was nearly quadruple the two prior years combined, with each logging about $15 billion. The role of real estate attorneys is also being expanded by the increased complexity of the arrangements and the shorter time frame in which clients expect the deals to be done, the lawyers said. With the transactions more likely to include publicly traded companies, competitive bidding and a duty to shareholders are also stretching their skills, they said. “There was a need to have a combined understanding of the underlying real estate business and the ability to execute transactions,” said Stephen Tomlinson, head of the real estate practice group at Chicago-based Kirkland & Ellis. Tomlinson, who works out of the Chicago and New York offices, said he spent more than half of his time in 2006 on REITs and merger transactions, compared with 10% or less in the past. REITs, which invest in portfolios of similar properties such as resorts or office buildings, have become a popular investment in the past 15 years since they first sold shares to the public in the early 1990s. When REITs became publicly-traded companies, not only could investors buy and sell an investment in real estate more easily and in smaller amounts, they also gained the transparency that comes with required public filings. In the biggest REIT sale ever, Chicago-based Equity Office Properties Trust agreed in November 2006 to be sold to Blackstone Real Estate Partners for $36 billion. In October, BlackRock Realty and Tishman Speyer Properties L.P. purchased the Stuyvesant Town-Peter Cooper Village apartment buildings in New York City for $5.4 billion in the biggest-ever transaction of that type. Tishman in December also agreed to sell a single Manhattan skyscraper to the Kushner family of New Jersey for a record-breaking $1.8 billion. “I’ve seen our role expand as a result of the increasing pressure to deploy larger and larger amounts of capital,” said Andy Sucoff, who leads the real estate group at Goodwin Procter in Boston. Sucoff said he and his partners joke with retiring real estate attorneys about deals five years ago that were considered big if they were valued at $100 million. Roots of larger role Real estate attorneys may be playing a larger role partly because some deals are growing out of relationships initially formed by firms’ real estate practices, said Jonathan Mechanic, who heads the real estate group at Fried, Frank, Harris, Schriver & Jacobson in New York. That was the case with client Broadway Real Estate Partners LLC, which hired Fried Frank to help it buy a 10-property U.S. office portfolio for $3.4 billion from a private REIT, Mechanic said. Fried Frank found that there was so much need for a blend of the corporate and real estate focus that early last year it created a practice group separate from Mechanic’s real estate group called the corporate real estate group. Attorneys from the two areas are spending a lot more time together, especially given the increased size and complexity of the transactions, he said. “You really can’t remain in your own silo,” Mechanic said. ‘Wave of the future’ While some firms have offered a blend of corporate and real estate services for a decade, many say it has become more important in the past 18 months to have real estate attorneys taking senior roles in the transactions. “To me, this is the wave of the future,” said Robert Lee, a Jones Day real estate attorney in Chicago who recently led CalEast Industrial Investors LLC in a $3.4 billion acquisition of Centerpoint Properties Trust, an industrial property near Chicago. In the past, the real estate attorneys would have been more likely to simply assess the properties, leaving most of the regulatory, financial and other considerations to mergers and acquisitions lawyers. Now, real estate attorneys say they’re being brought into the negotiations sooner to strategize over the transactions. They’re helping create new financial structures, formulating bids for the best tax and pension fund advantages for investors, and helping push the deals through faster. “What drives a deal is not transferring a deed,” said Jana Blackman, a Sonnenschein Nath & Rosenthal attorney in Chicago who chairs the firm’s national real estate practice. “What drives it is formation and rights of the party in the investment vehicle.” On the recent proposal to sell the Starrett City apartment complex in New York, now called Spring Creek Towers, Neveloff said he began work a year before it was announced, crafting strategy, interviewing and retaining brokers, and getting lobbyists involved. He had a part in every aspect of the transaction, he said. “We for the past several years have been using more of the same sophisticated techniques that are used in the corporate world,” Neveloff said. Michael Glazer, a real estate investment management attorney with Goodwin Procter in Boston, said that two years ago he worked on a transaction in which he helped an investor set up a private REIT to buy a Washington hotel, and he’s used techniques from the deal ever since. Glazer has also become adept at using joint ventures in real estate transactions to maximize tax advantages. “My niche is in the joint venture world where money and operators are coming together,” said Glazer, who also worked on the Peter Cooper Village-Stuyvesant Town transaction. Amid the increased competition in the buying and selling of properties, a deal with a superior tax advantage is something that can help a client win a bid, Sucoff said. To be sure, some clients still turn to mergers and acquisitions attorneys to take the lead. When Equity Office Properties was sold, Sidley Austin attorney Imad Qasim of Chicago was at the forefront. He declined to comment on the transaction. Equity Office Properties’ chief in-house lawyer, Stanley Stevens, said the company used Sidley, its usual corporate counsel, for the firm’s mergers and acquisitions as well as tax expertise, while relying on 25 in-house attorneys for real estate acumen. “No one knows our portfolio like we do,” Stevens said. Most companies may not have that kind of in-house firepower, Stevens said. To the extent that some buyers are snapping up REITs or other real estate companies and then reselling them in pieces, they will need real estate attorneys who can help them assess resale values, Stevens said. “You need to fully understand each asset from the perspective of a buyer and that’s going to require a real estate attorney’s expertise,” he said.

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