In May, Pillsbury Winthrop Shaw Pittman’s Hong Kong office managed to become profitable. While this is the goal of any law firm active in Hong Kong, Pillsbury’s feat was remarkable because it occurred after the firm had been operating in Hong Kong for only one year. In a market that is notoriously tough, Pillsbury was able to beat all expectations by being different.
“The plan has always been being different. There is no point opening an office decades after everybody else and trying to compete in the exact same space,” said Paul Jebely, the Hong Kong managing partner of Pillsbury. “Our plan was to go very niche and go very different.”
Jebely himself was in fact the first step of that “niche and different” plan. Still in his late 30s, Jebely joined the firm last year from the British firm Clyde & Co, where he had been global head of aviation finance for more than two years. By tapping Jebely, who specializes in both commercial aircraft and private jets financing, Pillsbury made a rare move among U.S. firms by venturing into a practice that has been traditionally dominated by U.K. firms in Asia.
Jebely’s goal for the Hong Kong office was to turn a profit from the outset. “I made it very clear that my goal was to be profitable within a year,” he said. “That after every single penny was spent, we would come out in the black.”
To achieve that, Jebely first needed to keep the overhead down. Pillsbury’s Hong Kong office is located in the SoHo area, a neighborhood of restaurants, bars and boutique shops uphill from the business district known as Central, where most global firms have their offices. According to listings on real estate agency Prime Property’s website, the per-square-foot rent in Pillsbury’s building—Kinwick Centre —($5.50 to $5.90) is as much as a quarter of the amount that some U.S. firms pay for space in the most popular buildings ( $17.30 to $23 in the Landmark or $21.20 to $25.60 in the Exchange Square).
The office also keeps a lean team. In addition to Jebely, the only partner, Pillsbury has three associates, one paralegal and two staffers, and everyone came with Jebely from Clyde. While Pillsbury was among the U.S. firms to match a new associate pay benchmark initiated by Cravath, Swaine & Moore last June, the pay raise didn’t include Pillsbury’s offices outside the United States, including Hong Kong.
Jebely said the associates in Hong Kong are paid at the same level as those working at a Magic Circle firm in London. “In the Hong Kong market, that is what is to attract and retain top talent,” he said. According to a 2016 survey by recruitment firm Hudson, Magic Circle firms pay first-year associates between £67,500 and £78,500 a year in London; that’s about HK$675,000 to HK$785,000 or $86,600 to $100,700. That compares to the $180,000 rate set by Cravath.
But more importantly, Jebely knew specifically what practice areas to emphasize. Years ago, Pillsbury actually had an office in Hong Kong: In 2001, the combined firm of San Francisco’s Pillsbury Madison & Sutro and New York’s Winthrop, Stimson, Putnam & Roberts inherited legacy Winthrop’s Hong Kong office, which handled corporate and capital markets transactions. But only a year into the merger, the firm decided to close its Hong Kong office, citing significant drop in capital markets deals in the region.
Jebely said he was not going to repeat that same mistake. “We would never have launched a Hong Kong office today doing mid-market capital markets [work]. It would be an absolute bloodbath,” he said, adding that if the firm were to work on capital markets deals, it would be competing with hundreds of lawyers in town.
Instead, he competes in the aircraft finance space with about 20 other partners in the region. Aviation finance is one of the fastest-growing practices in Asia. In fact, the practice has already gotten a lot more crowded in the year since Pillsbury’s office launched. So far, Hogan Lovells; Watson Farley & Williams; Berwin Leighton Paisner; and Stephenson Harwood have all added an aviation finance specialist. And Chicago-based Am Law 200 firm Vedder Price has opened a Singapore office to focus on the growth of aircraft finance work.
When the market gets crowded, it inevitably makes fees fall, Jebely said. “It’s not nearly as profitable as it was in the past.”
Pillsbury has also differentiated itself with a commercial aviation finance enforcement practice. In March, it released a second edition of its World Aircraft Repossession Index where the firm rates different jurisdictions based on their repossession risk and advises lenders on that risk. “We take a rating agency approach to jurisdictional risk. … If you loan money to an airline in this country, if the deal goes south, how likely are you to get your planes back,” he said.
But Pillsbury wasn’t betting solely on aviation finance. The plan, according to Jebely, was that the aircraft finance practice would naturally generate disputes work, and the private jets clients would lead to high-net-worth client advisory work such as trust and estate planning, which then would lead to other lines of work including white-collar defense.
Jebely said the transitioning of his private jets clients into Pillsbury’s other practices such as wealth planning advisory work has been successful. The next step, he said, is white-collar defense and investigations. Two weeks ago, the firm’s Washington, D.C.-based white-collar defense practice co-head William Sullivan held a seminar on defending Foreign Corrupt Practices Act investigations in Hong Kong. So far, the Hong Kong office hasn’t had a major white-collar case but Jebely said that seminars like the one Sullivan just held tend to attract lots of interest in that area. “Over time, there will be a natural need to have someone physically based here,” he said. “But that’s still a few years off, I think.”
For now, Pillsbury is not in a rush to expand in Hong Kong, but several U.S.-based partners will spend more time in the office. In addition to Los Angeles-based firm managing partner Edward Perron, who has registered as a resident partner in Hong Kong, San Diego-based intellectual property litigation partner Steve Moore, whose clients include Shenzhen-based smartphone maker ZTE Corp., and Palo Alto, California-based trust and estate partner Jennifer Jordan McCall are both applying for a registered foreign lawyer status with the Law Society of Hong Kong.
More partners like Sullivan travel to Hong Kong to use the office as a “forward operating base,” said Jebely, citing the military term to describe U.S.-based partners coming to Hong Kong to host business development events and make contact with new clients.
But Jebely intends to keep the Hong Kong-based team very small for a long time.
“We have had no shortage of CVs, but the firm is extremely selective,” he said. “There is no reason to go big in this market now when we can take our fair share without a massive amount of overhead.”