Richard Sussman and Michael Lefkowitz
Rosenberg & Estis
Representing huge developers in huge deals is not normally the work of a smaller firm. But for Rosenberg & Estis, a firm of 50 attorneys dedicated entirely to real estate, it has become not uncommon.
The firm has represented clients like the Durst and Brodsky organizations in large, complex deals, including, for Durst, the carefully watched 1 World Trade Center negotiation, as well as in quainter ones, like the CUNY School of Social Work lease at 118th and Third Avenue.
Among Rosenberg & Estis’s achievements this year was also the closure (finally!) of the financing for the no-longer-so-new Bank of America Tower at 1 Bryant Park. “It was a Herculean deal,” Mr. Sussman said. He said they essentially created an “integrated financial instrument” involving C.M.B.S.’s and Liberty Bonds. “This had never been done before, as I understand it.”
Rosenberg & Estis was also behind commercial debt fund RCG Longview, which was making predevelopment loans on sites like 180 Avenue of the Americas, at a time when more traditional lenders were keeping their distance. Enabling lenders like RCG greases the wheels of the commercial industry as a whole, according to Mr. Lefkowitz. “They have the advantage of being more nimble.”
So what is Rosenberg & Estis giving its clients beyond mere due diligence? “We actively work to structure everything. An economic situation which is not ‘vanilla’ requires a lot of work,” Mr. Sussman said. For instance, after the Durst Organization won the stake bid at 1 World Trade, “there was still a lot of dealmaking to be done,” said Mr. Lefkowitz. In the CUNY deal, the firm ended up using reversionary interest among other less orthodox tools. “We work with them from the earliest moment, especially with the off the market deals,” Mr. Sussman said.
Kramer, Levin, Naftalis & Frankel
Mega-firm Kramer, Levin, Naftalis & Frankel closed tons of high-profile real estate transactions in 2011, including the sale of the upper portion of the old New York Times Building to Blackstone and the sale of St. Vincent’s to Rudin Management.
The year also has seen lots of stalled deals being recapitalized and lots of medium-size clients returning to the market, according to Jay Neveloff, head of Kramer Levin’s real estate practice. He says clients are more inclined to go to their attorney to make sure they have an accurate read on the market and that he is happy to oblige. “The top lawyers in the city are performing broader functions. You really get involved in the business of your clients.”
Kramer Levin boasts New York City’s largest land-use practice, with attorneys who have worked for the Department of City Planning, the Landmarks Preservation Commission and the Parks Department. Currently, they represent Columbia University in its ongoing land-use negotiations in Harlem.
In the end, perhaps Kramer Levin’s size is its strongest asset for clients. “I have the ability, if I have clients who want to meet an owner, or make a joint venture, go to a bank,” Mr. Neveloff said, “I have the ability to open those doors. Or, if I don’t, I have someone in my office who can do that.”
Sullivan & Cromwell
Did you know that real estate securitization structures were created by adapting commercial paper financing structures originally used for nuclear plants? Neither did The Commercial Observer, but this is the sort of knowledge one is treated to in conversation with Joseph Shenker, chairman of the real estate practice at Sullivan & Cromwell.
“We do high-end, sophisticated deals,” he said. “This justifies our fee structure.”
Sullivan & Cromwell has been behind some of the highest-profile debt restructurings of the last year, including at 280 Park Avenue, 1 Park Avenue, Independence Plaza in Tribeca, 230 Park Avenue and 666 Fifth Avenue. And with many properties in the city requiring some financial, uh, adjustments, they have lots to do. “When they are buying a complicated piece of mezz debt, they have all these questions,” Mr. Shenker explained. “[We] provide one-stop shopping.”
On 230 Park, for instance, the sale involved a deleveraging of the capital structure. “It amounted to Invesco putting in equity and paying down the total debt, a somewhat typical transaction” Tony Colletta, the lead counsel on the deal, said. On 280 Park, SL Green and Vornado pooled their acquired debt and added equity. It was “a complex and delicate transaction,” said Arthur Adler, another partner at Sullivan & Cromwell, who handled the deal.
The real estate cycle seems to provide such seemingly endless maneuvering for law firms. “The nice thing about New York real estate is you see the same buildings again and again,” Mr. Shenker said.
In teaching his real estate transactions class at Harvard Law, Jonathan Mechanic uses the Lipstick Building as a case study. Not only has he been involved in nearly every aspect of the building’s purchase, lease and debt repackaging—he repped Tishman Speyer in their original purchase; oversaw the lease to major tenant Latham & Watkins; repped Tishman Speyer in the next sale and then the Royal Bank of Canada in the building’s recent prepackaged bankruptcy—his conference room window looks out over it. The building, having had what Mr. Mechanic calls a “truncated life cycle,” represents the extremes of New York City real estate, and helps his students learn what he considers the most important lesson of real estate law: “To be a good lawyer you need to understand the business.”
The night before he spoke with The Commercial Observer, Mr. Mechanic, oft referred to as the most powerful real estate lawyer in the world, just happened to run into Frank Gehry and Bruce Ratner grabbing a drink at the Greenwich Hotel—for Mr. Mechanic, a typical evening in the business.
Mr. Mechanic has worked for Fried Frank since 1978, save for a five-year run as general counsel for developer Howard Ronson. This year alone has seen Fried Frank work on deals that are not just significant for their size but for the impact they will have on the city. Mr. Mechanic repped Condé Nast in its move to 1 World Trade Center, in “a total collaborative effort,” among the Durst Organization, the publisher and the Port Authority. Just recently, Fried Frank was involved in the Whitney’s move downtown; the recently finished 8 Spruce Street, designed by Mr. Gehry and developed by Mr. Rather; and Google’s purchase of 111 Eighth Avenue.
And what of the near future? Mr. Mechanic says to look for redevelopment of the South Street Seaport, lots of deals at the Hudson Yards and a vibrant market for retail and office space near the World Trade Center.
No list of top real estate practices would be complete without the inclusion of Skadden, Arps, Slate, Meagher and Flom.
Among their notable transactions of late? There was SL Green’s debt restructuring at 280 Park Avenue; the Helmsley Charitable Trust’s sale of the Helmsley Hotel for $314 million; and, of course, the 20-year lease for Wilmer, Cutler, Pickering, Hale and Dorr LLP’s new space at 7 World Trade Center. That lease was the first to use Mayor Bloomberg’s new “green lease language,” which lets tenants and owners share the cost of energy efficiency upgrades.
Neil Rock, head of Skadden Arps’s real estate practice, is the type of real estate attorney whose projects alter the very landscape of the city. He represents the Empire State Development Corporation, the state’s economic development arm, in connection with Atlantic Yards and the New York Convention Center Development Corporation regarding the Jacob Javits Center and of the High Line. Little surprise, then, that Forbes calls Skadden Arps “Wall Street’s most powerful” law firm. The real estate, practice, appears to be no slouch either.
Bill McInerney and Steve Herman
Cadwalader Wickersham & Taft LLP
Bill McInerney heads a real estate practice that is not at all shy about its aptitude on the financial side of real estate deals. “We can originate the asset, but also have the expertise to exit the asset” in various ways, including the private market, Mr. McInerney said. “As the market rebounds, we are in a position to take advantage.”
Together with Steve Herman, head of the bank finance practice, Mr. McInerney sees a bright next couple of years. Not only did Cadwalader not slash its staff as so many firms did post-Lehman, they specialize in the types of deals that will be most in demand in the coming years. “There is $100 billion in debt that is overleveraged,” Mr. Herman said. So the real estate industry will be seeing “restructuring for years to come.” Their “soup to nuts,” practice, as Mr. McInerney calls it, deals end to end with origination, securitization and sale of real estate debt, as in the recent case of the Extended Stay Hotels portfolio.
Cadwalader was the firm most active in commercial mortgage back securities … you know, back before the CMBS crash in 2009. “I’ve lived through multiple cycles in this industry,” Mr. Herman said. And he believes anyone overly upset by the current debacle is simply revealing how young they are. “Last downturn, there were many more bankruptcies and contested foreclosures. Since then, we’ve developed structures to mitigate that, and they’ve had the desired effect.”