Wednesday, November 28, 2007

Update on law firms and CMBS

I wrote previously about some firms with large CMBS practices and their plans for what to do with not so busy associates. At the time, one of the firms, Thacher Proffitt & Wood, was not planning any layoffs. But a month later, with no end in sight, reports from Above The Law are that the CMBS heavyweight will probably have to let go about two dozen associates in structured finance and real estate, and first-years in those groups are also apparently being offered generous severance packages given that they apparently have little work to do.

As I said before, TPW is a good shop in my opinion and from my experience. It is disappointing to see layoffs might be on the way, but at least they are being honest (how could they NOT be?) by saying that the layoffs are economic-based. And maybe I was wrong before about comebacks in that these firms were probably geared up to do record, unsustainable volumes. I’m just not sure. And, according to the ULI's blog, The Ground Floor, "At 'street level,' originations of commercial mortgage-backed securities loans are said to have come to a literal halt; some are saying the current downturn is worse than 1998 (which it clearly is, as the current impact is global and includes all facets of the debt capital markets)...Conclusion: this is going to take much longer than many thought possible to work itself out."

I do know this: As a lawyer, you can get really pigeon-holed in a structured finance practice, though, so maybe in the end this can be a silver lining in a bad cloud for the lawyers. When you see more and more deals being done with the old standby lenders, the insurance companies, it seems that many people are agreeing with my thoughts about doing traditional deals for now, waiting for better times before into the more restrictive and less forgiving CMBS market.