Thursday, April 30, 2009

Poor, poor partners

The AmLaw 100 is out, and many big law firms had a decline in revenue last year. And you've seen many if not most of them whacking staff, associates, non-equity partners and even some equity partners in response.

So how much should we cry? I'm not so sure. Take Chicago, for instance. According to the Tribune, "Average profits per partner at six of the 11 [Chicago-based firms in the AmLaw 100] either fell or were flat compared with 2007." That means five were up, perhaps modestly, but up nonetheless.

And those that fell?

Mayer Brown: PPP went down to $1.11 million.

Sonnenschein: oh my gosh, the PPP went down from $915K to $805. The partners may have to cut back to one country club membership.

Kirkland was the big boy, as it usually is, with flat PPP of $2.47 million. Get out the violins. No tears here.

In short? BigLaw's a business and it has been for years now. Most partners are still making plenty of money and to ensure profits do not tumble too much they are dumping employees. With a glut of talent there is no need to stockpile. Much as I might want to I can't excoriate them for doing it, because it is probably the right business decision for most. Just keep these realities in mind and don't have blinkers on.

Tuesday, April 28, 2009

Don't forget the tweets!`

There are times -- today is one of them -- when I'd like to be writing about a lot of topics, but business just won't allow it. I do, however, to tweet about them when I can. So check out or subscribe to my Twitter account or the column to the right, which is updated continuously. Have a great day!

Monday, April 27, 2009

CMBS delinquiencies still on the rise

OK, now this is one we can expect. The question is, where does it end? Loans are coming due, CMBS is dead and equity will need to be found to refinance stuff even when you can find a lender. Call it both a great opportunity and a scary time, depending on where you sit at the table. Thoughts, anyone?

Sheldon Good & Co.'s BK

Well, I had no clue on this one. I know it happened the other day, but now that I am back home from vacation I cannot help but say a few words (beyond my previous tweet) about the Chapter 11 filing by Sheldon Good & Co., the Chicago-based real estate auction powerhouse.

The company says its filing can be blamed upon its late Chair and CEO, Steven Good, who sadly took his own life in January. Millions of dollars may be missing. Ouch. (By the way, a link to Steve's book and his web tribute are still on the website.)

Those who follow the company had to assume there had been some down times just because the market is in the tank, but you might also think the company might do some volume on liquidations caused by the economy. In fact the filing makes me wonder where the auction business is.

We also know there'd been a long standing fight between Steve and his father, company founder Sheldon Good, that led to the elder Good's departure from the company. (Crain's says he's listed as a creditor.) Here's an update with a quote from the senior Mr. Good.

In any event, this just adds to the sad course of what's going on in the market. I wish Alan Kravets and his team (some of whom I have met at business and sales lunches in the past) nothing but the best. I've always thought they did a great job for their clients, even when I was on the buy side of a deal they were selling.

Wednesday, April 22, 2009

GGP and asset sales

GGP says it does not want to sell core assets in its bankruptcy. But Retail Traffic correctly points out that many industry insiders don't think that can happen. And that makes sense to me. Look at the LTV of its portfolio and the amount of debt the company has to restructure.

In any event, read for yourself and make your own conclusions. And sharpen your due dilgence pencils.

Dear Jenner & Block - stop working so hard!

A Trump Tower Chicago resident is apparently complaining that Jenner & Block's lights are on 24/7, and that this is disturbing her sleep, not to mention that Jenner's wasting energy. Not very green, I guess, but yhey are a BigLaw firm, and that's the way many of these folks operate. (When I was in BigLaw lights went out around 9 as I recall; after that you had to work them manually in your office.)

OK, so this buyer never bothered to check out a million dollar-ish condo at night for the views or other issues? She's apparently using eyemasks now (uhhh, yeah, a good idea), but that's not good enough.

But at the end of the day I don't understand why the Tribune story failed to catch a key issue here, one that hopefully makes this story a non-story soon. As I recall, Jenner is moving to new digs later this year. Hopefully that solves this "problem."

Tuesday, April 21, 2009

Tuesday Tidbit - 4/21 edition -- letters of intent

I'm on vacation this week, which explains the dearth of posting. But I did run across an item from South One Capital's blog that made me want to say something quick about letters of intent.

An LOI, while generally non-binding, is important for two reasons: first, as the post says, most institutional investors will seldom look at a deal without an LOI. This is as true for sales and leases as it is for loans.

Second, the LOI is the general road map for the structure of the deal. Yes, things can change, but if deal terms change thereafter then you get accused of retrading. That's okay, of course, but be prepared. But more importantly, often key issues that impact the legal side get negotiated in the letter of intent. I am not giving everything away for free, but believe me, there are many things that a good lawyer can help you with here.

Moral of the story? Get your lawyer involved now, at the beginning of the deal. You may spend a few extra dollars but the lawyer could end up saving you more down the road in money, time and headaches.

Thursday, April 16, 2009

GGP files Ch. 11

Well, it happened, but not without making a good run at trying to stop it. General Growth Properties filed for Chapter 11 bankruptcy protection this morning. I am reading this: "The filing affects properties owned by the company but does not impact its third-party-management business and some centers owned in joint ventures." Here is the press release that says "broken credit markets" require this filing. (Well, that and levering yourself to the hilt. Wonder how certain former CFOs feel today.)

Now, not all the malls are in this 11:

Of the 158 regional centers included in the filing, some high-profile properties stick out, such as Ala Moana Center, in Honolulu; Faneuil Hall Marketplace, in Boston; and the Grand Canal Shoppes at the Venetian and Fashion Show Mall, both on the Las Vegas Strip. Of the about 60 properties that aren’t part of the filing, some big-name centers are Water Tower Place, in Chicago; Oakbrook Center, in Oak Brook, IL; and Glendale [CA] Galleria.
What next? Perhaps a mega-restructuring of debt, together with the sales of some properties to others at a good price. The sales may bring some cash out of the wood works and maybe some lenders to go along with it. Apparently 20% of the workforce has already been dropped previously, and I hope for people I know who are still there the axe does not cut at all or too deeply. What troubles me about this one is that real estate deals can sometimes be very complex, and this BK might take time and a lot of money to sort out. I was hoping not to have to test this theory, but here we go. The NYT shows a copy of the petition and the organizational charts, which themselves make for entertaining reading. I wonder whether those charts were made internally or if GGP paid $500/hour for a law firm associate to create them. Yes, folks, that happens. Take my word for it.

Tuesday, April 14, 2009

Not all GGP bondholders are so patient

Or so says Wilmer Cutler Pickering Hale and Dorr LLP, the lawyers who say they are representing a bunch of bondholders demanding repayment...or else. You can read about it here and here.

There are some people who might be happy about this, including possibly William Ackman. That said, I find this quote telling:

The bondholders' action pushes General Growth closer to a bankruptcy filing but doesn't mean one is imminent. A trial spurred by the bondholders' lawsuit likely would take months to play out. Meanwhile, General Growth previously pledged to work with its unsecured lenders to craft an out-of-court restructuring of its balance sheet by the end of June. If General Growth meets that commitment, the trial might not be needed.
Is there more here than meets the eye, or is this just a desire to be repaid?

(H/T Traffic Court.)

Monday, April 13, 2009

Landlords or Carnies?

You may recall reading my post the other day about landlord's coming up with creative uses for vacant space, including indoor surfing. Well, the Llenrock Blog has taken this one step further with an informative and humorous post on creative use, to wit:

This concept seems all to familiar to retail landlords of regional malls, power and lifestyle centers. The only thing worse than a rainy day to a carnie is a dark store to a landlord. And landlords aren't being all that shy about it either. A recent article in the New York Times showed that a burgeoning trend to fill up the mounting oceans of vacant space is, well, water.
I'm not really into indoor surfing, but if a landlord let a tenant put in a temporary indoor pool (how you do that is beyond me, though, because of the dehumidification costs), I'd be all over it. But I am dreaming because of the damage to the space, the objections of tenants, the cost, the insurance and a million other legal issues. I can tell you this, however: I have been to the local mall exactly once this year, and I was there a grand total of twice last year.

Tuesday, April 7, 2009

Tuesday Tidbits - April 7, 2009

There's a lot going on both in dirt and in my profession. Here's a quick summary of what I have been thinking about and reading:

In the "It's about time" department: many law firms are cutting way back on summer associates, retooling the programs from cocktail parties to work and even reevaluating the necessity of them altogether. I actually worked hard as a summer associate, but I wonder aloud whether we should to to an articling/apprenticeship system (a la medical residency) where law grads are low-paid interns at firms for a year before taking the bar -- and if they cannot find an articling position then they cannot take the bar. I always felt the second year law student thing was not a great way of evaluating talent.

WTF is going on with GGP stock? Up big yesterday, up again so far today...and the company is acting like Sergeant Schultz.

Some harsh but perhaps accurate advice for laid off associates who are not networking and developing business: get out of the profession. You don't belong.

I mean, lets be real here. Most of you never wanted to be lawyers. You wanted the trappings of what L.A. Law made you believe the practice was all about.

So get out.

Don't go into foreclosure defense, that'll be dead in two years. If you have no established practice in an essential area of law, get out. It's not going to get better in the next 5-10 years. If your goal is money, go make money. Buy a franchise, open a business. You went into law to make money, the money is not there, get out.

What is so wrong with realizing that you never really wanted to be a "lawyer?
What are the world's safest banks? Mostly not here. And "Bank of America is notably absent from the list."

No shock, but nontheless shocking: S&P is about to downgrade a boatload of CMBS. This is a very ugly quote: “We concluded that the ratings on a significant portion of our CMBS portfolio may no longer be appropriate, given our view of the increase in credit risk.”

That's enough for one morning. Enjoy!

Saturday, April 4, 2009

Surfing at the mall? Yup. And I don't even mean web surfing or channel surfing.

Desperate time require desperate measures. And with mall owners facing vacancies, you'll see just about anything. Community colleges, multi-level anchors with two users, temp stores, medical offices....but surfing?

Yes. That is not a typo. Read here. It makes lot of sense, especially here, and also because it appeals to the young demos that retailers covet.

Leave it to the dirt industry to find ways to use space creatively.

 
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