Dealing It Up, Dealing it Down
development by Janet Leiser | Senior Editor
One real estate attorney's desk is stacked with deals, even though the Gulf Coast housing market has slowed to a crawl. He negotiates multimillion-dollar transactions for developers, lenders, landlords and investors.
Lee E. Nelson closed deals throughout Florida during the past 12 months that include the $36 million sale of a regional mall in Pinellas County, a $55 million bond issue in the central part of the state and the acquisition of a development of regional impact by a private-public partnership.
One corporate client is moving its North American headquarters to Tampa, where it will employ 250 white-collar workers. He declined to identify the business until the relocation is formally announced.
Nelson doesn't usually get involved in a transaction unless it involves seven or more figures. The more complicated, the better. Some projects, especially developments of regional impact, can take five, 10 or more years to complete. Clients, who usually are repeat customers, include national public homebuilders and banks and developers.
"I'm always on the deal side," Nelson says. "If you're going to stroke a check for $20-, $30- or $50-million I want to be part of that critical decision-making."
His expertise is in master project permitting and entitlements, including annexations, development agreements and environmental resource permits. He represents financial institutions in site acquisition, complex construction lending and working capital lending. He also restructures debt for borrowers, private lenders and banks, among others.
Shutts & Bowen LLP, an old established Miami law firm that opened its first Gulf Coast office last year in downtown Tampa, recently wooed Nelson, 44, away from local competitor William Schifino Mangione & Steady. He's the 21st attorney to join that office, and the firm plans to eventually have about 50 corporate lawyers in Tampa.
R. Alan Higbee, managing partner in Tampa, says Nelson's name came up regularly when he asked attorneys who'd be the best person to head the firm's local real estate practice group.
Slow market, more work
Higbee, a former Fowler White partner who joined the firm in September, says it's a good time to establish a real estate practice group.
"The only thing bad for law firms is the doldrums when nobody knows what's happening, when everyone sits around waiting to see what the economy is doing," Higbee says. "For lawyers, as long as the market is going one way or another we're in good shape. If it's headed down we have a lot of clients and new potential clients that have to do things to prepare for that and to deal with it."
Developers stuck with inventory or land possibly need help restructuring multimillion-dollar loans or they might have to extend contracts. Or maybe they're going to build a development in phases, rather than all at one time.
"The market is taking a hit now," Higbee says. "It's a correction. As it has in every cycle through history, it had gotten a little out of whack. It's cycling back."
There's a trickle-down effect when construction slows, Higbee says. It affects more businesses than just those companies that build houses, from the manufacturers of concrete, windows and aluminum to real estate companies and newspapers.
"The other thing that happens, which is bad for clients and good for us," Higbee says, "is they have to skinny down their staff and outsource work."
Many take proactive action before the bottom hits, he says, adding, "You have a lot of folks who have projects on the drawing board who say, 'Wait a second, this isn't going to work.' "
What does an investor or developer stuck with a project do during a downturn?
"There's no perfect answer," Higbee says. "But you start saying what do I have to do to finish? Do I go back and try to deal with my lenders where I say, 'Hey, look we're both in this together. Let's ride the storm out together. Let's not sink either one of our ships.' Or do I accelerate because all of a sudden construction is getting pretty cheap? There are a lot of folks out there who'd like to do your deal now, but they wouldn't talk to you a year ago."
Higbee expects the market to fall more before it starts the climb up.
"It's not at the bottom," Higbee say. "There are facets that haven't really felt it yet. Those with financing in place and building out units, they haven't had to sell them yet because they're not finished. But it's all going to come home to roost at some point and that's where the bottom will be. When the last guys finish."
Still, as bad as it might get, Nelson says it's not nearly as rough as the early '90s when few deals were made. That's also when Nelson first started his career as a transactional lawyer in the Tampa Bay area.
In today's market, there are still buyers, he says. They're just not paying as much or buying as quickly as they were two years ago.
"It wasn't as good as some people thought and it's not as bad as some people may think," Nelson says. "You're seeing people getting in now because a lot are pulling back. Where's the real value?"
There's also more room for negotiation, which enables buyers to get both a better price and terms.
The residential market isn't all that's suffering, he says. The commercial and retail market is also being affected by rising property taxes and property insurance.
"I think the government should be like everybody and subject to forces of change," Nelson adds. "Their has been a lot of money put into their coffers and you don't want to kill the goose (Floridians) that lays the golden egg."
Just as businesses and consumers have had to cut back so should government, he says.
In the future, Nelson expects the state to have more infill projects that allow higher density and less sprawl.
"Density has been a bad word to a lot of people," he says. "Everybody is starting to realize now how density concentrated in the right area is a good thing."
Among other benefits, it cuts back on traffic congestion and pollution if people live near where they work and shop, he says.
Both Higbee and Nelson say they don't expect a turnaround to be long in coming.
Higbee says, "Whatever our bottom is, we'll start back up the other side long before the other states."
And both lawyers say the real estate industry will continue to play an important role in Florida's economy.
Who. Lee E. Nelson, R. Alan Higbee
Trend. Market forces builders, developers and others to adapt.
Key. The real estate market hasn't yet hit bottom.
Work in Progress
Shutts & Bowen faces growing pains as it continues to recruit top lawyers from other Tampa law firms for its first Gulf Coast office.
Hammers and drills can be heard these days as workers remodel the 15th floor of Wachovia Bank building in downtown Tampa to make way for the lawyers and staff that are being added at a regular clip.
Yellow Bob the Builder hardhats decorate desks.
With a 21-lawyer staff after a year in the area, R. Alan Higbee, managing partner, says the local office will likely grow to about 50 lawyers.
"We need labor and employment lawyers, real estate lawyers, tax, estates and trusts, antitrust, bankruptcy and all sorts of litigators to be a one-stop shop for corporate clients," Higbee says.
Shutts & Bowen, a Miami-based firm that is nearly 100 years old, has offices throughout the state so it can turn to lawyers in those other offices for specialties with a smaller niche.
The firm recruited Lee E. Nelson last month to head its real estate practice group. He's one of a long list of veteran Tampa lawyers to join the firm.
"Real estate is such a big part of Shutts that we'll have quite a real estate contingent when we're finished," says Higbee, a corporate and securities lawyer who left Fowler White last year after 25 years to join Shutts & Bowen.
Shutts & Bowen is one of many law firms that are opening offices in Tampa as the area becomes more sophisticated and better at attracting new companies to the region, Higbee says.
In addition to Tampa and Miami, the firm has offices in Orlando, Fort Lauderdale, West Palm Beach, Tallahassee, Amsterdam and London.
- Janet Leiser