What does it take for a small real estate law firm to work on more than $1 billion in deals over a year and a half?
It pays to specialize – and invest in hungry young talent. Wilson Cribbs and Goren – started by respected practitioners Reid Wilson and Abe Goren in 1985 – focuses on providing legal services to the real estate industry, including transactions, financing, litigation and land use. It has 20 lawyers on staff, which is bigger than the real estate departments at many larger Texas law firms.
Managing shareholder Tony Marré and attorney Derek Pershing surpassed the 10 digit mark for deals handled last year and into this year, trading around everything from luxury apartments to retail centers to storage facilities. Their clients have included Trammel Crow Retail and Baker Katz in Texas as well as Cardone Capital in Florida and McCann Realty Partners in Virginia.
Marré recently spoke with The Texas Lawbook’s Claire Poole on how they managed to reach that magic number.
The Lawbook: Tell me about how you were able to build a real estate practice that did more than $1 billion in deals.
Tony Marré: Part of it is changes in the legal market itself. When I first started at this law firm 13 years ago as a law clerk, it was difficult for a firm our size to get access to a large real estate transaction, anything north of $25 million to $50 million, for this part of the country (in New York, that wasn’t so big). If we were involved as local counsel, we’d be writing an opinion letter or providing some ancillary function. Over time, we’ve seen larger law firms reduce the size of their real estate departments to focus on corporate transactions. So we’re seeing a lot more institutional-grade transactions looking for a home from a firm like ours, with 15 to 20 real estate lawyers doing transactions all day long.
The Lawbook: So what kinds of deals were they?
Marré: It’s not like we’re picking up other people’s trash. These are really high quality clients that anyone would like to have. The way I look at it, we built something that is a natural, better alternative to where these firms like to go, creating a real estate practice that is substantial. With 20 lawyers, that’s as big as any real estate practice in the city, bigger than Baker Botts and Vinson & Elkins, firms that used to do a lot of of the work. We have 10 or 11 lawyers who are board certified. I was the 11th lawyer in the law firm, the youngest lawyer by at least 15 years. I took over recruiting in my late 20s, built a group of young lawyers and gave them resources to do these kinds of deals. It’s about building a better mousetrap.
The Lawbook: Do you compete on price?
Marré: That’s the way we’ve intentionally built our law firm to compete in this area. We own our own building in midtown. We carry no debt. Because we only have real estate lawyers in the office, we’re able to tell clients that they’re not paying for the overhead of other attorneys. We have a flat compensation structure; our base salaries are intentionally depressed so we can ride changes in market. We have billing rates that are 20% to 30% lower than some of our competitors.
The Lawbook: Who do you compete with in Houston?
Marré: Winstead and Jackson Walker have the largest real estate practices in town. But we’re doing real estate transactions all over country, so we also compete with Troutman Sanders and Greenberg Traurig. We’re running into attorneys out of state as much as we are in state.
The Lawbook: So what kinds of real estate deals are you seeing?
Marré: There are a lot of apartment deals to be done, but we’re not focusing on one asset type. We’re doing self storage, retail – the cycle for apartments is different for retail and student housing –and all kinds of industrial. I’ve always had a pretty general broad brush practice, so if you looked at my work in process, it would have retail, industrial, office, self storage, student housing and multi-family. The thing that ties all those things together is the dealmaking, being able to manage professional relationships across those asset sales.
The Lawbook: Given what you’ve bought and sold, what trends are you seeing in real estate? Are there dark clouds ahead?
Marré: The thing that I’ve learned to be true is there’s always a dark cloud somewhere. The way that you’re going to sustain yourself and thrive as a legal provider in a real estate practice is being flexible and having broad experience across asset types. If you’re a multi-family specialist focused on Houston, which is gigantic, you’re always going to be looking for dark cloud. When jobs go south, multi-family is first to be punished. The U.S. trade war with China would have an effect on development specific to multi-family but maybe some residential subdivision developers and the changing dynamics with home builders they contract with.
Real estate is extremely local, and the last time we had a recession, Houston was booming with oil at $100. We did a ton of deals during that time. When oil went down to $30, Houston suffered, so I was doing self storage deals and student housing deals across country. There are always dark clouds somewhere and you have to teach yourself to be flexible. There’s always going to be a place for you in the cycle.
The Lawbook: What’s the hottest area?
Marré: Right now multifamily has the highest velocity of transactions in the market. Class B multifamily and also class A, not necessarily here but across the country, they’re trading frequently and on short time lines. My buyer clients are putting out very strong, aggressive offers. When Houston was losing jobs across the city, those blue collar projects weren’t trading much, occupancy was low and pricing wouldn’t have been good. Now that job growth is strong, they’re trading very frequently. Add that to steady retail transaction velocity and it’s a very busy market.
The Lawbook: Which firms do you run into the most?
Marré: I run into Troutman Sanders the most [earlier this year it hired a pair of former Fannie Mae attorneys] and also Greenberg Traurig in Dallas and in Florida and Barack Ferrazzano in Chicago.
The Lawbook: Are you looking to expand?
Marré: We have 20 lawyers and 16 of those are full-time transactional, but we’re always looking to grow. The work is coming in our direction; we’ve been engaged by four Fortune 100 companies as outside real estate counsel. Some of our clients are institutional; we are real estate counsel for Grant Cardone out of Miami. He’s a self-made, rags-to-riches social media celebrity. He was a referral from a mortgage banker we’ve done other deals with. That’s not unusual. We have clients based all over the country. I wish I could say it’s my charming personality, but we tend to keep them once we have them.
The Lawbook: Would you consider opening another office?
Marré: To me that adds overhead that’s going to be passed along to clients, which would take away our competitive advantage. It used to be meaningful for firms to have offices all over the country, but we have relationships with local counsel in every state where we operate. I’d rather offer clients value than hang a shingle out in Tuscaloosa.
The Lawbook: Do you work with family offices and private equity firms?
Marré: We deal with them on both sides of the table. We represent one private equity real estate firm whose principals were previously at large real estate firms doing debt and equity transactions. They broke off and had no place to go, so we incubated them our office for six months before they started their company.
The Lawbook: Any interesting new deal structures that have emerged?
Marré: The corporate structuring for deals is getting more complicated. When I first started in 2006, the debt led the way of the deal. Then the capital markets crashed in 2008 and 2009 and the debt wasn’t there anymore. The result was that a lot of people got more creative on the equity side, looking for different places to find it and structuring equity to look like debt. Different funds were created to fill the gap in capital markets that banks like Bear Stearns left behind. The groups that are still working are much more sophisticated on the equity side. Earnouts are not as common, but the layering of equity, the way the economics are structured, is more complicated and sophisticated.
We also have a substantial land use and development practice, which is almost nonexistent in Houston. Just because we don’t have a zoning ordinance doesn’t mean that land use regulations don’t exist.
The Lawbook: What kinds of transactions do you see coming?
Marré: One thing I tell people all the time is that the easy deals are all done. Now we have deals that are more complicated on the corporate side and on the dirt, putting big tracts under contract with complicated rezoning and entitlement processes. You have to be more creative, including using joint ventures to make things happen, to unlock properties that were fallow.
The Lawbook: How active is out-of-state and foreign money in Texas real estate?
Marré: Foreign capital is still there, but it was more intense five years ago because capital here was less active. The foreign capital filled a hole because the local capital was more shy. Now that local capital is stronger and national capital is stronger, it’s more active. Real estate is local but Houston is an international city and we are dealing with people from out of state on daily basis.
The Lawbook: Does the market feel a bit boomish?
Marré: Yes. They say $50 oil is the new $80. When oil is down, there’s not as much national interest in Houston specifically and Texas to some extent. When it’s back, job growth comes back and the national guys are back really quick. It’s all about story telling: Brokers listing the deals and mortgage bankers trying to get the debt and equity.