The Real Estate Philosopher


Brexit and London and Talent, Oh My

Jul 11, 2016

I am sitting here in New York reading goodness knows how many articles on the Brexit. It is getting more coverage than any other news right now.

I recognize it is juicy for the media because there are all sorts of thought-provoking issues that touch on how human beings can live together (or maybe not live together) – but I have another take on this that I haven’t seen in other articles so I will share it. My thoughts also lead into a possible twist on real estate investing as well.

Let’s start with London. People are wondering understandably what will happen to London. It appears that some parties want to pull their money out; hence, various London based investment funds are (temporarily) closed to withdrawals. Other articles indicate a concern that the EU will make it rough on London and/or the informal financial center of Europe will move away from London. There is a concern that London may be in trouble.

I know I shouldn’t make a prediction about the future – indeed, that was the point of my last article – but here goes anyway. I predict that:

London will be just fine!

There I said it. I sure hope that either (i) I am right or (ii) if I am wrong no one remembers I made this prediction,

Here is my thinking…

About eight years ago – at the end of 2008 – there were many who thought it was lights out for New York. The thinking was that the banks and investment banks and funds were falling apart, there were no bonuses for the people who worked at them, people would give up, the financial center would shrink down and die and possibly the center of the US world would move to DC or another location.

At this time I made a speech to my law firm about this issue. My speech had a central theme that NYC would be just fine. My reason was simple – it was that New York City has a special magic to it that makes the key ingredient – the talented people – stick around. Even though everything financial was crashing, my thesis was that the people that think of and effectuate complex real estate and corporate financial transactions wouldn’t “want” to leave. They would “want” to stay in New York and if they did in fact stick around they would create the next upside.

That is “exactly” what happened. The talent stayed and New York is stronger than ever before.

I see the same thing here with London.

I have only been to London once and I haven’t traveled much – so I admittedly am taking a bit of a leap here – but from what I know, London is a very special place. It is a melting pot of humanity. It is a vibrant and powerful city that has a special magic to it. When you get right down to it, I don’t see the talent “wanting” to leave – uprooting their families to go where, exactly? There are other great cities in Europe for sure, but if your life is in London, I don’t see people eager to move somewhere else so easily. If you live in London and have family and business contacts there, your optimal first strategy is to figure out if there is a way to stick around.

And if the talented people that form the backbone of London’s financial expertise don’t actually leave then I am confident that everything will be just fine in the end for London. That talent will create the next upside, just as occurred in New York.

Also, London has other significant features compared to the rest of Europe: The language in London is English (or some variation of it) and the language of global business is also English. This is a significant built-in advantage for a global financial center. And, London is a common law system with a well-developed and understood legal tradition and landscape that is far easier to navigate through compared to any other jurisdiction in the remaining EU.

Now I will philosophize a bit and wonder if this is a theme for a modest twist on real estate investing; namely, to follow the talent?

Consider this for the real estate world, i.e. evaluate where to invest based on whether the location is attracting and retaining talent -- or not.

Currently, real estate investors look at population growth and jobs growth, which of course makes a ton of sense – however, I haven’t seen people look at “talent growth” or “talent flight” for purposes of real estate investing. Perhaps this is worth considering.

And I do hope I am right about London. . . . . .


Specialty Practice at Duval & Stachenfeld – Tax Controversy

At D&S we look to find nooks and crannies in the legal world where we can devote time and effort to gaining a deep knowledge that is of particular value to clients. These nooks and crannies are often small in size and often overlooked by most other law firms. In each issue of REP going forward I will mention one of our nook and cranny practices.

This week I highlight our Tax Controversy Practice.

Our Tax Controversy Practice Group is handling complex cases for some of the world’s largest financial institutions with hundreds of millions of dollars at stake. The practice area plays to our strengths by bringing together the extensive expertise of our tax, litigation and non-profit practices into a unique team providing clear-cut strategic advice on tax disputes against government agencies and private litigants. The partners who run the group all rank among the very best in their respective practice areas – in fact, all of them went to Harvard Law School.

I am pleased to say that this service to our clients has really filled a need. Even though this practice group is fairly new, it is already handling matters involving over $1 billion in financial instruments – ranging from a bank’s tax treatment of a Tier 1 capital issue -- to an individual taxpayer’s investment in a leveraged option arrangement.

Of course, I hope that you never find yourself in the crosshairs of an IRS audit, but in the event that you (or someone you know) find yourself in that unfortunate situation, I have linked here an article penned by Tax Controversy Practice Group Co-Chair Stephen Land, providing some perhaps counterintuitive advice on how to escape from an audit without making an enemy of the IRS – and without losing your shirt. To that end - if you ever find yourself in a sticky situation, please give us a call.


Superstar D&S Lawyer – Stacie Trott, International Lawyer

Sometimes a D&S lawyer hits the top of the legal profession in the area she/he practices in. This means that this lawyer can provide particular – and unique – value to clients. When this occurs, I may highlight that lawyer.

This week I highlight our international superstar partner Stacie Trott.

Stacie Trott has spent the past 6 years working almost exclusively on cross-border deals. I don’t know the exact total number of deals she has handled, but it seems as if she always has four or five going at the same time. These are both in-bound and out-bound and are all over the world, including U.S., Europe (London, Ireland, Spain, Switzerland, France, Germany, the Netherlands and Denmark), Australia and Asia (Hong Kong, the People’s Republic of China, Japan and Korea).

Our clients find her incredibly useful not only because of her extensive cross-border expertise, but because of her cultural fluency as well. Stacie – who we jokingly call an “IWOM” (which stands for “International Woman of Mystery”) – is especially talented at getting along with counterparts in different jurisdictions and cultures.

For this reason our clients can’t stop saying “we love Stacie”.

Finally, Stacie is not on her own. There are now no less than 5 IWOM’s at Duval & Stachenfeld who handle cross-border transactions for our clients, all of which are in Stacie’s international law group. 

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As the Managing Partner of Duval & Stachenfeld – a 70-lawyer law firm in mid-town NYC known as The Pure Play in Real Estate Law – I am inviting you to join The Real Estate Philosopher™. This will consist of my thoughts and also thoughts of friends and colleagues.

It will not be published in any traditional media – it will go only to friends of our firm. The purpose here is very simple – to put forth thoughts in the real estate world that are different, provocative, and challenging of accepted wisdom. Hopefully, nothing said here will be mainstream thinking.

You may be wondering how I am qualified to write on these topics since I am “just” a lawyer. However, I have an unusual place in the real estate world. As the managing partner of The Pure Play in Real Estate Law (one of the largest real estate law practices in NYC), I interact with an incredible number of real estate players. This ranges from small real estate shops with nothing but a gleam in their eyes, to some of the largest real estate institutions in the world, and everything in between. This gives me a unique and global perspective and allows me to act as an amateur philosopher in the real estate world. This has always been my hobby and it is what I love doing.

Regards,

Bruce Stachenfeld
a.k.a The Real Estate Philosopher™

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