Chris Smith, with DLA Piper, working from home during the Coronavirus pandemic. June 7, 2020.Editor’s note: This article is part of The New View, a special report from The American Lawyer on how the coronavirus crisis is changing the way work gets done across the legal industry—now and in the future.
The novel coronavirus upended DLA Piper partner Chris Smith’s practice almost immediately.
He remembers the murmurs in the office—”What’s going to happen?”—when the coronavirus had yet to become a domestic threat. Then people began to social distance. And then, in mid-March, DLA leadership made the decision to move the workforce remote.
“I was pushed to make sure that we were ready to go, that I and my team knew what was expected,” says Smith, who co-leads DLA’s New York real estate practice. “I felt like it happened overnight.”
The pandemic has upturned the entire legal industry and the world at large at a breakneck speed. Business closures and economic free-fall have transformed practices in all firms, Smith’s included. And not only have the matters changed, but the way legal services are delivered has been altered entirely.
Credit: Roberto Jiménez/Shutterstock.comSmith’s practice, the way he works and how he views the future of the law have been refashioned by the pandemic. He went from putting together deals and finding financing for clients to advising his clients at all hours on nonpaying tenants, plummeting valuations and lenders. He is not alone.
But many are optimistic that the economy isn’t as fundamentally damaged as it was in 2008, and they see a small bounce-back in the real estate market as capital waits in the wings.
Big Questions, Few Answers
The adjustment to remote work did not come naturally to Smith, who made the first lateral move of his career in 2018, when he left Shearman & Sterling at age 67.
“Some of us, including myself, are a little slower at that than we probably should have been because we’ve been dependent on administrative assistants and associates to do some of these things,” Smith says.
But he has been impressed with the ease of shifting his practice remotely. Since Smith left the office in March, he has been working from his home in upstate New York with his wife and two adult children. He has loved having his children around—the family recently watched “Top Gun” for movie night.
Before the coronavirus made its way to U.S. shores, Smith primarily worked on typical real estate matters: financing, ground leasing and acquisitions. Now, his practice has been divided into two buckets.
He first wrapped up the big deals that were in the pipeline and were carried through to the end. Nearly everything else has been advising: What rights do landlords have if tenants refuse to pay? How should clients handle evaluations, which changed significantly as the economy tanked? How should clients deal with lenders?
“Big questions and not a lot of easy answers,” Smith says. “All this advisory stuff became, very quickly, front and center. It clearly grew at an exponential rate until people got a sense of what’s going to happen and how it’s happening.”
In this advisory role, his job has become a nearly 24/7 endeavor. Clients call late into the night now, as late as 11:30 p.m. Remote work has eroded norms, as the hours and days blend into one another.
Volume has not dropped, Smith says. Between pipeline projects and advisory work, he and his team have stayed just as busy as they were before the pandemic. But not everybody has been as fortunate. An ALM survey of nearly 300 attorneys found that more than half of the respondents had experienced fewer clients calls and matters as a result of the pandemic. This turmoil has led firms big and small to institute austerity measures, with some cutting pay as much as 25% for associates and staff.
Holland & Knight real estate practice group leader Joe Guay has seen a turn in his practice similar to Smith: He’s handling more advisory work for landlords and hoteliers on legal questions and federal assistance, while wrapping up big deals that were already in the pipeline. He says the pandemic-induced recession has not battered the market in the same fashion as the Great Recession, which was catalyzed by the collapse of Lehman Brothers and the implosion of financial markets.
“The day before Lehman Brothers announced bankruptcy there were 15 deals on my desk, and after there was one,” Guay says. “This time around, private equity and the banks are in pretty good condition.”
And as states slowly begin to reopen from months of business closures, Guay and Smith are seeing signs of life. Guay’s team has begun to field calls from lenders who are picking deals back up. Lenders are doling out construction loans. The firm’s land use attorneys, often the first in line in many deals, are seeing business return.
“Right now, people are seeing that pricing is attractive,” Guay says. “Maybe not in the third quarter, but in the fourth quarter you’re going to start seeing great deal flow.”
Smith, on the other hand, is a bit more pessimistic. Capital is looking for ways to enter the market, he says, but there is so much uncertainty. Investors are looking at the hospitality industry, in particular, which has seen some of the worst effects of the pandemic, with occupancy hovering between 8% and 20% at hotels and valuations taking a nosedive.
As in previous recessions, this opens the door to investors looking to scoop up distressed assets. But because of the inability to predict what this economic recovery might look like, lenders have been skittish regarding hotels. Many have chosen to wait to see how valuations shake out.
“A lot of capital that would normally borrow money is ready to go but doesn’t have a lender ready,” Smith says. “How will that market sort out over time? It is clear there’s a lot of capital being formed.”
Smith also anticipates changes to the business of law writ large. Remote working is here to stay, he says. Firms will be more flexible in work arrangements and, if not, attorneys will vote with their feet. And business development norms will have to be reconfigured as well.
“How do we play good offense in the context where everyone is remote? Is that going to put a whole new spectrum into play that we don’t have now?” Smith wonders.
Like the rest of the legal industry, he’ll have to wait for an answer.
Email: djackson@alm.com
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