It ain’t easy being a real estate lawyer in Calgary. If you lived in Vancouver, you’d be a prominent member of a high-profile business community. In Montreal, you’d be on a first-name basis with important people at Quebec kingmaker CDPQ. In Toronto, you’d get to occasionally buy lunch for someone from OMERS. In Cowtown, your entire real estate department contributes less than 4 per cent to the overall revenue of your firm and has to struggle not to get absorbed into the corporate department. And your colleagues keep asking you to handle their residential mortgages for them. Who do they think you are—a two-bit conveyancing lawyer with time on his hands?
To add insult to injury, when you do finally get your teeth into a lucrative property development or disposition, you’re playing second fiddle—a.k.a. “Alberta counsel”—to some hotshot from Toronto whose only claim to fame is that he once had lunch with someone at OMERS. Could life be any more depressing?
“The real sex appeal in Calgary is mergers and acquisitions, and here it involves energy,” acknowledges Wayne Whitlock, head of the real estate department at Bennett Jones LLP, Calgary’s largest law firm. But Whitlock never wanted to be an oil and gas lawyer. When he started practising in the mid-1970s, Calgary was in the middle of both an oil and a real estate boom. The lawyers working in energy were doing corporate filings and a lot of paperwork. Whitlock got to watch buildings grow. “In real estate you saw immediate results,” he says, and a lot of them. In the 1970s, construction cranes crowded the city’s skyline, transforming it into the compact island of skyscrapers that silhouettes Calgary today.
“The joke was that the crane was Calgary’s official bird,” recalls Robert Homme, Q.C., the lead real estate lawyer at Burnet, Duckworth & Palmer LLP (BD&P), another of Calgary’s major energy firms. Like Whitlock, Homme became a real estate lawyer because he “loved being part of making the deals” and “being part of the landmark projects,” and, like Whitlock, he carved out his real estate career in the shadow of energy deals. He characterizes BD&P as essentially “an oil and gas securities boutique.” The oil and gas connection didn’t hurt. It meant Homme represented the joint venture that built the two Petro-Canada Towers—still the largest buildings in the city—and developed, mortgaged or sold buildings for numerous energy companies.
Homme is still doing commercial real estate, but the story on the street is that his firm has been focusing on its core competencies (read: energy) and slowly divesting its real estate practice. Although Homme maintains that “There’s a group of six or seven of us who do real estate work,” BD&P alumnus Terry Livermore, now part of the real estate department at Bennett Jones, doesn’t see it that way. The Calgary independents rarely exchange partners, but Livermore jumped ship to Bennett Jones because “There were basically just the two of us”—Homme and Livermore—“doing real estate at BD&P. There’s a more substantial real estate department here…. This firm gives it some import.”
The fact a first-rate property development practice has managed to thrive at Calgary’s dominant energy firm has a little to do with the overall cachet of the Bennett Jones name in the market, and even more to do with the enthusiasm and experience of Whitlock. Over the last 20 years, Whitlock has been involved in the development, disposition and acquisition of most of Calgary and Alberta’s major properties, from Bankers Hall, downtown’s most prestigious commercial tower, to Canmore’s SilverTip golf course, reportedly the most expensive golf course in Canada. His commitment to developing a strong commercial real estate practice means that nine of the firm’s 190 Calgary lawyers practise real estate law. While insignificant in comparison to Vancouver—99-lawyer McCarthy Tétrault LLP has 26 real estate practitioners, while 24-lawyer Stikeman Elliott has 10—in Calgary, that makes Whitlock’s department the city’s largest.
With the exception of Whitlock, the real estate lawyers do a fair bit of non-real estate commercial, lending or banking work. When the big deals come, Whitlock is able to put together a solid team that includes veterans Tim Kerrigan and Larry Johnson and draws on the expertise of the firm’s tax, finance and banking lawyers. The broader corporate experience they bring to the table is a plus; an even bigger plus is that they are already known to non-real estate (read: energy) clients who need real estate work.
“We’re still dominated by oil and gas,” says Whitlock. This, after all, despite the economic diversification that Calgary’s municipal leaders like to boast about, is the city that’s built on and run by oil—literally and figuratively. The towers that define Calgary’s downtown bear the names of energy giants past and present: Husky Oil, the two towers of Petro-Canada, TCPL Tower, the Shell Canada building, Gulf Canada Square, Canterra Tower. In between the energy, regulatory, environmental and M&A work the energy firms send to the law firms of “what is still a one-horse town,” as Homme puts it, they also send some major real estate files. Every one of them has leases that need to be periodically renegotiated; a few, like Husky and TCPL, have dozens of complicated sub-leases that need to be addressed on a regular basis.
Some of the more bizarre leases are an integral part of Calgary’s history of boom-and-bust cycles. Macleod Dixon LLP, the third Calgary independent, makes its home in the Canterra Tower, which was built for the Canterra oil company in the 1980s by Oxford Properties Group Inc. Canterra ceased to exist just as Oxford was capping its new home. Along with its purchase of Canterra, Husky Oil acquired Canterra’s 15-year lease on the 46-storey building—minus the anchor tenant, i.e., Canterra. Most of the current tenants in the building are still on the Husky/Canterra subleases.
Calgary companies grow, shrink, disappear and merge frequently, and as they change, so do their space needs. “There was a major lease shuffle in the 1990s as a result of the merger mania in the oil patch,” says Stephen Raby, head of the real estate group at Macleod Dixon. The lease shuffle had followed an era of real estate divestitures by the same companies. Jokes Raby, “I can almost say I specialize in selling buildings formerly owned by oil companies.” Virtually no energy company owns its building anymore: the newest oil patch tower is built and owned by Toronto REIT H&R Developments, which leases it to TCPL.
The oil patch divestitures were the beginning of major changes in the ownership and control of Calgary real estate. The initial purchasers of many of the towers were real estate companies, including TrizecHahn Corporation, which also built some of Calgary’s landmark buildings, including the twin Bankers Hall Towers. By 2000, Trizec was the city’s largest landlord with a strong personal connection to the city.
“It was a Calgary-based, major national real estate company, and it was Calgary-based because [former Trizec CEO] Harold Milavsky wanted to live here,” says Barry Emes, former managing partner of the Calgary office of Stikeman Elliott, who acted for Trizec on a variety of files before its massive 2000 real estate divestitures. Trizec, says Emes, “gave Calgary an opportunity to have a world-class real estate practice.”
When Trizec exited the Calgary market, most of its properties were picked up by Brookfield Properties Ltd. and Oxford Properties Group Inc. Both companies had a prior presence in the Calgary market—Oxford, for example, developed and managed a number of Calgary’s flagship buildings, including the unfortunate Canterra Tower—but after acquiring much of the Trizec portfolio, Brookfield and Oxford controlled more than half of Calgary’s top space. In the meantime, pension funds discovered that Cowtown had A-class real estate, and, as these came on the market, “Pension funds bought them up,” says Emes. When they ran out of properties to buy, they started to acquire the development companies—OMERS (Ontario Municipal Employees Retirement System) took over Oxford Properties Group in the fall of 2001.
The pension funds now own the majority of Calgary real estate. Through its Oxford portfolio, OMERS is firmly in the lead, with 27 per cent of Class-A space and some Class-B space in its hands. Great-West Life (8 per cent, including the Stock Exchange Tower) and Cadillac Fairview (3 per cent) each have a chunk of the pie and would be pleased to get more. But, with most of the existing real estate in pension fund hands, there is little movement in the market. Quebec-based CDPQ, through its Vancouver subsidiary, the Bentall Corporation, is creating a new piece of the pie by developing IBM’s three-building headquarters on the edge of downtown.
“Good quality real estate doesn’t change hands,” says Rick Dawson, a senior real estate practitioner at Blake, Cassels & Graydon LLP in Calgary. That means Calgary real estate lawyers can’t count on the development and sales of downtown towers to keep them in billable hours. “To be a successful real estate practitioner in Calgary, you need to be skilled beyond downtown real estate.” Not that Dawson is dismissing the prestige of working on downtown real estate—he’s worked on the Nexen building lease on behalf of Nexen Inc., Trizec’s sale of the tower at the corner of 5th Avenue and 5th Street, and Hunt Oil’s sublease of space in the TCPL Tower. But he points to “the long stretches of time when there has been no construction or very little construction in the Calgary market, with very few trades of major real estate in between.” Dawson has kept busy by working on sales of out-of-core projects such as Heritage Square, and out-of-city projects such as the $350 million West Edmonton Mall bond financing, as well as—a good Calgary stand-by—golf course developments and financings.
Out-of-core and out-of-city work is a key part of the practice even for those lawyers who are in on most of the downtown deals. Whitlock is working with long-time Bennett Jones client ATCO on the future of the ATCO industrial park and the adjacent city-owned Lincoln industrial park, well south of downtown. The most talked-about aspect of the project would have one of Calgary’s oil giants establish its headquarters in the park. “PanCanadian, very innovatively and aggressively, is exploring the opportunity to relocate its head offices into a suburban campus-style office location,” says Darryl Barber, Q.C., at Barber Durante LLP, who is representing PanCanadian in its discussions with the city. “It would be in essence the first major event of that kind in the city of Calgary, where you would see one of the major oil companies going out of the downtown core.”
What PanCanadian’s merger with Alberta Energy Company Ltd. (AEC) will do to these plans remains to be seen. But most practitioners say it’s a fair bet that EnCana Corporation (the now merged company) will need to revisit its space needs, creating at the very least another major lease shuffle. Between the two of them, PanCanadian and AEC have people spread through five downtown buildings, taking up some 1.5 million square feet of Class-A space.
“If someone wanted to find even 60- to 80,000 square feet of contiguous space in a tower, they would be hard-pressed,” says Kieth Mullback at McCarthy Tétrault. “If the AEC/PanCanadian merger goes through [which it has], it’s possible that company will be shopping for new space.” That’s good news for Mullback, who has done lease work for the major tenants and owners of such buildings as Gulf Canada Square, TCPL Tower, Bankers Hall West and the Nexus Building. It may also be good news for development lawyers.
“The market is ripe for a major tenant-driven development,” says Mullback. There are about half a dozen sites in the downtown core approved and ready for towers, including an OMERS/Oxford-owned lot in the vibrant Eau Claire Market area. All that’s needed is a developer with a vision (and a confirmed tenant). Whitlock thinks he’s got a client who’s going to make it happen. Ron Mathison’s Penny Lane Developments is planning to transform the low-rise Penny Lane Mall—virtually next door to the Bankers Hall Towers—into two soaring office towers, a potential new home for EnCana and other cramped downtown tenants.
Although the project is still mired in City Hall red tape, its prospects are good, if only because it’s not owned by a pension fund. While Calgary lawyers are pleased to get the pension fund work when they can wrest it from their Toronto counterparts, working with them has its challenges. Whitlock recalls a recent file where a pension fund (he prefers not to name which one) almost built an office tower, “but it couldn’t get through its internal process in time” to make the various deadlines. As a result, the opportunity passed, and the would-be office tower is still a parking lot—which may have worked out for the best for the owner. Commercial lease rates may still be half of those in Vancouver, but parking rates in Calgary, say Calgary lawyers, are higher than in Toronto, never mind Vancouver.
Compared to cities with hands-on governments like Vancouver, Calgary’s City Hall presents fewer hoops to developers. But in a city and province famous for getting things done at lightning speed, even the few hoops that exist are onerous. “The process can be excrutiatingly painful,” says Whitlock.
Enter Bruce Green, Q.C., one of the senior real estate practitioners at Fraser Milner Casgrain LLP (FMC), and lobbyist extraordinaire. While partner Eugene Durand, Q.C., acts for FMC’s property development clients, Green helps developers fight City Hall—and each other. “I’m not usually retained unless there’s an adversary,” he notes. Once retained, “I rarely lose,” he says.
Green’s impressive track record can in part be explained on the basis that he wrote a lot of the rules and what are now the city’s boilerplate agreements. He’s been very much involved in the “inventing of the Plus-15”—the above-ground pedestrian corridors that help corporate Calgary survive the winter. In between battles, he keeps helping Ralph Klein get elected.
After three decades of practice, while still active, Green is starting to pass some of his torch to younger generation “superstars.” His heir apparent is FMC’s John Merrett. Merrett and Green just scored a major victory on behalf of Remington Development Corporation in a battle of mega-malls against developer Heritage Partners Ltd. Heritage Partners and Remington are building big-box malls kitty-corner to each other, and Heritage Partners contested the terms on which Remington got its zoning approvals. After a marathon 10-hour session, council voted in favour of Remington.
Acting for Heritage Partners was Darryl Barber, “another superstar” according to Green, whose opinion is shared by many Calgary practitioners. Barber has just opened up Calgary’s first commercial real estate boutique, Barber Durante, with Macleod Dixon alumnus Samuel Durante. Barber had spent most of his career at Burstall Ward, an 18-lawyer Calgary firm he describes as a corporate/securities boutique with litigation support. “I was essentially a solo practitioner there,” he says. “My practice was 99 per cent portable and came with me.”
A key reason for the plunge was Barber’s recognition that the Calgary real estate market had changed dramatically over the last decade. While he has strong “personal relationships with the development community” and a busy, successful practice, Barber is aware that the major real estate players in the market were not from Calgary—and decisions were not made in Calgary. Unfamiliar with the market, they were unlikely to consider taking their real estate work to a practitioner at a firm like Burstall Ward. (The same trend, incidentally, is to the advantage of a firm like Bennett Jones.) He believes a boutique real estate practice will result in a higher extra-Calgary profile.
While only time will tell if he’s right—Barber Durante opened its doors on January 1, 2002 with only the two lawyers—Barber is optimistic. He’s already been approached by pension fund manager Beutel Goodman, and he plans to grow the firm to five or six full-time real estate practitioners. At those numbers, says Barber, his new firm will match the manpower of most real estate departments at the major law firms in the city. “It will provide us in essence with the same level of resources that any of those firms have to handle those large transactions,” he says. And, he adds, Barber Durante will provide an important service to these firms. “As these firms merge and grow, just given the size of them, they certainly have conflicts that arise frequently. We believe we will be warmly welcomed by them as an opportunity to handle any of their conflict situations. We are here available to do conflict work, without them being concerned that they will lose their litigation work or their corporate/securities work.”
But they might lose some of their real estate practitioners. As the firm’s profile grows, Barber expects to see some people from big firms “knocking on our door, saying ‘We’ve had it with big firm lifestyle and necessarily having our lives ruled by securities lawyers. We’d like to get together with a few like-minded practitioners who support each other and have a strong real estate marketing focus.’” That’s how he got his co-founding partner Samuel Durante, who felt his real estate practice somewhat at odds with the priorities of his former firm Macleod Dixon.
“The larger firms now chase bigger and bigger deals, and a lot of them happen to be outside of Alberta,” says Durante. “That creates overhead. That creates expectations and expense. My practice is located here in Alberta and I know Alberta real estate law and real estate deals in Alberta. Macleod Dixon has some interesting prospects in Caracas and Rio de Janeiro. Would that impact my practice? No.” But at Macleod Dixon, he was effectively paying for the Asia and South America trips of his international energy partners.
Durante’s former partner Stephen Raby may have the same challenges, but he is not complaining. He does note, however, that the practice area’s biggest challenge right now is attracting talented juniors, and he believes Barber Durante may appeal to some practitioners, young and seasoned alike. John Merrett at FMC also admits the attraction. Would he trade working against Barber for working alongside him? “You never know is all I can tell you,” he laughs. For now, he’s happy where he is.
It’s not as sexy as big corporate deals and it’s not as Calgary as oil and gas, but when you claw your way to the top, it’s as much about deal-making as the oil patch mergers. And if an ambitious real estate lawyer plays his cards right, he can end up running a firm. When greenfielding its Calgary office, Stikeman Elliott recruited well-known real estate practitioner Barry Emes from what was then Code Hunter (now Gowling Lafleur Henderson LLP) to be its managing partner. When Bennett Jones needed a well-connected lawyer to shake up its Toronto office in 1999, it turned to real estate partner Hugh MacKinnon. The type of real estate practised at Bennett Jones—MacKinnon was as much a financial services and banking lawyer as he was a property development lawyer—provides valuable connections with the business communities in both Calgary and Toronto. In today’s real estate market, even in independent Calgary, that Toronto card is critical.
As Emes characterizes it, everything about real estate law is exciting—once you’re doing it “at the proper level.” That means working with pension funds and REITS, which means working with Toronto. “The unfortunate problem with being in Calgary is that the capital markets are in Toronto,” says Emes, noting that he crosses paths with top Toronto real estate lawyers such as Greg Howard at Davies Ward Phillips & Vineberg LLP and Gordon Sato at McCarthy Tétrault more often than he deals with local practitioners. “It’s a Canadian market at that level.”
Whitlock’s experience is similar, and the Calgary arm of the Trizec divestitures is typical of this situation. By 2000, Trizec was based in Toronto and represented by Davies Ward in Toronto. Whitlock and Bennett Jones provided Alberta counsel to Trizec, while Emes was on side for purchaser Gentra, a subsidiary of Brookfield. Oxford was represented by Peter Quinn of McCarthy Tétrault in Toronto.
Raby concedes that “The big deals get done out of Toronto.” He adds, “But the major players understand there are real estate lawyers in Calgary who can do them.” First, the major players need to know who you are, and that means that marketing and networking among the ambitious practitioners is focused on the Calgary-Toronto corridor and beyond. “Real estate in Alberta is nationally oriented,” says Rick Dawson. “We have players from B.C., Ontario and elsewhere.” Theoretically that gives the nationals, like Blakes, Stikeman Elliott and McCarthys an advantage. Fraser Milner Casgrain, asserts Green, now has a national real estate platform, which it is using for intra-firm cross-selling. At Stikeman Elliott, too, “We try to pass the file on,” says Emes. “That’s the theory of the national firm.”
But in practice, pre-merger referral relationships die hard, and the real estate people at Bennett Jones are as likely to see a Vancouver- or Toronto-generated file as their peers at the national firms. On the west coast, developer Nat Bosa is primarily a McCarthy Tétrault client, but when he started to build condo high-rises in Calgary, he first went to Tim Kerrigan at Bennett Jones. McCarthy Tétrault just managed to snag this work back, and it is now in the hands of Calgary partner Stuart Blyth. McCarthys has not enjoyed the same success with the CDPQ-owned Bentall Corporation, for whom the firm does most of the development work in Vancouver. In Calgary, Whitlock at Bennett Jones is still representing Bentall on its construction of the new IBM headquarters.
The Quebec-controlled Vancouver-based Bentall is putting up IBM’s offices, Vancouver and U.S. developers are building condo towers along the Elbow River, and a Toronto-controlled REIT built and owns the TCPL Tower. But Calgary entrepreneurs continue to be active in the out-of-core and the residential markets. Calgary’s residential market continues to be the hottest in the country—and chances are good that it will be a Calgary developer who puts up the downtown core’s next tower. And his new tenants will all need Calgary real estate lawyers. Right?
Marzena Czarnecka is a Lexpert staff writer. This article is the third of a four-part analysis of Canada’s major real estate markets. The Toronto market will be examined in the July/August issue.
To add insult to injury, when you do finally get your teeth into a lucrative property development or disposition, you’re playing second fiddle—a.k.a. “Alberta counsel”—to some hotshot from Toronto whose only claim to fame is that he once had lunch with someone at OMERS. Could life be any more depressing?
“The real sex appeal in Calgary is mergers and acquisitions, and here it involves energy,” acknowledges Wayne Whitlock, head of the real estate department at Bennett Jones LLP, Calgary’s largest law firm. But Whitlock never wanted to be an oil and gas lawyer. When he started practising in the mid-1970s, Calgary was in the middle of both an oil and a real estate boom. The lawyers working in energy were doing corporate filings and a lot of paperwork. Whitlock got to watch buildings grow. “In real estate you saw immediate results,” he says, and a lot of them. In the 1970s, construction cranes crowded the city’s skyline, transforming it into the compact island of skyscrapers that silhouettes Calgary today.
“The joke was that the crane was Calgary’s official bird,” recalls Robert Homme, Q.C., the lead real estate lawyer at Burnet, Duckworth & Palmer LLP (BD&P), another of Calgary’s major energy firms. Like Whitlock, Homme became a real estate lawyer because he “loved being part of making the deals” and “being part of the landmark projects,” and, like Whitlock, he carved out his real estate career in the shadow of energy deals. He characterizes BD&P as essentially “an oil and gas securities boutique.” The oil and gas connection didn’t hurt. It meant Homme represented the joint venture that built the two Petro-Canada Towers—still the largest buildings in the city—and developed, mortgaged or sold buildings for numerous energy companies.
Homme is still doing commercial real estate, but the story on the street is that his firm has been focusing on its core competencies (read: energy) and slowly divesting its real estate practice. Although Homme maintains that “There’s a group of six or seven of us who do real estate work,” BD&P alumnus Terry Livermore, now part of the real estate department at Bennett Jones, doesn’t see it that way. The Calgary independents rarely exchange partners, but Livermore jumped ship to Bennett Jones because “There were basically just the two of us”—Homme and Livermore—“doing real estate at BD&P. There’s a more substantial real estate department here…. This firm gives it some import.”
The fact a first-rate property development practice has managed to thrive at Calgary’s dominant energy firm has a little to do with the overall cachet of the Bennett Jones name in the market, and even more to do with the enthusiasm and experience of Whitlock. Over the last 20 years, Whitlock has been involved in the development, disposition and acquisition of most of Calgary and Alberta’s major properties, from Bankers Hall, downtown’s most prestigious commercial tower, to Canmore’s SilverTip golf course, reportedly the most expensive golf course in Canada. His commitment to developing a strong commercial real estate practice means that nine of the firm’s 190 Calgary lawyers practise real estate law. While insignificant in comparison to Vancouver—99-lawyer McCarthy Tétrault LLP has 26 real estate practitioners, while 24-lawyer Stikeman Elliott has 10—in Calgary, that makes Whitlock’s department the city’s largest.
With the exception of Whitlock, the real estate lawyers do a fair bit of non-real estate commercial, lending or banking work. When the big deals come, Whitlock is able to put together a solid team that includes veterans Tim Kerrigan and Larry Johnson and draws on the expertise of the firm’s tax, finance and banking lawyers. The broader corporate experience they bring to the table is a plus; an even bigger plus is that they are already known to non-real estate (read: energy) clients who need real estate work.
“We’re still dominated by oil and gas,” says Whitlock. This, after all, despite the economic diversification that Calgary’s municipal leaders like to boast about, is the city that’s built on and run by oil—literally and figuratively. The towers that define Calgary’s downtown bear the names of energy giants past and present: Husky Oil, the two towers of Petro-Canada, TCPL Tower, the Shell Canada building, Gulf Canada Square, Canterra Tower. In between the energy, regulatory, environmental and M&A work the energy firms send to the law firms of “what is still a one-horse town,” as Homme puts it, they also send some major real estate files. Every one of them has leases that need to be periodically renegotiated; a few, like Husky and TCPL, have dozens of complicated sub-leases that need to be addressed on a regular basis.
Some of the more bizarre leases are an integral part of Calgary’s history of boom-and-bust cycles. Macleod Dixon LLP, the third Calgary independent, makes its home in the Canterra Tower, which was built for the Canterra oil company in the 1980s by Oxford Properties Group Inc. Canterra ceased to exist just as Oxford was capping its new home. Along with its purchase of Canterra, Husky Oil acquired Canterra’s 15-year lease on the 46-storey building—minus the anchor tenant, i.e., Canterra. Most of the current tenants in the building are still on the Husky/Canterra subleases.
Calgary companies grow, shrink, disappear and merge frequently, and as they change, so do their space needs. “There was a major lease shuffle in the 1990s as a result of the merger mania in the oil patch,” says Stephen Raby, head of the real estate group at Macleod Dixon. The lease shuffle had followed an era of real estate divestitures by the same companies. Jokes Raby, “I can almost say I specialize in selling buildings formerly owned by oil companies.” Virtually no energy company owns its building anymore: the newest oil patch tower is built and owned by Toronto REIT H&R Developments, which leases it to TCPL.
The oil patch divestitures were the beginning of major changes in the ownership and control of Calgary real estate. The initial purchasers of many of the towers were real estate companies, including TrizecHahn Corporation, which also built some of Calgary’s landmark buildings, including the twin Bankers Hall Towers. By 2000, Trizec was the city’s largest landlord with a strong personal connection to the city.
“It was a Calgary-based, major national real estate company, and it was Calgary-based because [former Trizec CEO] Harold Milavsky wanted to live here,” says Barry Emes, former managing partner of the Calgary office of Stikeman Elliott, who acted for Trizec on a variety of files before its massive 2000 real estate divestitures. Trizec, says Emes, “gave Calgary an opportunity to have a world-class real estate practice.”
When Trizec exited the Calgary market, most of its properties were picked up by Brookfield Properties Ltd. and Oxford Properties Group Inc. Both companies had a prior presence in the Calgary market—Oxford, for example, developed and managed a number of Calgary’s flagship buildings, including the unfortunate Canterra Tower—but after acquiring much of the Trizec portfolio, Brookfield and Oxford controlled more than half of Calgary’s top space. In the meantime, pension funds discovered that Cowtown had A-class real estate, and, as these came on the market, “Pension funds bought them up,” says Emes. When they ran out of properties to buy, they started to acquire the development companies—OMERS (Ontario Municipal Employees Retirement System) took over Oxford Properties Group in the fall of 2001.
The pension funds now own the majority of Calgary real estate. Through its Oxford portfolio, OMERS is firmly in the lead, with 27 per cent of Class-A space and some Class-B space in its hands. Great-West Life (8 per cent, including the Stock Exchange Tower) and Cadillac Fairview (3 per cent) each have a chunk of the pie and would be pleased to get more. But, with most of the existing real estate in pension fund hands, there is little movement in the market. Quebec-based CDPQ, through its Vancouver subsidiary, the Bentall Corporation, is creating a new piece of the pie by developing IBM’s three-building headquarters on the edge of downtown.
“Good quality real estate doesn’t change hands,” says Rick Dawson, a senior real estate practitioner at Blake, Cassels & Graydon LLP in Calgary. That means Calgary real estate lawyers can’t count on the development and sales of downtown towers to keep them in billable hours. “To be a successful real estate practitioner in Calgary, you need to be skilled beyond downtown real estate.” Not that Dawson is dismissing the prestige of working on downtown real estate—he’s worked on the Nexen building lease on behalf of Nexen Inc., Trizec’s sale of the tower at the corner of 5th Avenue and 5th Street, and Hunt Oil’s sublease of space in the TCPL Tower. But he points to “the long stretches of time when there has been no construction or very little construction in the Calgary market, with very few trades of major real estate in between.” Dawson has kept busy by working on sales of out-of-core projects such as Heritage Square, and out-of-city projects such as the $350 million West Edmonton Mall bond financing, as well as—a good Calgary stand-by—golf course developments and financings.
Out-of-core and out-of-city work is a key part of the practice even for those lawyers who are in on most of the downtown deals. Whitlock is working with long-time Bennett Jones client ATCO on the future of the ATCO industrial park and the adjacent city-owned Lincoln industrial park, well south of downtown. The most talked-about aspect of the project would have one of Calgary’s oil giants establish its headquarters in the park. “PanCanadian, very innovatively and aggressively, is exploring the opportunity to relocate its head offices into a suburban campus-style office location,” says Darryl Barber, Q.C., at Barber Durante LLP, who is representing PanCanadian in its discussions with the city. “It would be in essence the first major event of that kind in the city of Calgary, where you would see one of the major oil companies going out of the downtown core.”
What PanCanadian’s merger with Alberta Energy Company Ltd. (AEC) will do to these plans remains to be seen. But most practitioners say it’s a fair bet that EnCana Corporation (the now merged company) will need to revisit its space needs, creating at the very least another major lease shuffle. Between the two of them, PanCanadian and AEC have people spread through five downtown buildings, taking up some 1.5 million square feet of Class-A space.
“If someone wanted to find even 60- to 80,000 square feet of contiguous space in a tower, they would be hard-pressed,” says Kieth Mullback at McCarthy Tétrault. “If the AEC/PanCanadian merger goes through [which it has], it’s possible that company will be shopping for new space.” That’s good news for Mullback, who has done lease work for the major tenants and owners of such buildings as Gulf Canada Square, TCPL Tower, Bankers Hall West and the Nexus Building. It may also be good news for development lawyers.
“The market is ripe for a major tenant-driven development,” says Mullback. There are about half a dozen sites in the downtown core approved and ready for towers, including an OMERS/Oxford-owned lot in the vibrant Eau Claire Market area. All that’s needed is a developer with a vision (and a confirmed tenant). Whitlock thinks he’s got a client who’s going to make it happen. Ron Mathison’s Penny Lane Developments is planning to transform the low-rise Penny Lane Mall—virtually next door to the Bankers Hall Towers—into two soaring office towers, a potential new home for EnCana and other cramped downtown tenants.
Although the project is still mired in City Hall red tape, its prospects are good, if only because it’s not owned by a pension fund. While Calgary lawyers are pleased to get the pension fund work when they can wrest it from their Toronto counterparts, working with them has its challenges. Whitlock recalls a recent file where a pension fund (he prefers not to name which one) almost built an office tower, “but it couldn’t get through its internal process in time” to make the various deadlines. As a result, the opportunity passed, and the would-be office tower is still a parking lot—which may have worked out for the best for the owner. Commercial lease rates may still be half of those in Vancouver, but parking rates in Calgary, say Calgary lawyers, are higher than in Toronto, never mind Vancouver.
Compared to cities with hands-on governments like Vancouver, Calgary’s City Hall presents fewer hoops to developers. But in a city and province famous for getting things done at lightning speed, even the few hoops that exist are onerous. “The process can be excrutiatingly painful,” says Whitlock.
Enter Bruce Green, Q.C., one of the senior real estate practitioners at Fraser Milner Casgrain LLP (FMC), and lobbyist extraordinaire. While partner Eugene Durand, Q.C., acts for FMC’s property development clients, Green helps developers fight City Hall—and each other. “I’m not usually retained unless there’s an adversary,” he notes. Once retained, “I rarely lose,” he says.
Green’s impressive track record can in part be explained on the basis that he wrote a lot of the rules and what are now the city’s boilerplate agreements. He’s been very much involved in the “inventing of the Plus-15”—the above-ground pedestrian corridors that help corporate Calgary survive the winter. In between battles, he keeps helping Ralph Klein get elected.
After three decades of practice, while still active, Green is starting to pass some of his torch to younger generation “superstars.” His heir apparent is FMC’s John Merrett. Merrett and Green just scored a major victory on behalf of Remington Development Corporation in a battle of mega-malls against developer Heritage Partners Ltd. Heritage Partners and Remington are building big-box malls kitty-corner to each other, and Heritage Partners contested the terms on which Remington got its zoning approvals. After a marathon 10-hour session, council voted in favour of Remington.
Acting for Heritage Partners was Darryl Barber, “another superstar” according to Green, whose opinion is shared by many Calgary practitioners. Barber has just opened up Calgary’s first commercial real estate boutique, Barber Durante, with Macleod Dixon alumnus Samuel Durante. Barber had spent most of his career at Burstall Ward, an 18-lawyer Calgary firm he describes as a corporate/securities boutique with litigation support. “I was essentially a solo practitioner there,” he says. “My practice was 99 per cent portable and came with me.”
A key reason for the plunge was Barber’s recognition that the Calgary real estate market had changed dramatically over the last decade. While he has strong “personal relationships with the development community” and a busy, successful practice, Barber is aware that the major real estate players in the market were not from Calgary—and decisions were not made in Calgary. Unfamiliar with the market, they were unlikely to consider taking their real estate work to a practitioner at a firm like Burstall Ward. (The same trend, incidentally, is to the advantage of a firm like Bennett Jones.) He believes a boutique real estate practice will result in a higher extra-Calgary profile.
While only time will tell if he’s right—Barber Durante opened its doors on January 1, 2002 with only the two lawyers—Barber is optimistic. He’s already been approached by pension fund manager Beutel Goodman, and he plans to grow the firm to five or six full-time real estate practitioners. At those numbers, says Barber, his new firm will match the manpower of most real estate departments at the major law firms in the city. “It will provide us in essence with the same level of resources that any of those firms have to handle those large transactions,” he says. And, he adds, Barber Durante will provide an important service to these firms. “As these firms merge and grow, just given the size of them, they certainly have conflicts that arise frequently. We believe we will be warmly welcomed by them as an opportunity to handle any of their conflict situations. We are here available to do conflict work, without them being concerned that they will lose their litigation work or their corporate/securities work.”
But they might lose some of their real estate practitioners. As the firm’s profile grows, Barber expects to see some people from big firms “knocking on our door, saying ‘We’ve had it with big firm lifestyle and necessarily having our lives ruled by securities lawyers. We’d like to get together with a few like-minded practitioners who support each other and have a strong real estate marketing focus.’” That’s how he got his co-founding partner Samuel Durante, who felt his real estate practice somewhat at odds with the priorities of his former firm Macleod Dixon.
“The larger firms now chase bigger and bigger deals, and a lot of them happen to be outside of Alberta,” says Durante. “That creates overhead. That creates expectations and expense. My practice is located here in Alberta and I know Alberta real estate law and real estate deals in Alberta. Macleod Dixon has some interesting prospects in Caracas and Rio de Janeiro. Would that impact my practice? No.” But at Macleod Dixon, he was effectively paying for the Asia and South America trips of his international energy partners.
Durante’s former partner Stephen Raby may have the same challenges, but he is not complaining. He does note, however, that the practice area’s biggest challenge right now is attracting talented juniors, and he believes Barber Durante may appeal to some practitioners, young and seasoned alike. John Merrett at FMC also admits the attraction. Would he trade working against Barber for working alongside him? “You never know is all I can tell you,” he laughs. For now, he’s happy where he is.
It’s not as sexy as big corporate deals and it’s not as Calgary as oil and gas, but when you claw your way to the top, it’s as much about deal-making as the oil patch mergers. And if an ambitious real estate lawyer plays his cards right, he can end up running a firm. When greenfielding its Calgary office, Stikeman Elliott recruited well-known real estate practitioner Barry Emes from what was then Code Hunter (now Gowling Lafleur Henderson LLP) to be its managing partner. When Bennett Jones needed a well-connected lawyer to shake up its Toronto office in 1999, it turned to real estate partner Hugh MacKinnon. The type of real estate practised at Bennett Jones—MacKinnon was as much a financial services and banking lawyer as he was a property development lawyer—provides valuable connections with the business communities in both Calgary and Toronto. In today’s real estate market, even in independent Calgary, that Toronto card is critical.
As Emes characterizes it, everything about real estate law is exciting—once you’re doing it “at the proper level.” That means working with pension funds and REITS, which means working with Toronto. “The unfortunate problem with being in Calgary is that the capital markets are in Toronto,” says Emes, noting that he crosses paths with top Toronto real estate lawyers such as Greg Howard at Davies Ward Phillips & Vineberg LLP and Gordon Sato at McCarthy Tétrault more often than he deals with local practitioners. “It’s a Canadian market at that level.”
Whitlock’s experience is similar, and the Calgary arm of the Trizec divestitures is typical of this situation. By 2000, Trizec was based in Toronto and represented by Davies Ward in Toronto. Whitlock and Bennett Jones provided Alberta counsel to Trizec, while Emes was on side for purchaser Gentra, a subsidiary of Brookfield. Oxford was represented by Peter Quinn of McCarthy Tétrault in Toronto.
Raby concedes that “The big deals get done out of Toronto.” He adds, “But the major players understand there are real estate lawyers in Calgary who can do them.” First, the major players need to know who you are, and that means that marketing and networking among the ambitious practitioners is focused on the Calgary-Toronto corridor and beyond. “Real estate in Alberta is nationally oriented,” says Rick Dawson. “We have players from B.C., Ontario and elsewhere.” Theoretically that gives the nationals, like Blakes, Stikeman Elliott and McCarthys an advantage. Fraser Milner Casgrain, asserts Green, now has a national real estate platform, which it is using for intra-firm cross-selling. At Stikeman Elliott, too, “We try to pass the file on,” says Emes. “That’s the theory of the national firm.”
But in practice, pre-merger referral relationships die hard, and the real estate people at Bennett Jones are as likely to see a Vancouver- or Toronto-generated file as their peers at the national firms. On the west coast, developer Nat Bosa is primarily a McCarthy Tétrault client, but when he started to build condo high-rises in Calgary, he first went to Tim Kerrigan at Bennett Jones. McCarthy Tétrault just managed to snag this work back, and it is now in the hands of Calgary partner Stuart Blyth. McCarthys has not enjoyed the same success with the CDPQ-owned Bentall Corporation, for whom the firm does most of the development work in Vancouver. In Calgary, Whitlock at Bennett Jones is still representing Bentall on its construction of the new IBM headquarters.
The Quebec-controlled Vancouver-based Bentall is putting up IBM’s offices, Vancouver and U.S. developers are building condo towers along the Elbow River, and a Toronto-controlled REIT built and owns the TCPL Tower. But Calgary entrepreneurs continue to be active in the out-of-core and the residential markets. Calgary’s residential market continues to be the hottest in the country—and chances are good that it will be a Calgary developer who puts up the downtown core’s next tower. And his new tenants will all need Calgary real estate lawyers. Right?
Marzena Czarnecka is a Lexpert staff writer. This article is the third of a four-part analysis of Canada’s major real estate markets. The Toronto market will be examined in the July/August issue.
Lawyer(s)
Robert A. Homme
Tim D. Kerrigan
Larry L. Johnson
Stéphane Raby
Barry E. Emes
Richard L. Dawson
Darryl J. Barber
Kieth R. Mullback
Ron Mathison
Eugene J. Durand
Ralph Klein
John D. Merrett
Samuel F. Durante
Hugh L. MacKinnon
Peter D. Quinn
Stuart F. Blyth
Firm(s)
Capital d'Amérique CDPQ inc.
Omers Realty Corporation
Bennett Jones LLP
Burnet, Duckworth & Palmer LLP
McCarthy Tétrault LLP
Stikeman Elliott LLP
Husky Oil Operations Ltd.
Suncor Energy Inc.
Norton Rose Fulbright Canada LLP
Oxford Properties Group
Canadian Real Estate Investment Trust (CREIT)
TrizecHahn Office Properties Ltd.
Brookfield Properties Corporation
The Great-West Life Assurance Co.
Bentall Capital Limited Partnership
Blake, Cassels & Graydon LLP
CNOOC International Ltd.
Hunt Oil Company of Canada
West Edmonton Mall Property Inc.
ATCO Ltd.
Alberta Energy Company Ltd.
Encana Corporation - Palliser
McCarthy Tétrault LLP
Baker Real Estate Corporation
Dentons Canada LLP
Remington Development Corp.
DS Lawyers LLP
Beutel Goodman Real Estate Group
Gowling WLG
Gentra Inc./BPO PropertiesLtd.
Bentall Corporation
IBM Corporation