Editor: Would each of you gentlemen tell our readers something about
your professional background?
Fryer: I am a senior partner at King &
Spalding and coordinate the firm’s real
estate and capital markets practice groups.
My own area of practice is real estate with a
decided equity and corporate bent that
would include public mergers and acquisitions,
rollups, large portfolio and building
acquisitions and funds formation.
Culhane: I am a partner in the private
equity and investment funds group of King
& Spalding. For the last 12 years, I have
focused on private investment funds, which
comprise private equity funds, real estate
funds and hedge funds. In my capacity as a
private funds lawyer, I support the real
estate practice as well as other groups
within the firm.
Editor: How did each of you come to King & Spalding?
Fryer: I came straight from law school over
30 years ago at a time when the firm was
less than 10 percent of its size today. Needless
to say, I have seen a great deal of
change in the firm.
Culhane: I joined a year ago. King &
Spalding was a firm with an established reputation
and a growing presence in New
York. The firm’s vibrant and growing funds
practice and talented teams of lawyers
across many legal disciplines represented a
very attractive platform for me.
Editor: Would you tell us about your respective practices? How have
they evolved over the years?
Fryer: The evolution of my practice has
been one that is reflective of what has
occurred in the real estate industry generally.
It has gone from being project driven
to being enterprise and capital oriented.
That is, it reflects two fundamental trends:
consolidation and globalization.
Culhane: There has been enormous growth
in the private funds industry over the course
of my career. There has also been a trend
towards greater institutionalization of the
industry and greater convergence among the
types and investment of private investment
funds. I had the privilege of working with
many leading hedge fund and private equity
managers, who have now spun out into new
groups and contributed to this tremendous
growth in the industry.
Editor: When the economy is booming – or at least some important
segment of it, like technology or IP – what kinds of projects do you find
yourselves handling? And then when the bubble bursts?
Fryer: Having been through four or five
recessions, I can say that a bubble bursting
is not a good thing. In general, in an up market
we feed off transactional activity. There
is currently a considerable amount of core
money portfolio balancing gravitating to
real estate. In a down market, there is a
combination of workouts and opportunistic
capital formation, but the overall volume of
work is diminished.
Culhane: I see similar rotational trends.
During good times, capital formation, private
equity and real estate are very active. In
the down times, there is a movement
towards distressed investment funds and
hedge funds. Irrespective of the state of the
economy, then, there is always one group or
another raising and investing money.
Editor: Real estate is cyclical in nature as well. We appear to be
in a rising real estate market just now. What are the implications for your
Fryer: It has been in an up cycle, and the
principal reason is the unprecedented
amount of liquidity in the marketplace. As
long as that liquidity exists, it sustains a
remarkable level of transactional volume.
Certainly, our real estate industry practice
has benefited from this level of activity.
Editor: Mr. Fryer, one of your responsibilities is to coordinate the
firm’s real estate and capital markets practice groups. Would you tell
us about this aspect of your work?
Fryer: When we refer to capital markets,
we mean our corporate practice. The capital
markets group includes the three legs of a
traditional corporate practice: mergers and
acquisitions, corporate finance and private
equity. The real estate industry is such a
voracious consumer of capital, and creates
such a tremendous transactional volume,
that it cuts across all of our transactional
practice areas, and it is natural for me to
play a key role in promoting and growing
our corporate practice, the focus of which is
in New York and London, with particular
reference to the private equity area. This is
a wonderful source of highly desirable, and
Editor: Who are the clients here? Institutional investors? High net
Fryer: They include the traditional real
estate investment managers, the Morgan
Stanleys of the world, opportunity fund
sponsors like Apollo, and, to a degree, the
REITS. There are non-U.S. investors as
well, and on the investment side, large tax
exempt organizations, corporate pension
funds and investment companies.
Editor: Would you tell us about your efforts with respect to funds
formation and project developments relating to real estate securitization? Is
this a recent development?
Fryer: We had a great run over the last ten
years in this country, as both the equity and
debt markets have securitized. We have
seen the REIT industry grow to become a
component of the S&P. We will continue to
see new names that come forward as public
companies in the U.S. However, there are
three inhibitors to substantial growth for
real estate companies in the public market
in the U.S. at present: private company valuations
are high compared to public company
valuations; the private market is awash
with liquidity, and thus there is little incentive
to go public; and Sarbanes-Oxley has
meant higher costs and a higher degree of
exposure to risk for public companies. For
real estate, the growth of the public market
is primarily going to be outside the U.S.
Editor: Mr. Culhane, you had an extremely interesting few years with
Goldman Sachs, which, I am sure, informs your private investment fund formation
practice. Would you tell us about some of the recent developments in this area?
Culhane: There are a number of things to
highlight. In the private equity arena, there
has been an increase in the number of funds
coming to market after a couple of years of
relative lethargy. The regulatory regime has
become more intense, and changes in the
tax code and the statutes governing investment
advisors and investment companies
reflect increasing government scrutiny and
oversight of the private funds industry. At
the same time, domestic funds are seeing a
greater number of non-U.S. investors, and
the industry is becoming more global than it
was a few years ago, driving more standardization
of the terms governing these funds.
Editor: In a world which has not seen much investment stability in
recent years, what kinds of investment instruments are popular? What does this
mean for a practice like yours?
Fryer: There are two types of vehicles that
come to mind. One is institutional. The
other is a retail product that is symptomatic
of a change in the psyche of investors. On
the institutional side, we have the phenomenon
of the open-ended fund that is non-public
and accommodates a variety of different
investors, not merely tax exempt organizations.
This permits big investors to come in
and out of the fund on a quarterly basis. On
the retail side, the private REIT format has
been successful in raising large amounts of
money, and we think that we will see large
financial institutions beginning to sponsor
With respect to our practice, these
instruments are very complicated and,
where the investor is either non-U.S. or a
tax-exempt organization, require a great
deal of work. We have been, and anticipate
continuing to be, extremely busy.
Editor: Please tell us about the resources – the expertise and
the personnel – that you are able to bring to bear in serving the firm’s
Culhane: With more than 800 lawyers in
offices around the world, King & Spalding
is a major international law firm at this
point. For the fund formation and the real
estate practices generally, we draw upon the
expertise of a great many practice areas in
addition to our own. One of the benefits of
the fund business is the opportunity to collaborate
with so many different disciplines
and practice areas; happily, King & Spalding
has a deep bench in each of the relevant
Fryer: I would add that in the transaction
business, a firm is required to put a team
together from many different practice areas.
A firm that does not get along very well
internally is probably going to be difficult to
deal with externally. King & Spalding
works on a collaborative basis – among ourselves,
with the accountants and bankers
and with the lawyers on the other side – in
attempting to achieve the desired end. That
focus on the end result, and on the means to
get there, has served us well. And our
Editor: What about the future? Where do you see this practice –
these practices – going in, say, five years?
Fryer: The U.S. will continue to be a huge
source of the world’s GDP, which places us
at the center of the global economy, Today
there are about three billion people living in
a capital market environment, and property
markets all across the world are becoming
destinations for investment. We are going to
see the continuation of a dramatic transition
from private ownership to public outside the
U.S., and many of the leading investors in
that transition are going to be U.S.
institutions. Of particular importance are
the tax-exempt institutions, foundations,
government pension funds, university
endowments, and the like. These are the
players that will drive that market, and that
fact constitutes a wonderful opportunity for
firms like ours with expertise in fund formation
and all manner of financial and
investment vehicles and the ability to
deploy that expertise internationally.
Editor: You have been speaking of the globalization of the economy.
What does this mean for a practice like yours?
Fryer: We have had the good fortune to
represent several global companies such as
The Coca-Cola Company over many years.
That represents a wonderful model for us, in
that it takes a specific kind of expertise and
adapts it to a variety of local conditions all
across the world. That is what King &
Spalding is attempting to do with this practice.
The U.S. has a tremendous advantage
in remaining the largest source of capital in
the world, and to its competitiveness and
investment style, it adds flexibility and an
openness to other cultures that means we
will continue to be the single most important
driving force in the development of the
global economy. King & Spalding plans to
be at the center of that development.