Louise M. Wells took over the leadership of Morris, Manning & Martin in January in the midst of the worst real estate bust to hit Atlanta in most lawyers' memories.
It is a challenging time to be running a large law firm, but Wells is upbeat and entrepreneurial by nature -- and no stranger to the ups and downs of the economy. Like her predecessor as managing partner, Robert Saudek, she is a real estate lawyer. Saudek, one of Morris Manning's founders, will retire at the end of the year.
"I'm used to the expansion and contractions of the business," she said. "It's one of the things my partners thought would be helpful for this job."
Wells joined the firm in 1978, straight from Emory University School of Law, and just two years after its launch as an eight-lawyer real estate and litigation boutique.
As a young associate, Wells started building a residential real estate practice that has become a major department for the firm, making up as much as 10 percent of its revenue. The group represents builders, developers and lenders in condo and subdivision work and also handles residential real estate closings.
She built her practice on Atlanta's condo boom. "Around 1980, apartment conversions to condos became the rage," she said. "We represented many people who were doing that conversion. That's where I got exposed to the residential part of real estate."
Morris Manning gave her the opportunity to pursue that interest. In 1980, as a third-year associate, she opened a perimeter office for the firm to do condo conversions. "It blossomed from there," she said. "People started calling and my clients grew as well."
She made partner in five years.
Wells said this is at least the third real estate slump she has been through. "None have been as deep and dramatic as this one, but none followed peaks as robust and high as the previous boom," she said.
Like many other large general practice firms, Morris Manning's bottom line suffered last year from the drop in demand for legal services. The Am Law 200 firm's revenue declined 16 percent to $83.2 million. Despite cost-cutting measures, profits per partner declined almost 9 percent to $760,134.
But Wells is optimistic about 2010. "I think there are signs of life in the market," she said. "I think it will be a decidedly better year than 2009. There is not a lawyer at our firm who isn't busier than last year."
A residential real estate practice is a particularly sensitive barometer of Atlanta's economic climate. Wells' practice pared down last year, shuttering its residential real estate closing offices in Alpharetta and Cumming in response to the grim real estate market.
This year she's seeing more homebuilders making contracts to buy lots and securing construction loans. "It's still hard to find capital, but there's some money out there and some is being loosened up," she said.
Wells added that almost all of these deals are being made based on reset prices -- suggesting that the market is finally finding its bottom.
One of the firm's corporate partners, David M. Calhoun, reports similar signs of life. He said lending remains tight, but his group is seeing deals get done that don't depend on credit being available.
"We're seeing an uptick in the venture market, an uptick in M&A -- I wouldn't call it robust yet, but an uptick -- and an IPO market, which we haven't seen in a couple of years," said Calhoun, a member of the firm's three-lawyer executive committee, which shares management responsibilities with Wells.
Morris Manning has handled three public offerings so far this year. One was for SyQuest, a computer tech company, and the other two were for real estate investment trusts, Cole Credit Property Trust III and Carter Validus Mission Critical REIT. The latter plans to invest in buildings used by medical facilities, data centers and schools -- and is hoping to pick up some good deals. "In the current market environment, we believe it is possible to buy quality commercial real estate properties at a discount to replacement cost and with significant potential for appreciation," says the March 23 prospectus for the Tampa-based REIT.
Morris Manning has redeployed lawyers from areas hit hardest by the recession, such as corporate and real estate, into growth areas, such as real estate litigation.
"We're combining strengths to create groups," said another corporate partner, Ward S. Bondurant.
"It's like a Reese's peanut butter cup -- if you've got chocolate and peanut butter, make a peanut butter cup."
When real estate goes bust, traditional commercial litigators plus real estate deal lawyers become a distressed real estate group.
"In the last 12 to 18 months, we've taken excellent transactional lawyers and put them on distressed real estate litigation," said Bondurant. "Working across borders is how we grow the firm. There is no incentive to stay in your group."
In like fashion, Calhoun said, Morris Manning is redeploying corporate lawyers experienced in doing tech deals into intellectual property litigation.
Meanwhile, the firm is working to expand Tim T. Xia's busy China practice from U.S. patent work for Chinese companies into transactional and corporate work. Morris Manning opened outposts in Beijing and Taipei last year to support that practice.
"The folks that thrive are the folks that are flexible," said Calhoun.
"Our creditors' rights practice has gone gangbusters, which is probably not a surprise," he added.
That kind of flexibility got Morris Manning through another steep downturn at the beginning of the decade. The dot-com bust hit the firm particularly hard because of its extensive tech practice. In 2002, profit per partner fell $118,731, to $508,929 -- a 19 percent drop from 2001.
Bondurant said that the securities lawyers who did IPOs for tech companies during the tech bubble reinvented themselves as a real estate capital markets group after the bust. At the time, investors saw pools of real estate assets as a safer, more tangible place to put their money than dot-com startups.
That group, which is run by Lauren Prevost, has become an important practice for the firm.
Like other firms, Morris Manning is recruiting lateral partners to extend practices into more fertile areas. As with distressed real estate, the firm sees opportunities in distressed banks.
"It's a great time to be a bank acquirer," said James C. Wheeler, who joined the firm from Bryan Cave in March. Wheeler said distressed banks have become a potential opportunity for "the money that's been sitting on the sidelines for several years."
Wheeler declined to divulge any specifics, but said he's working with "two large investment groups with nine-figure bankrolls with their sights set on very large acquisition proposals that could include multiple banks and very large real estate proposals."
He cautioned that any distressed bank plays must be approved by bank regulators, which means investors much have a management team with banking experience.
Morris Manning's growth over the years has come from adding key lateral partners to expand and diversify its offerings.
"A lot of our success has come from bringing in successful lateral partners," said Saudek.
He said that in the mid-1980s, A.B. Manning added a real estate lending practice plus "maturity and a big name," and John C. Yates brought a corporate practice working with tech companies. In the 1990s, he said, Morris Manning "fleshed itself out into a general practice firm," adding, for example, Thomas A. Player's corporate insurance practice.
Wheeler is the only lateral partner the firm has added so far this year, but Wells said the firm has added four other laterals, including associates in its real estate and corporate practices.
The firm brought in two new partners last year, Stephen B. Schrock and C. Glenn Dunaway, who handle timberland transactions for investors, but it also lost longtime corporate partner John F. "Sandy" Smith to Womble Carlyle Sandridge & Rice.
Saudek was one of seven lawyers who in 1976 broke off from Stack & O'Brien to form Morris O'Brien & Manning, which Saudek noted had the reassuring acronym MOM. Saudek was 31 and the other partners were just a few years older. "Back in the 1970s it was a boom period and people were feeling they could break off and start something new," he said.
Saudek said he and his partners expanded MOM from real estate into a 140-lawyer general practice firm in part so it could weather boom and bust cycles in the economy.
A more diversified firm "can ride out the economy better," he pointed out. "The tech collapse hits a tech firm more severely than a general practice firm."
Wells is only the second managing partner in Morris Manning's history -- and the first to be elected. Saudek said he was handling most of the firm's management by 1994, after taking on responsibilities in an ad hoc fashion. "I was never elected -- it just evolved," he said.By 2000, Saudek was managing the firm full time. His impending retirement prompted the firm to set up a more institutionalized management structure.
The partners scaled back the managing partner job to a half-time position with a three-year term and created a three-member executive committee to share day-to-day leadership responsibilities.
In addition to Calhoun, real estate partner Thomas S. Gryboski and litigator John P. MacNaughton are the executive committee members.
Wells is still overseeing the firm's residential real estate practice with the assistance of Darla G. McKenzie, but she has relocated from her Dunwoody, Ga., office to Joe Manning's old office at Morris Manning's headquarters in Buckhead's Atlanta Financial Center. Wells said Manning offered her his office after he retired last year.Wells is used to running a practice with lean margins and seasonal changes in demand. She said the residential real estate business is cyclical, even when times are good. "January and February are tough months and things start perking up in the spring," she said.