JOURNAL NEWSWIRE ARTICLE
© 2003 The Daily Journal Corporation.
All rights reserved.
CARY TO GATHER ALL ITS PEOPLE UNDER BROBECK ROOF
The firm consolidates staff in 143,000 square feet of East Palo Alto office
space two months after Brobeck died. - April 14, 2003
Daily Journal Staff Writer
FRANCISCO - Gray Cary Ware & Freidenrich has answered one
of the key unresolved questions following Brobeck, Phleger & Harrison's
collapse: What would happen to the defunct firm's sparkling new
offices in East Palo Alto?
Cary announced Friday it will take over almost all of Brobeck's
143,000 square feet at University Circle, a year-old redevelopment
project in East Palo Alto's Whiskey Gulch neighborhood.
great news for everybody," said Eric Berson, a former attorney
who brokered the 15-year lease for Gray Cary.
Cary, for one, gets a great deal - saving as much as $2 million
a year once the lease runs out for the firm's office space on
Palo Alto's Hamilton Avenue in 2005. University Circle Investors,
Gary Cary's new landlord, also acquires a major tenant in a tough
real-estate market just two months after Brobeck closed shop.
addition, Brobeck significantly reduces the damages it could
owe for breaking a 12-year lease that began January 2002.
not bad news for Brobeck," said Richard Shapiro, a Thelen,
Reid & Priest partner who represents University Circle Investors
in its $100 million suit against the former firm.
this will reduce it," Shapiro added of the amount sought
by University Circle. Brobeck "would have been subject to
a much larger claim" without a new tenant to lower the landlord's
Snyder, the chairman of Brobeck's liquidation committee, had
not responded to questions at press time.
Gowdy, a former Brobeck partner who now is managing partner of
Morgan, Lewis & Bockius' San Francisco office, wasn't familiar
with the deal.
it good news? My uneducated reply would be that I think so," he
said. "It should mitigate the landlord's damages."
who also represented the landlord in Gray Cary's lease, said
other tenants at University Circle include Bingham McCutchen
and Dewey Ballantine, which acquired former Brobeck partner Jim
Elacqua's intellectual property group last year before Brobeck's
collapse. A Four Seasons hotel is being developed on the site
the wake of the news on Brobeck, landlords increasingly have
been cautious about signing up law firm tenants, according to
Berson, who also is chairman of Washington Realty Group, which
deals exclusively with law firms.
been educating landlords about law firms after Brobeck," said
Berson, a former developer. "Landlords in general are more
conscious of law firm strengths and weaknesses. They're becoming
more sophisticated but they have a long way to go."
Circle Investors "really worked hard to get up to speed" on
Gray Cary, a firm with "a balance sheet that is strong as
hell," he added.
firm is slated to move July 1, taking over five floors, or 120,000
square feet, and all of the building's furnishings, which the
landlord seized after Brobeck's implosion.
Cary will consolidate the 150 lawyers in its three Silicon Valley
offices at a single site. The existing offices are located at
300 and 400 Hamilton Ave. and on Embarcadero Road in Palo Alto.
are very excited about the opportunity to have all the lawyers
under one roof," said Terry O'Malley, the firm's chairman.
Just hours after announcing the news Thursday night, he received
40 e-mails congratulating him on the deal.
the extent that you wanted to have meetings with people from
disparate practice groups, people had to get in their cars and
drive," O'Malley noted. "Having everyone in the same
building will facilitate that collaborative work. For us, it's
an economic and an operating win."
Cary is seeking tenants for its space at Hamilton Avenue and
has already found two small subtenants. Those new tenants and
others expected to locate there will keep Gray Cary's rental
costs flat until its lease runs out in two years, according to
O'Malley. After that, the firm's Palo Alto rental costs will
was a unique combination of circumstances," O'Malley said. "You
had a sharp, unprecedented downturn in Silicon Valley real estate
[prices]. It was a once-in-a-lifetime opportunity."
Brobeck collapsed, negotiations for the space began almost immediately.
events began to unfold, we moved quickly," O'Malley added. "Most
law firms like to get started a year and a half ahead of their
move date. The elapsed time here will be a little less than five
the economic downturn, Gray Cary laid off 45 lawyers last year.
Since then, the firm slowly has been hiring lateral partners,
noting growth in its white-collar criminal defense, intellectual
property litigation, product liability and transactional practices.
had a very strong first quarter that exceeded even our own projections," O'Malley
observed of the 420-lawyer firm. "We're on pace to have
a really strong year."
Cary "did what it needed to do last year" by laying
off lawyers, he said. But unlike firms such as Brobeck, which
had $90 million in loans at its peak, Gray Cary "has never
been willing to incur a lot of debt."
profile was exactly what the landlord wanted," O'Malley