Here’s a Good One: Lawyers Think Fees Too High
Residential Land Brokers Keeping Busy; OC Rated 37 of 61 on Office Costs
REAL ESTATE
by Daniel D. Williams
Just when I thought I’d heard all the “lawyer jokes,” a new one comes along:
A lawyer walks into a bar and orders a beer. He stares at the frothy mug for a moment, watching the foamy bubbles pop.
“It’s got to stop,” he mutters to himself, shaking his head. “It’s just got to stop.”
“What’s that?” the barkeep asks.
“This price gouging, that’s been going on. We’re charging our clients too darn much,” he says.
“Ha ha!” the barkeep says. “That’s a good one!”
I come from a family of lawyers, so when I hear about an attorney with a guilty conscience, I can’t help but chuckle. Suffice it to say, I bit my tongue when I spoke recently with Henry Steipel as he told me about his newly formed law firm Costa Mesa-based Garrett DeFrenza Stiepel LLP, a firm he said was formed in reaction to skyrocketing legal fees.
“We’re charging up to 25% less than the bigger firms,” Steipel said.
Partners Stiepel, John Garrett, Marcello DeFrenza, Donald Hickman and associate Daniel Cho broke off from the Costa Mesa office of San Francisco-based multinational law firm Pillsbury Winthrop LLP and formed their own firm. It specializes in real estate law, representing developers, institutional investors, major insurance companies and tenants in all facets of real estate-related legal matters.
Legal fees have grown 30% in recent years, Steipel said, and those high rates have scared off clients to the point that attorneys in big firms rely on hitting the home run at the expense of “lawyering” the day-to-day business of their clients.
According to Steipel, he and his partners met with representatives of Pillsbury Winthrop to try and find a way to address the high legal fees. Steipel helped form the Costa Mesa office of Pillsbury Winthrop 12 years ago and was a managing partner with the firm that he watched grow to 30 attorneys.
“We had open and frank dialogue with Pillsbury. We let them know that the rising costs hurt us with much of the type of legal work we perform,” Steipel said.
Setting it Straight
In last week’s Top Real Estate Deals section, we messed up on a big one. Jim Cunningham of Grubb & Ellis Co. handled the 244,800-square-foot lease at 9401 Toledo Way in Irvine by Qwest Communications Inc.
With the data center downturn, Qwest is subleasing the space, which Cunningham is marketing. Several companies are interested in all or half the building, he said.
Cunningham also notes that the Qwest lease, which we listed as the largest OC industrial lease last year, was signed in October 2000. We cited it because the deal hadn’t been written about and was listed as closing in January 2001 by CoStar Group Inc., our source for the top deals. Look to see the Toledo site make the list for 2002, Cunningham said, with a new tenant.
RESIDENTIAL
Residential construction can’t keep up with demand, but it’s not due to a lack of activity. Local homebuilders are scouring available space throughout Southern California and land brokers are closing deals, especially in the Inland Empire.
Newport Beach-based residential developer Alexander Communities purchased 5.3 acres in Redlands for $1 million. Alexander plans to build 52 single-family homes on the site on Fern Avenue. Jerry Giglio of Grubb & Ellis’ Anaheim office represented the buyer and the seller, Scanlan Kemper Bard of Portland, Ore., in the deal.
Irvine-based land broker Whittlesey Doyle has been pushing dirt to the tune of at least $43 million. The company closed on two deals at Chapman Heights, a masterplanned community in Yucaipa. In the deals, Inland Empire-based Howard Roberts Development acquired an undisclosed number of lots while Hearthside Homes purchased 86 lots. Les Whittlesey brokered the deals.
Whittlesey also brokered deals on 305 lots in the planned community of The Colonies in Upland. Standard Pacific purchased 114 lots and KB Home acquired 92 lots. The Colonies acquisitions totaled more than $35 million.
Tom Doyle represented the seller, Abbacy Holdings, and the buyer, KB Home Coastal Division out of San Diego in the deal. In another deal, Irvine-based Richmond American purchased 89 lots from Lewis Management Co. Doyle was the broker of record on that one, too.
KB Home was busy buying more lots in Riverside County. KB acquired or additional 271 lots in the Breighton Woods community of Menifee. Mac O’Donnell, Mike Hunter and Dustin Schmidt of Costa Mesa-based O’Donnell/Atkins Co. represented KB Home and the seller, Newport Beach-based Warmington Land Co., in the deal. According to O’Donnell, another 135 7,200-square-foot lots in Breighton Woods and 328 10,000-square-foot lots in Menifee will be on the market.
Bits and Pieces:
In a recent study of office occupancy costs by Grubb & Ellis and Knight Frank, Orange County ranked 37th among 61 prime office markets worldwide. The report ranks the 61 markets from most expensive to least expensive based on average annual rents plus typical tenant expenses like common area maintenance costs. The average annual occupancy costs in Orange County’s office market hit $26.52 per square foot in the fourth quarter, down 15.6% from the same period a year earlier. For comparison, though, San Francisco was off 51.3%.
