The LCN Property Interview: Bill Hackney

Bill Hackney talks to LCN Property about his approach to property investment management, the relative advantages and disadvantages for bigger and smaller investors, and why very complex legal structures sometimes miss the big picture.

Bill Hackney has over 30 years’ experience in property investment management, having worked for Deutsche Bank, Savills Investment Management and Edmond de Rothschild REIM. He has a particular focus on the operational side of property investment management businesses.

How did you get into property investment?

I slightly stumbled into it. I got some decent O-levels, didn’t do too well at A-level, then went to Sixth Form College to retake a couple of A levels. And I thought to myself, ‘Do I want to go off to university, or is there a risk that I might make complete horlicks of a degree as well?’ So I decided to go into the world of work.

I’d done quite well in my A-level retakes, and an older family friend said, ‘In my day, when people left school with good A-levels, they went and worked for a bank.’ I thought, ‘Oh, that’s quite interesting. Never thought about that before.’ So I wrote to a whole load of banks, not really thinking about the job that I might do, and one of the organisations that responded to me was Morgan Grenfell. Not the merchant banking part of Morgan Grenfell, but the fund management side.

So I went and got a job with them in 1987. At that time it was an equities and bonds fund management business. It didn’t have anything in property. But in my first few years there, I got on pretty well. And then in 1990, they said, ‘We’re going to set up this property fund management business to invest on behalf of clients. Would you like to get involved?’ So I joined a team, with four other people, which set up this little property business. And that was my way into the world of property.

I sort of learnt it on the job, although I also did a distance-taught qualification in surveying, from the College of Estate Management, to add to what I was learning on the ground. Morgan Grenfell had been bought by Deutsche Bank in 1989. They kept the Morgan Grenfell brand until the mid 1990s, when it got tarnished. Then it all got rebranded as Deutsche. But effectively I ended up working for that one business for 16 years, from 1987 to 2003.

By the early 2000s, not had only our property business grown materially in terms of assets under management, but also Deutsche had been on a bit of a buying spree and had bought various other businesses around the world which had real estate within them. So I was on conference calls at six in the morning or ten at night with people in Sydney or San Francisco or Chicago or wherever, and travelling to meet colleagues around the world.

There were also cultural challenges from trying to integrate the various businesses that had been acquired around the world. And I’d become a Managing Director at Deutsche Bank. There wasn’t really much further for me to go in terms of rising through the ranks. So it got to the point in my life where I just needed a change.

Anyway, that’s how I stumbled into property.


In the eighties, was Morgan Grenfell rather conservative and ‘old school’?

It was quite old school, yes. Because I had come out of Sixth Form College, I literally started one step away from the post room. A lot of the fund managers were Oxbridge types, and well connected. And to tell you the truth, I’m not sure that some of them were particularly talented as fund managers: they just knew the right people, and that’s what got them the job.

So between ‘87 and ‘90, I was in what was called a ‘fund control’ role, which was supporting fund managers. And if you wanted to get into that organisation as a fund manager, pretty much you had to have an Oxbridge or red brick type of background. But also in the space at the time was an organisation called Phillips & Drew Fund Management. It was slightly more forward-thinking: they were working harder at taking people like me and progressing them more through to the ‘front office’. And Morgan Grenfell eventually figured out that that might be quite a good thing for them to do too.

So they approached me and one of my contemporaries and said, ‘Look, we think you’re young, bright, enthusiastic. How do you fancy moving to become a UK equities fund manager?’ I was slightly gobsmacked! Because I never really anticipated that offer coming.

But it came at the same time as the offer came to be involved in setting up the property business. I thought to myself, ‘Well, if I go and try and become an equities manager, surround by all these Oxbridge guys, I’ll be seen as a bit of a second-class citizen. I’ll always be the guy that moved from the more junior role elsewhere.’ So the idea of doing the property thing was a lot more interesting, not necessarily because I knew very much about property, but just because it was like a ‘greenfield site’ at Morgan Grenfell.


You’ve worked for some very big organisations. Do big investors have an advantage in the property market?

Even small investors can do property investment, of course. After Deutsche, I moved to Savills, and they had a really small fund management business at the time. One of the few things they already had set up was a joint venture with a firm called Carr Sheppards Crosthwaite: a fund for UK charity investors. Charities don’t pay stamp duty, and stamp duty rates on UK property had gone from 1% back in the eighties up to 4%. So charities could avoid an expensive transaction tax when the fund they were invested in bought properties.

The fund meant that they could also combine their finances. The minimum investment was £25,000, so a relatively small charity could invest and get exposure to a whole load of properties. That fund today has over £1.25bn of real estate, and around 1,700 charity investors.

So you don’t have to be a big player to invest in property. If you want to be able to walk around the building and call it yours (even though it’s probably tenanted, and the tenants think that it’s theirs!), you’ve got to have quite a lot of money to play with. And the numbers really are big: you see Canary Wharf towers being sold for billion pound price tickets. But equally there are a few empty high street shops around, which can be bought for not much more than £100,000.

So it depends what you want. It’s not just for the big guys.


Is there often a difference in mindset between the way institutional and private investors approach things?

With, say, listed property companies or REITs, they’re still accountable to the shareholders and other stakeholders, and they need to pay a significant share of their profits to their shareholders, but the company owns all the buildings, it generates all the rents and other income from the buildings. The company can more-or-less choose what it wants to do with that money and, as a long-life closed-ended structure, it decides when it want to sell buildings . If it’s a well run company, they can develop strategies with a medium- to long-term view and do some good things, such as placemaking and pursuing net zero strategies.

With some institutional investors – whether they’re open-ended property funds or maybe large pension funds that just buy buildings directly – I think it can be harder to deliver those medium- to long-term strategies, because there are some different agendas at play.

And one of the issues with the property fund sector is a lot of investors say, ‘I want to buy today and take advantage of a cycle and I’d like to get out in five or seven years time.’ They might get some good returns, but it can be quite difficult to deliver medium- to long-term strategies if properties get bought and sold over relatively short time scale.


It’s interesting to think of seven years as a short time scale…

In real estate, there’s a lot of bricks and mortar there. Even just changing the air conditioning system in an office building can take an awful lot of planning and an awful lot of time to deliver. And that’s even when the building is vacant, let alone when you’ve got tenants in there.


How do you see the property investment world changing over the next few years?

We’re already seeing increasing focus on issues like energy, waste, water, sustainability. That focus is only going to get stronger, and it’s actually where being a bigger organisation can be an advantage.

Some of the bigger organisations have taken a while to get there, but they’re really getting their act together in terms of trying to figure out how they can do the right thing. Trying to make sure that the buildings they own are energy efficient. And trying to think about things like placemaking: thinking a lot about public realm, not just about the building.

So I’m cautiously optimistic that bigger investors have now ended up in a position where they can do some better things for the world, including reducing their carbon footprint. I think smaller investors can struggle with that. I know some private property companies where it’s literally one man and his dog, and they don’t have the resources or the focus to tackle some of these things properly.


What are the most important things that people who are new to property investment often don’t fully understand about it?

It depends on what route they’ve had into property investment. Some people have already got family connections or whatever, so they may already have a good idea of what’s involved and how the market works.

Other people come from the traditional chartered surveying world, and possibly have worked in investment agency. Others maybe from investment banking or accountancy. A quantity surveyor or a building surveyor will probably be more focused on the technical end.

At the investment end, it’s interesting. Some people, ironically, aren’t necessarily that numerate. They may be great negotiators, but some of them can be a bit ‘all about the deal’ rather than thinking through what happens once the building’s bought. Although I think that’s less of a problem now than it has been.

In the nineties, I used to be more at the sharper end: originating some deals and executing those deals. And I then decided that actually I didn’t particularly enjoy the negotiation part. I was more interested in things like how the asset was going to be owned.

I got involved in helping structure joint ventures: setting up funds, SPVs and the like. And for many years, I held Chief Operating Officer roles. It’s good to have somebody involved in the investment process who isn’t at the sharp end of doing deals and can scrutinise things and say, ‘Are we buying this the right way?’

The two things that you have to figure out are the source of the capital and its destination. Where’s the money coming from? Is it a high net worth individual in the UK? Or in Singapore? Is it a US pension fund? Is it single source of capital, or multiple sources?

You have to find a solution that matches that source to the destination. If you’re buying just UK property, OK, you’ve got a series of things you need to take into account. If you’re building a pan-European portfolio across many jurisdictions, you can end up with some quite complex holding structures to reflect legal, tax and regulatory issues. Because it’s not single deal-by-deal acquisitions with one investor. It’s multiple capital sources investing into multiple properties in different jurisdictions.

Through the first 15 years or so of this century, the Big Four accountants and the tax teams of the big lawyers spent an awful lot of time and effort trying to come up with very tax-efficient structures and trying to save the last five basis points of tax. But, of course, these hugely complex structures have proved to cost quite a lot to run. And therefore you might be saving a bit of tax, but you’re spending as much money on paying for the structure, supporting the structure, trying to demonstrate you’ve got substance in Luxembourg or the Channel Islands or wherever so that you can push away a challenge from tax authorities. So you have to be able to challenge the efficacy of those structures sometimes.

One potentially good consequence of a lot of the tax avoidance stuff that’s gone on may come from the way that governments have responded – BEPS and the other work to try and stop taxable profits being diverted into low tax jurisdictions and the like. I think a lot of that, whilst it may result in more tax being paid – which I think is probably a good thing because it’s tax that should have been paid all along – it’s probably going to encourage people to think about simplifying things a little bit more. And trying to reduce some of the operational risk that is introduced through having complex structures. So I hope we’re going to end up in a more rational place in terms of how people go about constructing these arrangements.


What career achievement are you most proud of?

Well, it was fantastic recognition at the time to make it to Managing Director at Deutsche Bank in my early thirties. There weren’t many people in those sorts of positions who started off where I did – like I said, literally one step from the post room. I think I did relatively well. Unfortunately I didn’t hang around too much longer after that to enjoy the benefits.


What would be your ideal job if you weren’t in property?

I don’t really know the answer to that question. But one of my frustrations about the jobs I’ve had is that they’ve been very much office-based. Maybe less office-based than if I’d been an equities fund manager, because that involves a lot of time sitting in front of a screen. At least with property, you can get out and see the odd building. But I spent an awful lot of time sat in front of a computer.

And I did what a lot of other people do: I got married in my twenties, had kids in my thirties. By the end of my thirties I was pretty lardy! I was overweight and wasn’t exercising, and I’d spend far too much time eating the leftovers on the kids’ plates. I looked at myself at the end of my thirties and thought I was possibly not that far off from a heart attack or something, because I was spending so much time in this sedentary role looking at a computer screen.

Since then, I’ve always reflected that if I’d done a different type of job, I would have liked to have done something which was more active – actually out there doing something physical. I can’t be specific and say ‘I would have loved to have been a bricklayer’ or something like that. I just would have liked to have done something more active.

Work-life balance is pretty important. I think maybe people are a bit more cognisant of it now, particularly given the pandemic. Being somebody that did a lot of my growing up during the eighties and then worked quite hard in the nineties, I think we were all about work and earning a decent crust and whatever. Perhaps not thinking enough about lifestyle, and trying to remain fit.


How would you describe yourself in three words?

This reminds me of going on a training course with Deutsche. We were sent away – a dozen or more people – and we’re going through this session about values, and there was an A4 sheet with lots of words on it. You had to look through the list and pick out the words that resonated with you. And the sort of things I picked out were things like truth and honesty. Because I like to think I’m a pretty truthful sort of guy. Wasn’t it Mark Twain who said: ‘If you tell the truth, you don’t have to remember anything?’ I try not to lie because I can’t remember the lie! It’s easier just to call it as you see it.

I think I’m pretty diligent, and I’m good on attention to detail.

And probably I can be a bit like a dog with a bone, I’m a bit obsessive.

So maybe: integrity, diligence, persistence. I probably bore people a bit with some of it – I’m known for writing long emails! But you need different sorts of people on any team. I played a bit of hockey at school: I was a left back, and I knew my role was to mark their right wing and make sure that he or she didn’t score goals. I think that’s a bit like my role in the commercial world: better in defence than in attack.


Who would be the guests at your dream dinner party?

Maybe, given that quote, Mark Twain. Or Alexander Hamilton, or Lin-Manuel Miranda. I’m not particularly big on literature or American history, but in a dinner party situation where there are more than two people around the table, I tend to be more of a listener than a speaker, and I suspect that those people could share fantastic stories about their lives and experiences. My wife and I discovered the musical Hamilton on Disney+, and loved it. If we had a time machine, it would be fantastic to go back to 2015 and see the original cast performing the show on Broadway.


What advice would you give your younger self?

Don’t stay in your first job for 16 years. Actually, it’s interesting to see how the world has moved on. The current generation of people aged 20-something, they’re much more minded to change roles, compared to my generation and my parents’ generation. I think a lot of 20-somethings don’t necessarily know what they want to do. They could stumble into something, like I did, but equally, they’re more prepared to try a few different things until they settle down in a particular type of job.

So I think my advice to my younger self would be: it’s good to have success in one place and keep building on that success. But equally, it’s good to try something else, and just see what the world looks like from a slightly different vantage point.


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