The LCN Property Interview: Charlie Walker
Charlie Walker talks to LCN Property about his work at Boundary Real Estate, why his partnership with co-Director Mike Morrisson has been a success, and how they analyse opportunities to help their clients make better decisions.
Charlie has worked in the property industry for over 25 years, in a wide range of roles including investment agency, asset management, acquisitions and development. The majority of his career has been as a fund manager through differing strategies and across market cycles. He has a market reputation of identifying mispriced deals and creating value through active management. With Mike Morrison, he formed Boundary Real Estate in 2018.
How did you get into property?
I had no idea what I wanted to do, but my sister was at Reading University doing Food Tech, and she told me about friends there who were doing this course called Land Management and seemed to be having a lot of fun. It drew on a wide variety of skills, and she suggested that I might want to look into it. So, having had a desire to be an architect and not really found the passion for that, I ended up applying to do Land Management at Reading University.
And it was brilliant. There’s a long pedigree in the course and I met a lot of people. And there are so many options to pursue after you’ve done that sort of degree.
Did you go straight into a property job?
Yes, I went to Bidwells, based in Cambridge. The job was everything from fixing the fire alarm, to letting properties, selling them, advising clients, rent collection, everything… so a really good first job that gave a very broad experience.
This was in the mid-nineties, right? A pretty tough job market for new graduates.
You’re not wrong. It was a really difficult employment environment for the whole property sector, but particularly for young graduates. You’d spend countless hours filling in forms and applications for the big London agencies that would have one or two places available, and if your dad wasn’t in the industry or you didn’t quite have the ideal work experience, you were just filtered out straight away. But actually Bidwells was brilliant: just something a bit different, and their client base – Cambridge colleges, small charities and family offices – was a really great starting point for me. I probably wasn’t ready to go to London anyway.
Bidwells are a privately owned property agent, and did everything: all the agency functions that you would expect, as well as land and residential teams. Then I moved down to London where there was an opening with the investment side of the business. I was straight into helping out with reshaping some of the client portfolios I had been managing: selling off parts, and buying new investments. Then I started to get introduced to a wider group of institutional clients which broadened my exposure to investment trading – and in those days it was all done by fax machine!
So I was working in London in the investment team there, and also still in Cambridge for some of the working week, living in Wimbledon and commuting between all three – but loved it in my electric blue Renault Megane! The part I really enjoyed about being in property is that you’re not behind a desk the whole time, so you’re out meeting people, looking at investments, understanding business needs and using different skill sets to think about risk and return.
Why did you leave Bidwells?
I got a phone call: “Would you like to come to Legal & General?” I thought, “Well, that sounds very interesting.” So even though I had no Central London experience (a lot of the investment work that I was doing with Bidwells was in East Anglia), I joined Legal & General’s Central London office team.
I stayed with L&G for 18 years. I moved quite extensively through the business from that initial appointment in the Central London Offices team, to sitting on the board of the Real Assets business and the Investment Committee.
After that first phase in the London team, I had the opportunity to run a very small corporate pension fund, which was then the pooled fund for L&G clients. At about that time DB and DC pension schemes got interested in investing in property, and so I grew it from £100 million to over a billion in a very short space of time. That involved pitching to clients and their advisors to secure investments into the pooled fund.
After I’d done that for a number of years, I was asked to take on a segregated mandate which wasn’t performing terribly well, and turn that around. And then the business said, “We don’t have any real depth in overseas clients, so we’d like you to run a fund that concentrates predominantly on that.” So we set up a vehicle, and we employed Cushman and Wakefield to make those introductions to overseas clients and also help with the corporate finance of the vehicle. And that’s how I met Mike [Morrison, the other director of Boundary Real Estate].
At what point did you and Mike start thinking that you might like to go into business together, and what was the catalyst for that?
We’d spent a lot of time on planes and trains, and in airport lounges (including one memorable occasion in Finland when heavy snow brought everything to a standstill – unusual in Finland). Obviously eventually the conversation turns to what’s next, what does the future look like? Both of us had a desire to do something that was a bit of a reset, something different. This was back in 2012. Of course, we were busy with the fund. Then we picked it up again in 2016, and started talking more seriously about it. Because at that stage, we both had more experience, had had more time to think individually about career paths, and it felt like it was coming up to the right time. And as we have different skill sets, we could be quite a powerful combination.
So we spent a couple of years meeting every couple of weeks. Working out everything, from what our personal motivations were – it was almost like when you’re dating someone and thinking about getting married! – to things like what would we be called, where would our clients come from. Where would we be based. How many people did we want to employ. How much time did we want to spend in London. Every single question we explored in quite some depth over those two years, knowing that at some stage we’d need to make that decision. We wanted to know that, when we did, it was going to be the right thing and there were no red flags in there that would stop us.
Do you think that many people plan to that extent?
We deliberately took our time, because during our careers we’d spoken to quite a few people and observed similar businesses not work out. And you can see there are various common themes: for example, partners often split because they hadn’t got a unified vision. It felt right that we should be taking our time to be careful about it, for us and for the clients who would be critical to our success.
Did you ever consider starting something on your own?
No, I knew that I didn’t want to start anything on my own. That was one of my early decisions: it would be with someone who had some different skill sets. In investment analysis, the art of decision-making is about drawing on different resources: Mike and I coming together with different skill sets is a really powerful combination, and then we use other people to do other things that bring knowledge and value to what we do.
It has obviously been a successful partnership. What do you think is the secret to making a commercial partnership work?
I would say transparency, honesty, lots of communication, and being authentic. There are always difficult areas of decision-making, there’s always going to be different perspectives. Alignment is also super important. The alignment that we have with investors, and the alignment that Mike and I have with the business: we aren’t answerable to anyone else. That’s the glue that holds it together.
Mike sits in the same room as me, and we probably spend more time together than with our respective wives. We talk a lot about things, and we do analyse stuff in great detail. And we’re dealing with other people’s investments, so we need to hold those values through all of our dealings.
What do you think are the most important changes that you’ve seen in the property world during your career?
Definitely the levels of transparency of information flow. Back in ’94, when you were looking at a rent review, the deal that you’d done with the tenant down the road always used to be very closely guarded, to give information advantage. With the advent of technology and freedom of information, the range of sources to find information, it has really opened up our industry a lot.
The other area, of course, is the environmental impact and approach to sustainability. And in future that will be even more important than it is now, and rightly centre stage for decision-making.
If there’s more price information available now, does that make the market more efficient? Does it make it fairer?
It does make it more efficient. Buying a building back in the mid-nineties, you’d get a legal report, a building survey report, check that the tenant covenant was fine, and then off we go. But now there’s a lot more sophistication to the analysis. Quite rightly so: it has delivered a better understanding of risk and return for investors, and improved the accessibility of the asset class.
Do you think we put a little bit too much faith in data these days? There are all sorts of things which can’t be predicted or quantified but which will affect your experience.
You can’t predict ‘black swan events’, but among the investors that we speak to and work with, everyone has very different motivations for investing. So our job is to make sure that we interpret the data in terms of how we expect an investment to perform, and consider where the risks are and where the opportunities are, giving investors the information they need to make an informed decision.
Since you started Boundary in 2018 you’ve seen some big events. The prospect of a very left-wing government, Covid, and now very high inflation…
I would also throw in Brexit. And Kwazi Kwarteng’s mini budget. You could name quite a number of pretty significant events since June ‘18, when we opened the doors. Quite a rocky ride! But having said that, cyclicality in our market is a good thing because it actually gives us opportunities to acquire from owners that no longer have the necessary skills or who need liquidity. It makes for an interesting market.
2022, by and large, was a difficult year. Investments across many of the sectors had become quite expensive, and we weren’t convinced around the rationale for buying off those yields. So we actually only made one investment last year, towards the end of the year, which reflected the distress that the mini budget had brought: the need for liquidity from open-ended funds, the rapid movement of valuations to respond to the increasing interest rates, the energy crisis that then started to push occupational costs up, and ultimately the impact on investment pricing. All of that made the investment a really exciting prospect.
How concerned are you about inflation over the next few years?
I think we are set to see inflation come down towards the end of this year.
What is your general view of the next few years?
I think that the next twelve months will bring some more surprises. Some sectors of the market will be more challenging than others. Normally we look for points of distress. So the impact that falling land values have on developers. The impact of rising interest rates on the serviceability of loans. The operating environment for tenants. Inflationary effects, the cost of energy and build costs.
It’s interesting that at the moment there isn’t a huge amount of leverage in the property market relative to some of the other cycles that we’ve seen, but nevertheless rising debt costs will hurt borrowers. And there’s been quite a rapid correction in values since the summer. There will be fall out.
If you weren’t in property, what would be your ideal job?
I started working in a kitchen from the age of 16 and ended up as a chef, doing outside catering events, and also at a ski season hotel and various restaurants. It’s a tough environment but I did enjoy it… so perhaps a missed opportunity to be the Rick Stein of my generation!
What are your hobbies?
I enjoy playing golf, skiing and cycling. So that keeps me fit, as well as being a busy family man with three boys… and a long list of jobs most weekends!
Road cycling or mountain biking?
Road cycling. Mike does the mountains, I do the roads.
When we interviewed Mike he said that he had just bought himself an expensive mountain bike. What is your biggest extravagance?
You can definitely spend a lot on road bikes too, but my biggest extravagance was when I finished at Bidwells: I bought an old Porsche. I loved it to bits, until it started becoming heinously expensive. So the Porsche got substituted for an electric car, and I’m now enjoying range fear and all the pre-planning that goes along with managing that.
How would you describe yourself in three words?
I would say: personable, outgoing, and detailed.
What actor should play you in the movie of your life story?
I’m a big Tom Hanks fan, so he could step up to the challenge.
What advice would you give your younger self?
Be curious. Explore as much as you can. Enjoy the challenge of that new experience. And remember to value friendship and connections with people.
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