The LCN Property Interview: Mike Morrison

Mike Morrison talks to LCN Property about his route into property, his investment philosophy, and the many exciting possibilities in the sector's future.

Mike Morrison is co-founder of Boundary Real Estate Partners. His 20 years of experience spans both property and finance, with companies including Deutsche Bank, Savills Plc, Cushman & Wakefield and Fidelity International.

How did you get into property in the first place?

A very circuitous route. I came out of university with an engineering degree and I did what all good engineers did in the 90s: I went into investment banking. Because they like problem solvers. I did that for a long period of time. Then I had a ‘Jerry Maguire moment’ where I thought, ‘Actually, I don’t really understand what I’m doing, and I need to go and do something I do understand.’

So I left and I did a crossover degree at Cass Business School, in property finance and funding. I loved that. I managed to convince someone at Savills to employ me.

That was around 2003. I worked at Savills until the Lehman’s crash, when I got head hunted by Cushman & Wakefield. I was there for seven years or so, and then left to do client-side. I worked for Fidelity – I did three years there – and then in 2018 I set up Boundary with Charlie [Walker, the other co-founder].

 

How did you meet Charlie?

Charlie was one of our clients at Cushman & Wakefield. He was running a venture called the UK Property Income Fund Series: we helped him structure that and raised equity for it. In the early 2010s we spent a lot of time in trains, planes and automobiles, travelling around far-flung and uninteresting parts of the world, raising money from institutions.

We stayed in touch, and we got talking about starting something around 2016 or ’17. We’d always thought about doing something, although we didn’t know what it would look like. And then we had a moment where we both thought: ‘If we don’t do anything now, we’ll never do it.’

 

Did you have a particular vision for a way that you wanted to do things when you were starting out, or were you just thinking, ‘We want to work for ourselves?’

We were thinking that, 100%, but also we both felt – and still feel to this day – that certain real estate assets are mismanaged. It’s not necessarily that the people who own them are bad managers, but sometimes their interests are misaligned, sometimes their remuneration is misaligned, and that causes mismanagement.

Fundamentally, commercial property should be pretty straightforward. You buy buildings – for us they normally have tenants in them – and you look to improve that income stream. This generally leads to value enhancement. We feel that there are enough opportunities in the market where we can make a bit more of a management case. Opportunities for us to get a bit closer to our tenants, to extract more value than someone who might not be as focused.

Simplistically, that’s what we are trying to do at Boundary.

 

You’ve faced some pretty big challenges during your first four years.

Yes. We started the business and had a good six-month run, and then people started to wonder if Jeremy Corbyn could actually become prime minister. That created a threat of a very different kind of government, and that jammed our market up for about six months. So we found that difficult.

Brexit stopped the market again and then, of course, Covid hit. I was hopeful that 2022 might present a ‘normal’ market where the dynamics are not interrupted by geopolitical events but this looks increasingly unlikely with Russia and Ukraine.

I prefer a market with less unknown unknowns, more knowns.

 

What is your business focus right now?

We have an interesting portfolio which is keeping us busy. And we have a mandate to build on this success. Key to that is recruiting more people. We don’t want to be a big company, in terms of employees, but we do need to expand. So that will be a focus for this year.

We are also looking to invest a bit more into our tech and how we interact with our investors. So the area of Prop Tech might be a target for us.

 

When you need to go and find investors, what’s your process for doing that?

We’re always looking for new investors. We’re blessed that to date we have benefited from word of mouth, which I think is the absolute best way you can grow. In all aspects.

We have a number of investors from within the property industry, which is fantastic. People who live and breathe the markets choose to invest alongside us and that is very humbling.

So we’re very lucky with how we have started. We want the word of mouth to go around a bit more. We’re probably at a ‘tipping stage’ where we either build something a bit bigger, or we keep on doing what we have done to date, but just do it a bit more efficiently. Again this is where the Prop Tech element comes into focus.

 

What is the balance of power in the market? Are there many more investors than opportunities, or the reverse, or is it quite balanced?

It’s quite balanced. The property market is very opaque. It’s just not like the bond market or the equity market. Information is key in everything, but it’s absolutely fundamental in the bond and equity markets: that’s why you pay the best fund managers who stock-pick and add Alpha to your returns. I am a fan of these managers adding value, rather than passive ones.

In property, information is key – of course – but a lot comes down to relationships. People run our market. From an investment perspective it is dominated by the institutions: the Legal & Generals, the M&Gs – these guys are about 60% of the market. So we need to fight hard, with our relationships, to try and find opportunities that aren’t necessarily attractive to all. We go hunting in a very different space.

In property, you do tend to find that people congregate around thematic strategies. At the moment it’s logistics/industrial, and this makes that market very cluttered. We struggle to buy on-market shed deals, because everybody is pointing that way.

We are lucky because we aren’t thematic: we can be absolutely agnostic to sector. We are value hunters. So if you came to me with a caravan park that you thought was a really interesting investment, and we could get comfortable with your thesis, then we’d buy a caravan park. We’ve got no problems about doing something like that. We’ve just bought a marina. So as much as we would like to buy industrial warehouses, we know that everybody in the world is buying industrial warehouses.

As for the ‘balance of power’, I think there are always deals to do. There’s always reasons not to do a deal as well. But there are always investments to make in the UK commercial market, if you know where to go and look for them.

 

If someone comes to you with something that they say is a fantastic opportunity, how to you assess it?

Generally we’ve got two types of investors, who are looking for slightly different things. One group is looking for income, and so we are targeting what we feel are mispriced opportunities that allow us to pay them a running income yield. The better the mispricing and/or the rental growth opportunity, the better the income return can be.

We generally buy buildings with tenants in them. Some of the tenants might not be the right sort of tenants for that building – or actually you could say that the building is not the right sort of building for those tenants. Either way, there’s not a fit there.

We also need to have a strength of conviction about the location. Location, I think, is always key to how and why you invest. When the location is right and the fundamentals are strong, we can get comfortable with rental growth – we see this happening in lots of sectors, not just distribution warehouses.

So, for example, we have bought buildings in Leamington Spa. We like that town a lot, for some fairly simple reasons.

There are a number of new homes being built. So the supply/demand dynamics are going to change fundamentally over the next five to ten years. The people that are buying new houses there are generally young and professional.

Leamington Spa has quite a lot of retail. But because retail isn’t as popular as logistics, you can find mispriced opportunities. And in a town like Leamington Spa, which is growing and the demographics are changing, this can lead to the wrong type of retail for the customer. So there is an opportunity to curate something different that’s better for the consumer. And that can create growth.

Retail is interesting, because we are seeing a massive change in how we shop. We’re seeing a demographic change in terms of the people who are buying things on the high streets. And in what they’re buying and how they’re paying for it. So I think retail has a chance to provide good investments.

 

Have you had any mentors or role models who’ve helped you along the way and shaped your career?

We are lucky in our industry because generally a lot of people give their time. It’s a very nice industry like that.

When I was moving from investment banking into property, I went to see a number of people. Three stood out: Malcolm King from King Sturge, Nick Ritblat of British Land, and Martin Moore, who ran the Prudential back then. All of them were very generous with their time. I literally cold called them all, I think, and they all gave me their time. I thought that was invaluable. (How banking could learn from that!)

Then when I set up Boundary I spoke to Nick’s brother Jamie, who was equally generous with his time. There is nothing to equal experience in my opinion, and we have leaned on that experience when setting up the business.

You need a lot of friends when you’re going to start a business, because even with the best plans in the world, it is like stepping into the abyss. There’s an enormous amount where you just don’t know what on earth you’re doing. That’s when you need friends and you need advice. And we’ve been very blessed with a lot of both.

 

What achievement in your career are you most proud of?

For sure, setting up Boundary. It’s been wonderful so far. It’s been enormously challenging, and it’s been incredibly rewarding. It’s great just to go into the office. (Nice to be able to say that again, isn’t it?)

Charlie and I have a great relationship and we’re as excited – perhaps more excited – four years on than we were on Day One when we were sitting in our shoebox office in Guildford. So without a doubt, it’s been a brilliant ride so far.

 

If you weren’t in property, what would be your ideal job?

Something quite creative. I did product design and engineering at university, so maybe something design. Or I’d quite like to be a DJ. Without any talent whatsoever! I think that would be quite fun.

 

What do you do to relax? What are your hobbies?

Well, I’ve got young children, so they keep me very busy. We live inside the South Downs National Park so I mountain bike and I run a bit – exercise allows me to switch off. I also like to fish on a river; that is something that relaxes me.

 

What is your biggest extravagance?

I can’t think of a single one. I obviously need to be more extravagant. I did buy myself a really nice mountain bike recently. Maybe I should ask my wife: she would definitely have some suggestions.

 

Describe yourself in three words.

Ambitious. (Slightly) impatient. Gregarious.

 

What actor should play you in the film of your life story?

That’s another question for my wife, isn’t it! Brian Blessed, because he has a brilliant voice. Or Oliver Reed.

 

Who would be your guests at your dream dinner party?

I’ve always been fascinated by John D. Rockefeller. Isambard Kingdom Brunel. There’s an engineering and creative building theme emerging here. Neil Armstrong: I would like to know about his trip to the moon. I’m also very intrigued by Genghis Khan. And let’s have Oliver Reed to pour the drinks!

 

What advice would you give your younger self?

Get into property earlier.

Buildings are the building blocks of our society. It’s where human beings congregate. Every day, where you go and what you do will involve buildings of some description. You’ll leave one, and you’ll go around the built environment to others. So, for me at least, it encapsulates everything about human existence.

We are in the middle of some pretty seismic shifts that are affecting the property industry. We have seen, and will continue to see, a shift away from you visiting the butcher and the baker. Instead you open your front door to the Ocado man. How that plays out in a finite land mass that is the UK, with 70 million people (and growing), is going to be fascinating.

The built environment, and the part that commercial real estate plays within it, is really an interesting place. And I think the next chapter will be as interesting as the last one.

 


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