Susan Freeman
Hi, I’m Susan Freeman, welcome back to our Propertyshe Podcast Series where I get to interview some of the people I think are key influences in the wonderful world of real estate. Today I’m delighted to welcome Alex Price, CEO of Palmer Capital Partners after what has undoubtedly been a transformational year for the company. Alex joined Palmer Capital in 2003 to set up the fund management business after serving as an Army Office with the Royal Green Jackets, completing an MBA at London Business School and a period in corporate finance. He became CEO of the company in 2008. In addition to the fund management business Palmer Capital is a creator and manager of real estate assets through its shareholdings in eight regional property companies. Right at the end of last year 80% of the Palmer Capital business was acquired by Fiera Capital, Canada’s leading investment managers with a hundred billion pounds worth of assets under management. So now we get a chance to hear from Alex Price about his views on UK real estate and how he sees his business evolving alongside Fiera.
Alex, welcome. Thank you for joining me. You have an unusual background for a property company CEO it has to be said; Army Officer with the Royal Green Jackets, London Business School and then a stint in corporate finance. So what actually attracted you to the world of real estate?
Alex Price
Well I was very lucky my wife who I met at University is one of Ray Palmer, the Founder of Palmer Capital’s four daughters so I had known Ray for many years before I got to talking to him about business. I had known from University. What I found as I went through life is I realised that the military was a fantastic career and I would advocate it to other people but I did not want to stay after I had done five years. I came out, I worked for an investment bank as a graduate. I did not particularly enjoy that sort of environment so I went to the London Business School to re-train. It was after the London Business School I ran a start-up for a small time and Ray approached me and said you know, why don’t you come on board and it seemed to make sense. The property industry is a fantastic place to work, where else do you get tangible assets to deal with, you get great people to work with and you actually have a chance to do something that you can see what you’re doing day in, day out. So I was very fortunate. I joined Ray about sixteen years ago and about nine years ago I became the Chief Executive.
Susan Freeman
So you’ve been a Palmer Capital since 2003 and CEO since 2008. So I think it would be interesting to talk a little bit about the business model because it’s quite unusual. You back regional property companies and I think you’ve got stakes in eight of them and you also run a property investment fund, so how does that all hang together?
Alex Price
Yeah, so Ray when he set the business up he started backing property companies and this was in 1993 and I think the story is he answered a box advert which essentially was two guys in Cambridge looking for a shareholder to help them get off the ground and that company was called Wrenbridge. He became a 33% shareholder in the business and the business has grown from 1993 and today is twenty five years old. It made a profit in its first year and it has made a profit every year since. The model is very simple there. It is about finding two people who are or can be one or can be three but normally two who really understand their local market. They are really good at what they do but they need support because real estate is really capital intensive and as we go through life we see we need more compliance, more regulation, more operations, more legal backing. So Ray provided that substance behind each of those businesses. Wrenbridge was first. He then backed a company called Opus Land which is still here today and Opus North. He backed a company called Danescroft and so on and so forth. I joined in 2003 as you said, my background having worked for an investment bank and having been at the London Business School was slightly more financial and I joined to set up an investment management business. The observation being that we were sourcing maybe ten or fifteen deals a year through those companies that Palmer Capital Ray’s business was a shareholder in and each one of those would be funded on a case by case basis and we thought why don’t we raise the money first. Why don’t we have the money here so as the deals come in from these operating partner we can put them into our investment management arm. So we built a business over the last fifteen years that on the one hand has operating companies, some of the best regional companies we think. Those companies are entrepreneurial, they’re active, they’re innovative, those businesses are in their market doing what they do great which is finding opportunity but they need money. The other half of our business is investment management. We have got capital. Today we have about eight hundred million pounds of third party money and that capital is investing into projects predominantly undertaken by our property companies. So the two are symbiotic today.
Susan Freeman
And I think your, your regional companies must be doing pretty well because I noticed a number of them are listed for the property week awards and the RICS awards so…
Alex Price
Yeah so we’re really proud. I think we’ve got five nominations across those two sets of awards both for deal of the year and for property company of the year. Its great you know, its really wonderful watching a company launch and grow over the years and to see that success coming through so its something we all take a lot of pride in being part of those businesses and helping those businesses to succeed they really are the engine room of ours, our business.
Susan Freeman
Yes that’s terrific and I think you’ve recently set up a new bill to rent operator and developer.
Alex Price
Yeah.
Susan Freeman
That was last year I think so that’s relatively new.
Alex Price
So there we looked at a sector we, over the last eight years we have bought land and brought forward over five thousand plots and sold them predominantly to house builders. We then found ourselves developing, having forward funded to Granger, a two hundred unit scheme in Bristol and we sold it to Granger about three years ago and we said to ourselves well actually shouldn’t we be in this sector. You know residential is a six trillion pound market in the UK and build to rent represents what, one hundred thousand units today that have been purpose built for renting and we think that that market will grow considerably over the years to come but for good reason the people you know move from Blockbusters renting a DVD today they have Netflix and so people want that type of service and secondly people can’t afford to buy those houses and that’s a problem we do need to address. So our view is we should get into a sector that’s growing. A sector where we have the fundamental ability to source land and to build buildings and those are the hard bits by the way. Capital today is the easy bit in all of these things. So we set up a company last year called Package Living. We’re really excited about the prospects that that company can bring. Its already bringing through planning its first scheme, a seventy million pound scheme in Milton Keynes and we hope to bring forward other schemes during the course of this year. So we’re excited about what that can be and it is much easier to fly a kite with a hurricane behind you which is the way I look at build to rent as a sector.
Susan Freeman
Yes that’s interesting and are you targeting the millennial market, are you looking at later living because it seems that there hasn’t been enough focus on you know, the older age group who actually have money and are looking to downsize and could release property into the system.
Alex Price
Yeah I mean the way we’ve looked at it is we don’t have specialist skills to deliver to any specific demographic particularly when you’re setting up a new company but what we do believe in is that people want somewhere to live that is affordable with a small A. That doesn’t mean it’s got Government subsidies, it doesn’t mean its got a social landlord. It just means that us as packaged living are providing what I call the Ford Mondeo of build to rent. We’re not trying to do anything exciting we think people just want to live in a high quality, nice apartment that’s affordable for them. We don’t think they need saunas, swimming pools, helipads etcetera but we do think they just need somewhere where they can live and build a community and live with people they want to live with.
Susan Freeman
So I don’t think we can go any further without mentioning the Fiera deal so congratulations on that.
Alex Price
Thank you.
Susan Freeman
I think it was right at the end of 2018. So Fiera Capital, one of, I think they’re one of Canada’s leading real estate investment companies, has bought an 80% stake in Palmer Capital so Palmer will become the UK arm of Fiera Properties. So how did that come about and how’s that going to change the business?
Alex Price
Sure. Well sort of going back a couple of years ago, three years ago we went through a process of looking at whether to sell a stake in Palmer Capital to a third party and we concluded back then that we didn’t want to for many reasons in that specific instance. However that did leave me to continue thinking about it conceptually and I recognised that clients today want a broader product offering. So just offering UK real estate isn’t always enough for a pension fund that may want to also buy real estate in Europe or in Asia or may want to buy in UK infrastructure projects. The second thing I recognised was I spend a lot of time travelling particularly to places like North America which is a huge market for investor capital and I thought to myself this is a remarkably inefficient use of my time to be going out to prospect for people out there. The third thing I recognised was that we had a group of shareholders who had been with the business since we had set up twenty five years beforehand. Ray was the largest single shareholder but some of Ray’s friends had supported the business in the early years were significant shareholders and we needed at some point to create a platform for succession so that the management team would see corporate stability and finally I recognised that as a management team we had all worked together, the Board of Directors with one new person has worked together for more than ten years and I thought to myself actually we probably need some fresh ideas just to come in to help us shake up our thinking. We think what we do is really good, we think we do it really well and we think we do it to the best of our abilities but are there things we don’t know. I think it is Rumsfeld talked about the unknown unknowns. So we were, we conceptually said let’s think about a sale. Fiera then approached us they were talking to various investment managers across Europe and the UK. They approached us in the late Spring, early Summer of 2018. We met with them and it was a fantastic meeting because I recognised in their business a very similar business to us and I recognised that culturally there could be an alignment and that led on to a much longer process of getting to know each other of then agreeing some terms and then due diligence and finally we signed on 21 December.
Susan Freeman
It is interesting I mean I was going to ask you about culture whether Fiera are culturally similar because obviously it’s the same language but you know very different you know country, different outlook. We talked earlier about the climate differences.
Alex Price
Yeah.
Susan Freeman
I mean are there, do you see differences or is it just the same entrepreneurial spirit and you know that aligns you.
Alex Price
Well I think, I think more the latter and a chap called Jean-Guy Desjardins setup Fiera in 2003. At the time he had bought into an asset management company and it was relatively small. Today it has nearly eight hundred staff and the way they’ve done it is by buying boutique asset managers or investment managers in specialist sectors whether its in property, in infrastructure, in credit and they’ve left the teams to run their own business unit but they’ve provided that central layer of support, that operational backing, the legal backing, the access to capital. So two things really. One is I recognise that in their model they are very similar to our model the way Palmer Capital have grown by backing entrepreneurial best in class, regional property companies, they’ve done the same just at a bigger scale and secondly I recognised that any company that was brave enough and successful to bolt on boutiques and to allow them to flourish and grow would be a much better company because it creates a truly federal entrepreneurial organisation that is capable of growth rather than a sort of beermoth that gets slowed down by inertia and when I talked to them their business model for their property business is the same. We run core money and we run opportunistic money, they do the same. I recognised that our values of trust, integrity and entrepreneurship were pretty similar to their values. I like the people and I like their approach to growing their organisation and that cultural fit is really important and you don’t, you don’t really know until a few years down the line whether you are right or wrong but you need to start somewhere and I figured starting with the Canadian business would be the closest non-UK culture that we would find with maybe a few exceptions and secondly with a business like theirs we had the most similar type of parent that we could find so you start off with the best chances you can and then its down to you to execute.
Susan Freeman
Well it sounds, it sounds very promising. Now you talked about getting new ideas.
Alex Price
Yeah.
Susan Freeman
You know into the company and you’ve talked about technology and you have appointed a Director of Innovation, Darryl Coalthrust but in terms it takes time to change mindset and I think you know you have talked about that and how are you, how is that going?
Alex Price
It’s, well the first thing to say it’s incredibly important that people think about this. Whatever your views of the world generally machine learning will become more commonplace in the years to come and we can then debate whether that leads to artificial intelligence or not. If you accept that premise that machine learning it will become more important then if it is not machine readable you can’t use that tool for your business and what we found in our business was that we had a lot of data but that data wasn’t digitised. It wasn’t in a format that anybody could read it unless you had a person there reading some PDFs, some spreadsheets there etcetera. So the first realisation we had is just to survive in the future you have to digitise your business and that is a huge change and a change that when we looked across our talent pool which is great, it is broad and deep but our talent pool isn’t really about digitisation which is why Darryl came on board. The second option is the process of change is much longer than you think and much harder than you think. However big or small your company you are trying to change not just technology but the people and the processes that sit behind that technology and that’s really hard work and so we recognise that bringing an external party into our business was more likely to create an atmosphere of change than one of us trying to do it and doing it part-time and if you don’t do this at some point, I don’t know when, at some point in the future you will find yourself on a non-level playing field anymore because some people will and some people won’t. So it is something everybody needs to get on with and to accept it will take longer than they think.
Susan Freeman
I think that’s absolutely, absolutely right and talking about the process of change we were at the London Business School at the same time and I don’t know what your impression was but what really got to me was actually change management case studies where one was looking at corporates being moved from an old building to a new building, increasing productivity, changing culture and nobody was remotely interested in who’d actually provided the space and I just, I mean one of the things I also felt was that if the real estate sector was discussed it was regarded as a dinosaur so the bright young people coming through business school weren’t interested in going into real estate which I think is you know obviously a loss for the sector. I just wondered whether you found it the same or you had a lot of property people on your course.
Alex Price
No and when I left my course I left to perform a start-up with a friend in telecoms so I left with no intention of getting into property. I think the issue for property is we have traditionally sold space not a service. Generally brighter people recognise that selling a service is a much more interesting thing to do and fair less commoditised. They recognise it that having to learn about customers rather than tenants, having to learn about collecting data rather than just providing an empty box it is all sorts of things that people are interested in. So traditionally we’ve struggled to bring in the brightest and best talent into real estate because it’s not seen as a very interesting place to be. I think that’s changing and I think its changing because our customers now want their buildings to be much more of a service, they want to have data that can help them understand why employees enjoy one building more than another. They want to be able to lease not necessarily a whole floor but parts of a floor. They maybe want to be able to lease meeting rooms on a pay as you go basis and all these things require thinking so we are at a really interesting exciting part of the real estate world as we transition ourselves from being a space provider to being a service provider and I think that’s why we will start to see more talent for want of a better expression coming through that otherwise might have gone into consulting or investment banking.
Susan Freeman
But do you think it will go into real estate companies or will it go into the tech companies that seem to be disrupting the real estate sector?
Alex Price
My suspicion is it will go into both because I suspect that both will end up merging because you can’t have a technology solution without the asset and you can’t I don’t think, going forward have an asset that succeeds without a technology solution to it so I suspect the two are going to have to work hand in hand with each other if they are going to succeed and we are in a relatively early PropTech phase where generally speaking anything that’s put out there with information memorandum can raise money and generally speaking if you’ve got a business plan you can have a valuation of two million pounds even if you have done nothing. That will all work its way through. Some of the early ones will die and some of the others will succeed and do amazingly well and as the companies that own the space today align themselves with a technology company to provide an integrated solution.
Susan Freeman
Now I think, I think you are right. I was told that there are about six thousand five hundred PropTech start-ups so obviously a lot of people out there with ideas that they are hoping will be relevant to real estate and I think because the sector is seen as being a little bit behind the curve that obviously creates opportunities for other people to come in.
Alex Price
Yeah, I think, I think on that though in the same way for those viewers who watched, I don’t know if you watched Dragons Den, there are quite often products there, they are interesting products but they don’t actually solve a need. Other people come along with ideas, services, products that solve a genuine need and occasionally come across transformational ideas that change the way we are business practices. In PropTech there is probably you know, 50% to 60% of the business plans coming through are addressing a need that isn’t really there. There is probably 40% to 50% that are addressing a need and of that a very small number that are really genuinely transformational and you have to go through a sifting process as we all get a better understanding of what is transformational and what isn’t.
Susan Freeman
You are absolutely right and one of the things we are trying to do on the British Property Federation Technology and Innovation Committee is to try and make sure that the start up ideas actually are directed towards some sort of pain point so that you know, they solve a problem that somebody regards as a problem. So I know that Palmer Capital has sponsored the London Business School Real Estate Forum in the past and interestingly that seems to be driven by the students rather than faculty and I always sort of wonder whether it would help our cause in real estate if, if there was real estate on the curriculum so that there was some understanding of actually what the sector does?
Alex Price
Yeah I think, I think that definitely would help. I mean with you know, the problem with schools like business schools is that in that case it is a twenty one month course although it can be done quicker. In many other business schools it is a one year course so each year and most events and things are done on an annual cycle, there is a fresh bunch of students whose job it is to organise and to lead the real estate charge whereas you are right, we probably do need people who are continuously in post, maybe faculty who can can create a connection between the business school and indeed other business schools and the industry because these schools have some really bright people coming through who have very broad ideas about life and very broad experiences and some of those ideas and experiences would really help us as a sector move away from that traditional estate agent sort of view of the world, forgive the expression, into what we are now which is a vibrant financial services industry with hundreds of billions of pounds of real estate assets of commercial real estate assets that we are the fiduciary for with trillions of pounds worth of residential assets that in many cases we are becoming more involved in through the leasing market so I think as we grow as an industry we do need to bring in different talent and we don’t all want chartered surveyors, we need chartered surveyors but we need a range of talents, we need lawyers who have converted, we need pre-board financial backgrounds who have converted, we need marketeers, we need technologists, we need a whole range of people to make our industry relevant.
Susan Freeman
And maybe if one can regard it as space as a service rather than real estate, perhaps that becomes more interesting and more attractive to people that wouldn’t have thought about real estate?
Alex Price
Yeah, I mean my suspicion you look at things like serviced offices, you know, my view is WeWork, WeWork are currently a tenant for many landlords. I think if a landlord expects that to continue that they will be an mistaken because eventually We Work will go to the underlying investor in that landlord and say, why are you giving your money to the landlord who then leases it to us? We can package this as one so if you give us the money WeWork will buy the building and we will then operate the building for you, the pension fund or the investor. So as landlords we have to skill ourselves as service providers or otherwise the service providers will cut us out.
Susan Freeman
Or you will work with them in partnership or…
Alex Price
Or you need to form joint ventures and partnerships yeah.
Susan Freeman
Yeah this is, you know, this is true. So there really is so much change going on at the moment and I think running a property company you just have to be on your toes and open to new ideas more than you probably have had to do at any other time in your career really.
Alex Price
Well I, and I guess though that over history the pace of change has continued to accelerate so what took a hundred years to do last century and maybe took ten years in this century, maybe takes one to five years. All business planning which used to be five year business plans today, to my view, anything outside of two to three years is probably irrelevant because it is so far in the future. I think businesses need to change but that’s the exciting point today. In our industry there is a lot of opportunity for those people who are prepared to grasp change, who are prepared to accept change as an enabler, not something that is threatening them and who are prepared to you know, unlock their thinking and think about things because if they don’t, Google will come in and do it better or whoever the firm is.
Susan Freeman
So, against that backdrop, what advice do you give to young people looking to come into real estate now because it’s a, you know, it’s changed so much?
Alex Price
Yeah I think my… and if I look at this very broadly I think anybody can come into real estate so my first point is you don’t have to go through the APC, it probably helps, it’s probably the best foundation course but you don’t have to do that to get into real estate. My second piece of advice is, when you apply for jobs you often forget that the company needs a rational to hire you as much as you know, you need to go to join that company. So I always say to people, my oldest child is a teenager now, when I talk to her I say, when you are talking to companies you have to persuade them why you are a good bet for that company to bring on board, not just turn up expecting a job to land on your lap and that’s about thinking about who you are and what you offer and spending your formative years trying to get some experience, if only small measures, and trying to show things on your CV and your life that make you relevant to the industry or career you are thinking about.
Susan Freeman
Yes that’s pretty, pretty good advice. What’s the best advice you were given when you were starting off on your career?
Alex Price
Probably to not join the Army. Which I ignored by the way. My mum thought it was a very bad idea. She has forgiven me but it has taken a long time.
Susan Freeman
Okay. Well she is probably very pleased when you decided to curtail your Army career.
Alex Price
I don’t, she just turned up at Sandhurst and saw me in my uniform and she was fine at that point.
Susan Freeman
Okay, I’d like to see a photograph of you in your, in your uniform. So what, when you are not working, how do you spend your time?
Alex Price
Well I’ve got three daughters so I generally spend my time as a taxi driver. The only thing is I realise that the only people paid worse than Uber drivers is me because mine is generally I have to give them money when I drop them off rather than receiving money. I am very, very lucky, I live just near Guildford, I moved out of London a few years ago and I spend a lot of my time with my kids. On top of that I do still stay physically active. I run a few times a week and try to do the odd half marathon or marathon for charity, in particular for Land Aid which is a cause that I am particularly aligned to. So I find plenty of things outside of work although inevitably there is always a bit of work to be done at the weekend because that’s as a chief executive you spend a lot of time during office hours catching up with people and sometimes you’ve got some planning to do which I tend to do in my own time.
Susan Freeman
And have any of your daughters shown any interest the real estate sector?
Alex Price
No, they’re…
Susan Freeman
Or is it too early?
Alex Price
…they think I am an estate agent and they don’t know what anything else other than that is. I could tell them I am a painter decorator in which case they would understand that as well but those are the only two parts of what I do that have any interest to them.
Susan Freeman
I see okay.
Alex Price
So no.
Susan Freeman
And when it comes, you know, when you actually get to the stage where they will turn to you and ask you you know, for career advice. What will you tell them?
Alex Price
I mean I think as a parent actually it is quite difficult to give career advice because you are inevitably very bias towards what you think is a good idea for them, not necessarily what they think is a good idea. So I think the best advice I can give myself is to send my children off to talk to my friends for career advice rather than talking to me. The best thing I can do is to, where people want to get experience in industry is to try to facilitate that. Whether they are other friend’s children or indeed just good people and we get some CV’s through and every now and again you see a CV that somebody has really tried to show they have an interest and a relevance in your company and your role and what you do and we do try to help those people if we can.
Susan Freeman
Yes and the interesting thing is now for you know, some of the children going through school, the roles and jobs that they will you know, take on haven’t even been created yet so I, I don’t know how you go about giving career advice as kids go through school. I think it’s really, it’s really difficult.
Alex Price
Well I mean there is lots of research. I suspect that roles that are easily adopted by machines, robots in particular will be less relevant going forward and more creative roles will be more relevant but it doesn’t really change the fundamental that if you try to be the best person that you can be as you are growing up and try to give yourself the best experience, exposure and personality you will probably succeed in something, it just may not be what you are thinking about.
Susan Freeman
True and in fact you might lose your role as taxi driver, you will get an autonomous vehicle.
Alex Price
I am a huge fan, autonomous vehicles I am a big fan of because I can see what it can do to change my life.
Susan Freeman
Brilliant, Alex thank you very much.
Alex Price
Thank you very much it’s been a pleasure.
Susan Freeman
It’s brilliant to hear from a successful real estate entrepreneur who is embracing tech and innovation. It will be great to watch how the Palmer Capital business grows alongside their new Canadian investors. I hope you enjoyed today’s conversation and found it interesting. P lease joint us for the next Propertyshe podcast interview in a couple of weeks’ time. In the meantime make sure you check out our Propertyshe website; you will find it at mischon.com/propertyshe and there you will find all our interviews and programme notes. The podcasts are also available to download on your Apple podcast app, the purple button on your iPhone and on Spotify. Do continue to let us have your feedback and comments and importantly any suggestions for future guests and of course you can also follow me on Twitter @Propertyshe for a very regular commentary on real estate, PropTech and the built environment.