#245 TR Property’s Marcus Phayre-Mudge on manager-investor alignment and the NAV problem

Three decades on from joining a graduate scheme during one of the deepest property recessions in living memory, Marcus Phayre-Mudge, fund manager and partner at Thames River Capital, has watched the listed real estate sector cycle through booms, busts, structural change and a creeping crisis of confidence between boards and shareholders. Speaking to Propcast host Andrew Teacher, the long-serving manager of TR Property Investment Trust delivers an unvarnished assessment of governance, manager-investor alignment, communications and the persistent question of scale that continues to challenge the UK market.

Phayre-Mudge begins by setting out a framework he still uses to explain the two distinct ways property cycles inflict damage. “There are two diseases for real estate,” he said. “One is a much more short, sharp shock, a bit like being punched in a pub. It hurts like hell, but it’s over quite quickly. That’s when you get a very dramatic change in the cost or availability of capital, which is what we saw in the GFC and more recently in 2021 with the dramatic change in the cost of money.”

The second, he warns, is more pernicious. “The other disease, which is actually much more insidious, more of a long COVID if you like, is the consequence of a long period of overdevelopment.” In periods like this, landlords across entire sectors become price-takers, dealing with tenants who know that competition to lease space places enormous downward pressure on rents.

His own entry into fund management came via a deliberate pivot away from surveying. Recalling a conversation with his boss at Knight Frank & Rutley over funding for an accounting night course, he laughed at the negotiation. “Marcus, if I fund this and you get the qualification, you’ll leave. I said: well, if you don’t fund it, I’ll also leave.”

The qualification opened the door to Henderson, predecessor to Janus Henderson, where alongside veteran fund manager Chris Turner he looked after the private allocation of TR Property Trust, then a smaller vehicle with exposure across both listed and private real estate. Later, in 1999, he assumed control of the listed property equity sleeves of two small Henderson diversified equity funds, each capitalised at between £20 million and £30 million, marking the start of his career in the public markets.

A move to Thames River Capital (TRC) in 2004 with mentor Chris Turner remains a moment Phayre-Mudge recalls fondly. “We told the founders of Thames River, Charlie Porter an