Lisa Allen talks to Robert Magid about building an empire
Property developer, investor, and hotelier Robert Magid arrived in Australia in 1950 at the age of nine after his family was thrown out of Harbin, China, by the Communist government. Taking the lead from his late father Isador Magid, Robert has built a property empire with three sumptuous hotels: Sydney’s Pier One and Harbour Rocks and Melbourne’s Hotel Lindrum. Magid, who trained as a mathematician and economist, says generosity of spirit goes a long way in deal-making and earning colleagues’ trust.
How do you handle pressure, particularly when working on a $100 million-plus property deal?
If you are working on a $100m property deal you should have several hundred million [on hand] and not have too much pressure on yourself. If you don’t have the money you should not be involved. This sort of situation has not happened to me. I have had bad deals but I have not overstretched myself.
How do you manage people?
The most important thing is to work with people you like and who like you. Then they have to be trustworthy, capable and reliable. So if you have all those ingredients it is always a pleasure working with people. I think life has to be enjoyable and it has to have humour, you have to like people. If you don’t like people you can be successful, but life is miserable.
What would you tell someone starting out now?
Be cautious and do not assume tomorrow’s real estate prices will necessarily be higher than today’s prices. And don’t become a property developer if you don’t have money. It does not have to be your money, it can be a partner or a lender’s money, but make sure that the money is in your bank account under your control before you start and not just a promise it will be there. I have seen people come a cropper because they had verbal approval and the money did not materialise. They were stuck with having paid a deposit and borrowed from friends and got themselves into serious trouble when they thought something was a certainty to be a success. Also don’t get involved if you don’t know what you are doing. You need experience because there are so many pitfalls in property including technical and financial. Property is not a lay-down misère that you will make money, you could easily lose everything.
What are the key traits of successful business leaders?
Vision, dependability, social skills, and generosity of spirit.
Where did you get your first break?
I was offered a Sydney wharf with a 17-year lease in 1995. I had not had any hotel experience prior to that. The first act was to try to get the NSW government to extend the lease over the wharf from 17 years to 99 years and that took a considerable length of time. The wharf was derelict, it was built in 1912 and was the point of take-off for passengers, vehicles and freight until the Sydney Harbour Bridge was built. It became derelict when the bridge opened. It begged to be used and the government was being very difficult until it agreed to introduce a procedure [so I could build the Pier One Hotel]. They determined a price and we didn’t argue.
How do you predict the property market?
I like the Hebrew expression “the prophet is a fool”. Anyone who claims they can predict the future is making a fool of themselves. What you need is information and if you are well informed you can see what is happening. If you see there is a shortage of housing then you can anticipate prices and rents will rise. If you are selling apartments and you see they are not selling, you can be wary of the direction that prices will go. So it’s being well
informed that is the key.
What is the key to running a successful property?
It is having an intimate relationship with the properties and knowing every single aspect from design to marketing, being familiar with the engineering, and being aware of customer comments, getting involved to the level of choosing uniforms and staff. I am in touch with the management and the staff of the hotels on a continuous basis. It also helps that we have two different management organisations at different hotels. [The Pier One is managed by the American hotel chain Marriott while the Harbour Rocks and the Lindrum are operated by French group Accor.]
How important is creativity in your business?
I get involved with every aspect of what I do from selecting architects and interior designers to choosing materials. I am very involved in planning and seeing what you can change and improve on. You have to be creative in the sense of seeing potential.
How do you put deals together?
There is no formula. In my case it all depends on opportunities which can easily come out of left field. Don’t rely on other people’s assessments. Do your own due diligence. My first property project was the conversion of the Esso building to the Highgate apartments in Sydney. I saw that Sydney was going through a complete emptying out of buildings in the city; we are talking 1993 – this was not long after the 1987 crash and people went from shares into property. But property was shrinking as a result of the companies doing badly so you had empty offices. I asked myself, is there an office building that has fabulous views of Sydney which could be converted into residential? And that is when I came up with the Esso building in Kent Street. It was a building with the most superb views in every direction: towards the Opera House, the Sydney Harbour Bridge, northwest Sydney, out towards the west and south to Botany. It was an extremely successful conversion into 220 apartments. It was just an opportunity. No one approached me, I just thought, logically, that is the way to go. If I was smarter I would have continued and bought other buildings.
How much has business changed in your lifetime?
While the banking system has not changed, the rates one pays has varied enormously over my business life. At the moment the margins are fairly tight but after the GFC they quadrupled and it was much more difficult to get financing. The nature of buyers has changed too. Today in many of the developments the buyers are Chinese, as are quite a few of the developers. Marketing has changed too. Once you could sell buildings with just a photo, now you have video walk-throughs, computer-generated images, 3D presentations where you can appeal to overseas purchasers in a way that was not as easy in the old days. On the building front, much of Sydney was once a quarter-acre block; now that has been replaced by medium-rise buildings so construction has changed completely.
“Anyone who claims they can predict the future is making a fool of themselves. What you need is information and if you are well informed you can see what is happening.”