Q&A

Lisa Allen talks to Robert Magid about build­ing an em­pire

The Australian - The Deal - - News - In­ter­view by: Lisa Allen Pho­to­graph by: Hol­lie Adams

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.”

Robert Magid

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