Welcome to Episode 13 of The Constructive Finance Podcast.
Today, Dan spoke with Syd & Lachlan Walker of Place Project Marketing about their market views, opportunities and challenges they have faced and some advice/lessons learned thus far in their careers.
The podcast will be released every fortnight on Tuesday and will feature an elite developer discussing these same topics.
The podcast will be available to stream from iTunes and via the HoldenCAPITAL website.
For more information about the podcast or getting involved please email paige@holdencapital.com.au
Read the full transcript below:
Daniel Holden: So, bit of a industry kinda comment here is that rookie developers engage the chapter's build up. Unfortunately, we're going through fifteen months of so many builders falling over them, and it's causing a lot of strife for guys like you and guys like me where we're having to pick up the pace of these builders falling over. But I say that because our lead developers choose good consultants ... That's very important ... I guess looking at that, how do we combat developers making bad decisions because it's cheap and understanding value again in consultants now that we've been through this boom and this wave of hyperactivity. It's all about volume, it's all about numbers. How do we bring them back to actually understanding the value of -
Syd Walker: I shouldn't be brutal but, you can't help people who are fools. It doesn't matter what you do, there's gonna be people who think they're like the top, the master and do whatever. It's just out of the group of people we deal with, we've just gotta be smart enough to understand ... I can smell a bad deal from a mile away because I've been burned. You know, once you've been burned you know that I'm not dealing with those sort of fellas.
There's some really talented people coming in in their 30s, early 30s, that are smart, they've got it, and they just don't have the money. There is some really talented people out there [crosstalk 00:02:17] the next generation. Somewhere between-
Lachlan Walker: They'll be lifetime developers.
Syd Walker: Oh, lifetime. Good attitude and all the rest of it, so ... I think, the other thing is they aren't, let's call them like "my generation", but I didn't do uni, right? We did it off of smelling an oily rag and we took huge risks. Huge risks were commiserate with the costs where it's due. Where as today, people are well educated and if you look at them, I've got absolute admiration for a lot of people that are in Lachlan's age group who I can see are gonna really cut the mustard in time and they're gonna understand what they're doing because they're more educated-
Lachlan Walker: Syd, yesterday, [crosstalk 00:03:00] ... Fucking mad.
Syd Walker: The worst thing is when you get to my age, you know, doing this for twenty years ... Is that I can smell a ... I can see it happening, and you say to someone whether it's close to me, whether it's whatever, and I say "That's going to be an absolute cock out," and they don't listen to you, and-
Lachlan Walker: Sometimes they pull off.
Syd Walker: Well, really? And then, all of a sudden it's just carnage. You go, well, I did tell you. But, that's, I think-
Lachlan Walker: You've gotta make mistakes to-
Syd Walker: Oh, absolutely.
Lachlan Walker: I think that's the best way to learn.
Syd Walker: Well, a developer who hasn't gone broke once, in my opinion, has not learned anything and cannot be a better developer. What's the definition of going broke? Well, you got personal guarantees on the line, you go broke, then you're a ... What I call [inaudible 00:03:52] is this idea of Insult-ency. I think Chapter 11 or whatever they call it in America, I think is a great thing. I think you should be allowed to do that sort of thing. But in Australia, you're like a pariah.
Daniel Holden: You're toast.
Syd Walker: You know, you just, whatever. But these are the things that make it, personality.
Lachlan Walker: Yeah.
Syd Walker: And that's what the business room, when I talk about it being prepared to lose money. Everyone knows you're prepared to lose money, so obviously you didn't tell lies to get that money. You know, if you tell lies you deserve all the treatment you get. So, a very broad-brush approach to what the developer ... Today's developer, what's gonna happen to him in the future, I think is a big thing. So where you sit, Dan, in this whole game ... Is a good thing today. You're not a banker, but you understand the game, and you should be able to get some brutal truth and be like the old banker used to be earlier which is, you know, this is the way it is. Fix it up-
Daniel Holden: I think it's caught on with risk, that's ... A different assessment now to what it was when I started and I won. Risk back then was risk, like it's real. Now it's probably [crosstalk 00:04:54]-
Syd Walker: I just ... One thing, which getting into your space, which is where you organise money and all the rest of this ... Idea and developer has gotten a mettle to say to their funder, that you have to be around to also fund some of the buys.
If you take one bad instance, I call it really bad, which is all part of what I call the, dare I say it, the Bankwest thing, Noosa. They've funded all these, or what you call bankers call them, funded the GFC Catalogue, had no money and then all of a sudden they've pulled the funding. In Noosa, I think for example, every development was funded by Bankwest. And when they delivered the product, there was not one banker there to fund any purchaser. Now that, fundamentally to me is you're dealing with hypocrites. If you're gonna fund the front-end, be prepared at the back-end.
Whatever that percentage is, when you get into your space is, that's a challenge. You've got all the rubbish they've come up with, "Oh, we'll only fund 20% of the building,". But you've funded 100% of that building, so you're a hypocrite. The logic in that, in my mind, is a flawed way of looking at financing and the way the money game works. [inaudible 00:06:18], you fund someone through and let them go broke at the end, but it just has no logic-
Lachlan Walker: Yeah. You believe in the product, back it on the end.
Syd Walker: You can't tell me that most funders in Australia, dare I say it, are better research than even Lachlan on I do, cause we're a Mickey Mouse little show in Brisbane compared to the nation. We're bigger now ... We're serious frogs in a little pond. But we're a tadpole in Australia ... in our operation's case. You go, "Well why? Why wouldn't a bank know what the future's gonna be?"-
Lachlan Walker: Why aren't you seeing what we're seeing?
Syd Walker: Well, Reserve Bank would be pretty good at it.
Daniel Holden: [crosstalk 00:06:57]
It's 100% right. You've gotta be a little bit more intuitive on these, the message there, which I think is 100% true. We're definitely not seeing that from the banks at the moment. We are seeing them funding somewhat, but we're not seeing them funding everything that we used to, which is frustrating to some but probably reality to others.
Syd Walker: I think you know, in your going, Dan, I think you ought to go back to the world. Your world is where you get your money from, and you gotta get money at the right terms, and you gotta replace ... before GFC and they all disappear and they're driven by credit managers, not by operators and I guess that sort of ... That might be brutal, but that's how I see it.
Daniel Holden: No, it's ... Definitely become a tick and flick in the banking space, which is brutal on developers. They're not used to it, and it's definitely not nice delivering the news to a developer saying "Mate, it's tick and flick and you missed one box, it didn't happen so here's the alternative,". It's not a nice game at all, so I very much appreciate those insights.
Unfortunately, I guess for my space in finance there isn't a disruptive technology coming through. There isn't anything coming through. I've spent a lot of time on it, I've wasted a lot of time on it. I've spent a lot of time in Asia in the last 15 months. I've just returned yesterday from another 10 days in Asia, trying to find money to fund property developers in Australia and it's there but it's not coming. It's not in droves like at the border waiting to come in. But one thing I do see for you guys is somewhat disruptive is this fly-through virtual reality technology ... That is a marketing tool, right?
Lachlan Walker: Correct.
Daniel Holden: You can distil it to a marketing tool but the electronic contracts as well, it's a double whammy of an annoying thing that just happens to be a little bit more invasive. I'd be keen to hear you guys' thoughts in terms of how that impacts what you do day to day. It definitely makes, once it's up and running, cause none of these are actually up and running ... Fly-throughs are, but ... Once it's up and running it definitely makes your job easier. Then it comes down to how do we enable it and make it more accessible to more people? That's what I'm interested in.
Lachlan Walker: I think technology ... Is our friend. I think we've got to ... If you don't embrace technology and you're not an early user, you get left behind. If we're not there trying to work out ways that we can use VR, we can use electronic contracts to make our lives easier, to be able to sell product better and faster to get a better result for our clients so they know what they're getting into ... I think if you're not in earlier, you're gonna be left behind and I think that's the big point of it. If we're not there and we're not getting ourselves involved at the front-end ... We're going to end up, our competition's going to take over or there will be a disrupter in the industry who will come in and do it. You will ... I think VR is going to be the future, there's no doubt about it. Electronic contracts are going to be the future, it's gonna help us. There's not gonna be this thing people are gonna be able to track IP addresses when they open the contract, there's not gonna be this discussion saying "Oh, we haven't signed the contract yet," cause we can say "We have. You opened it at 11:51 PM on March the 17th, 2016,".
That will occur and we've gotta work with it. On terms of pre-sales, I think it helps that off the playing marketplace. People walking around the goggles now, we're seeing it now in the general real estate marketplace already. You know, people can almost click on ... They can click on realestate.com and they can see a virtual house no matter where they are in the world. That opens a global marketplace, expands who we're marketing to, who we're selling to ... Really, if you're not doing it you're going to be left behind.
Syd Walker: [crosstalk 00:11:17] Let's say a general project. We're selling 3 million dollar product. Technology's not worth to us, because the age group you're dealing with says "I'm touch and feel"-
Daniel Holden: Doesn't make sense.
Syd Walker: Doesn't make sense. But let's say you're in the investment world and you're looking back to what we've been through, for all this technology we've got at the start of it, who knows where we would've gone on the younger generation. It's a big thing like you take, put a set of goggles on me and I am not comfortable with them and that's just showing my age, which is fine. I'm only 40 at the moment ... Lachlan was born when I was fifteen.
From the point of view of where we're going, I think the electronic things, I think of the contracts and things like that is probably the smartest thing I've seen. It's not properly right yet, ease the manager and that's dealing with a very slow group of people called lawyers-
Lachlan Walker: Yep.
Syd Walker: Who are set in their ways and whatever they are in the middle of the suburbs, so that's the challenges out there, but yet I still come back to a decent display. It all comes back to hey, you set a project, am I gonna have a decent display or am I gonna do it by technology? You look at who your market is, all that sort of things, and who's gonna accept being presented with that sort of stuff.
Lachlan Walker: I think there's marketing elements that we can also drag on ... Social media hasn't yet really taken hold. There's people fluttering in it in the real estate, no one's really done it well. Again, it's an evolutionary path. Instagram didn't exist a few years ago, Facebook didn't really exist a few years ago. All of a sudden, that's our means of targeting our clients. In five years time, it'll be different again. I think we've just gotta be continually adapting and if we're not able to do that, we're gonna be left behind.
Syd Walker: The one greatest thing I think that's ... A project's side is the ... CGI space. The actual reality of an image compared to when I was doing it 20 years ago. What someone's hand painted ... The images-
Lachlan Walker: Syd used to make me go 'round bloody Kwinana looking at sale signs saying "Well that guy's been on the marketplace for 30 days now, you go and do a realestate.com,". [crosstalk 00:13:50] That was me as a 12 year old. [00:14:12]
Daniel Holden: The product used to be a guy with a stencil and the calligraphy [crosstalk 00:13:59], now you can render it up like it's real-
Lachlan Walker: Syd, Syd, Syd ... As a ten year old, Syd stopped selling **** used to give me five bucks, wasn't even five bucks it was two dollars, to walk around and letter box drop, just-
[crosstalk 00:14:13]
Syd Walker: Absolutely, but that part of ... The feel of a project while doing a CGI to look at the ... Getting a computer to generate an image that looks real is just mind blowing.
Lachlan Walker: You should have seen Syd with the goggles on a little while ago. That's the market changing again, that's the next stage.
Syd Walker: I just think, if used properly, technology is a great thing-
Daniel Holden: It's a beautiful thing.
Syd Walker: And the last, I've got to say, on the technology side, I don't care what anyone says about internet shopping or whatever. Property, particularly our business what we do, is still touch and feel. People will still fly-in and still look and do whatever. It's the last thing that a person has that will buy needs to feel. You cannot ... It's fine sitting in Asia or America or Britain or whatever looking up on the internet saying "I'll buy that," or whatever. I can't ... How many sales have you actually made to people without them actually flying in or having a representative fly in and look at it?
Technology has its place, but is not the decision maker.
Daniel Holden: It's not replacing, it's adding to the decision-
Syd Walker: It's not the decision. It's adding to information because we're such ... Driven by ... All the Internet's been a great thing of telling people about who's been taxed and who's lost money and who's been bought something they shouldn't have or who's bought underwater ... Going back in the old days, they were selling blocks of land underwater on islands and all that sort of ... Today the Internet, and if you have the right CGIs and the right stuff to "I'm gonna go look at that". I stood by it, I put it on hold, I make all those decisions.
Daniel Holden: The touch and feel is huge.
Syd Walker: Never, ever ... I don't think a human being will ever-
[crosstalk 00:16:08] If anybody home, we decide it on a computer.
Daniel Holden: Interesting data that came out, I think it was on the Monday this week so mid-March this week. That came out that, I'm pretty sure it was June last year, that Internet sales had reached 6% of the total gross product of some of the big Westfields. They thought that was a precursor that Westfield was doing because Internet had reached 6%, and this data came out kind of third week of March 2017 that said it's actually dropped. We all think this Internet thing's going to change. And I'm not Homer Simpson thinking it's not going to work, I'm just saying that we think it's going to change the way we do business and all of a sudden you've got a stat from two and a half years ago that all of a sudden ... The big Westfield, it's actually declined.
People still want touch and feel, particularly in real estate. They want to touch and feel it.
Syd Walker: The challenge is that, you take me at my height. Lachlan's similar to me, we're not small people, we're 6'4", 6'5", all up nearly two metres. When we're trying to buy something on the Internet, like a set of jeans, I've actually got to go out to the shop and buy a set and then I'll look at the label and try to hope like hell they still make them that same way. So, it's got its limitations. I'm sure, particularly in the female world, buying fashion on the Internet just flies in the face of the way they do things. It just cannot be.
Lachlan Walker: You gotta remember that real estate, you're talking about half a million plus purchase, generally ... You're spending half a million dollars. It's a big purchase - [crosstalk 00:17:56] They want to see what they're doing, they want to know what they're getting involved in.
Daniel Holden: I guess a small comment for my industry is the biggest thing I've seen in this is being a disrupter. Crowdfunding, FinTech, all this kind of stuff, I look at it and I go "What actual decision do they have over that thing?". All of a sudden they're led to a certain thing via Google ad words that they're gonna buy this thing off what? Just because you paid more for Google ad words? Doesn't matter if it's a better product. Whether it's my mortgage product or your investment property, it doesn't mean it's better, it's just all of a sudden who pays the highest price and how it works. To me, that's a concern because it's not down to the best managed thing. It's down to the highest bidder, the highest payer, and it becomes like an auction for the eyeball of the buyer and that doesn't lead to good investment decisions.
Lachlan Walker: I think the other thing to think about is you've still gotta market, and that's probably a big thing. We have seen change in the last 12 months. Two, three, four years ago a lot of it was done off market, there was a lot of sales happening off marketplace that are done through the investment sales or done through channels, done through the Chinese market. Might not ever hit the Brisbane shores. We've gotta get back to getting our product out, telling the story, and trying to hit that local marketplace. If we're not doing that, we're not doing our job properly either. That's the other side of the coin, too.
Daniel Holden: I also think ... Hope you guys can comment on this, we've got some really exciting stuff in Brisbane-centric. In terms of, there's talk about new world city, but I'm talking about it being a really, really good place to be in terms of investment into big infrastructure. That surely must put us on a landmark.
Syd Walker: Just think about this: in my experience in Sydney and Melbourne, I love Melbourne, it's all square it's got the trams and all the rest of it. Sydney's a place I still can't get the grips on, but you come to Brisbane ... This morning I go from Hawthorne [inaudible 00:19:56], drop my car off to get serviced that was 12 minutes straight through the tunnel. Now you cannot tell me as a city that we are not one of the greatest places to live, just in that simply. I'm impatient, I just think "Christ, that took me a long time," and then I timed it this morning, and that's a fair hike. Then - [crosstalk 00:20:17] ...
We are still 90 day expo we turn from a really dumb place to have some life and what's going on in Brisbane, if you take the casino thing that's gone all [inaudible 00:20:36] that's a game changer. But we will still be way behind Sydney and Melbourne from a cluster point of view ... Car parks and cars and traffic and all there is. You got to say, on one hand we are in pretty good shape. Getting out of Brisbane, to both coasts, that's a nightmare.
Lachlan Walker: On a Friday afternoon.
Syd Walker: Well, any afternoon. You've got north or south or whatever. But in the city, it's still taking ... The worst day in the morning from where I am, we've got no tunnels over our side of the river. It'll take you 40 minutes to go two and a half kilometres. That annoys me, but I go "Well, if I was sitting in Sydney, maybe it'd take me an hour," ... Everything's relative. Where we sit, I think, is the most livable city around. Pricing of our product is still 40% of Sydney and 60% of Melbourne, or whatever, so we're still in the right go ... Now anything we're missing amongst it all, that is jobs. You can't say that all our cycles, this time around, everyone from the south should be turning up to buy our product and put money in their pocket. They're not turning up because there's no job, and migration is embarrassing.
Daniel Holden: They did last time.
Syd Walker: They did last time. Of course they did, because they had jobs and they hit both coasts and we had a bit of a run. I remember that time, some of their stuff went up 150% but it was still cheaper at 150% than same in other markets.
Lachlan Walker: We're currently the cheapest city ever ... Compared to Sydney, in history. I think there's great opportunity to come. I think the big thing from the apartment ____** folks and apartments independently is they are new____. That's where, if you go 2 kilometres from the city you're buying this brand new apartment. You can't do that in Sydney for a similar price. [crosstalk 00:22:32]
Syd Walker: Another part of the market which you gotta look at is your housing market. Consider this: at 5k rent, we're all in good homes and all [inaudible 00:22:48]. In the world, everyday, there's less and less houses to sell cause the houses are getting knocked over to build-
[crosstalk 00:23:00] The easiest way to measure any real estate market, in any suburb, is to go the highest priced house, and say it's an average of five million, pick a number, the highest price you end up with should be in that market should be 70% of that house. That's just the absolute gauge from my perspective is, if someone's got the highest price house and the delivery is five million and the unit is five million, that unit is so far overpriced it's never gonna move.
Look at our fundamentals, our apartments have not gone up in price in the last three years, because there's a supposed 40,000 units of overhang. You could pin that to the houses. Houses have gone from the floods of 2010, where they dropped 20%, they are past what they used to be. Your market on the housing side is good. There's less and less houses, which means there's gonna be more supply and demand, duh, it's not hard to work out. Those are gonna keep going up. While all of that's going on, you just look at the next six in the market, which is underplay the hill, which is not getting done extremely well because I've got to say in the apartment space, in the unoccupied space ... Those sort of people are not around to deliver quality. People's idea of quality is pretty ordinary in developer space ... They all go on this bullshit about "This is the best of the best,"-
Lachlan Walker: That's where those younger guys are coming through, they're starting to deliver something better because they haven't got time enough for the shit product.
Syd Walker: They haven't got the ability yet to deliver 70 million.
Lachlan Walker: That's true. [crosstalk 00:24:46] They haven't got the cash.
Syd Walker: You've got to look at-
Lachlan Walker: It comes down to money.
Syd Walker: Absolutely. Of course it does. The whole world works like that, but my point is that, if I'm not [inaudible 00:24:56] from a property point of view, I'm in really good shape. The only thing that's not in good shape is delivering one bedroom units at 390 grand with a fucking 5% guarantee and fooling the world that that's the way things work. You've just gotta [crosstalk 00:25:16]
Lachlan Walker: The media latching on to certain things which punch out a bad story every hour-
Syd Walker: Fundamentally across our industry, we have the worst edit because every so-called commentator latches on, government, whatever it is, latches on to 40,000 units ... What space are you all in? They are people who should know better.
Lachlan Walker: They should.
Syd Walker: They should know better, because if they let Lochmans Report and are in for money, they know how it works. [crosstalk 00:25:46]
Lachlan Walker: One of them called me two hours ago so I won't comment on his ability, but I'll definitely-
Syd Walker: Seriously, if you say a fundamentals our business because, at the end of the day we do spend 12 months with people getting their projects right and then we don't get appointed. It really shits us off, but life goes on ... Cause I'm on the old world, once you shit on me once, you're not able to do it again. Fundamentally, you look at it, we put our work in on the upfront, then we take that sort of stuff to get the stuff right.
In that whole scheme of things, you look at how we're gonna go forward in business and projects and developments. You've gotta value that sort of things that get offered to you, you've also gotta think that if we're doing that sort of thing and then we say "Well, we only sold two and a half thousand with all this overhang and all this rubbish that goes on," because ultimately, which defines everything, is the market. The market.
I didn't go to university, but I do understand one thing when I used to sell cattle. When I used to light up the sale yards full of 2000 head of cattle and no one turned up, I'd go duh, no one wants to buy cattle. So I didn't load the sale yards up again. That's just really simple economics to me. You come back, the one bedroom's gone. We probably supplied too much stuff in that market, that's being driven by what we'll call if I have been market, and we haven't worked out the ... We've gotta build it and deliver it and all that sort of thing. That's just in overhang. That's 1/6th of the market. But our market, generally, in my mind is in really good shape.
Lachlan Walker: I think the challenge we have, moving forward, and what we touched on earlier is that potential overhang of the hired stock is ... If you are in a [inaudible 00:27:53] and you're trying to deliver o-grad stock, it's not gonna sell. Brisbane people, if you're delivering a three bedroom apartment, you want to be on the water, you want to be saying "direct views of the city,". You want big, you want amenity, you want to be in a good location. If that's not the case, it's gonna be impossible.
Syd Walker: I shouldn't mention this, but Queensland is Queensland. Cynical. Seriously, we are ... People I mix with, and all the rest of them, on a day to day basis the people who come in are cynical. We're bred that way and we are that way, and when occasionally we get people from the south who come in with a positive attitude we go, "Well, that's a good thing,". There's been some good projects we've done in the last year which have been in the upper end, and there's people who come in and think it's cheap and they're poor and all the rest ... and that has formed the basis of our market. We don't see them rushing in and buying one bed rooms at 380 million.
Daniel Holden: No, no. But they're not in it for that.
Let me ask you this. I've got a tangent theory, which is: the empty-nester, which has bought their house for 280 in a 5k ring, and they're now selling it for 1.4 to two. They have now finished working their ass off to put their kid through school, the kids have left, they're now selling this thing for two. They'll now downsize to something worth 1.2, what Camp Hill with sea views. And, they'll finally spend money on themselves. If you said to them four years ago, whilst they had two kids in grammar, "Will you spend 1.2 on your house?" [crosstalk 00:29:27] The answer would be absolutely not, because they couldn't imagine spending money on themselves.
My thing is, there's a pent-up demand of people who actually realise now they can actually spend money on themselves instead of their kids. Cause they've always put their kids first, and all of a sudden the kids have actually left the coop, now they want to spend money on themselves. All of a sudden for them, for those guys, hey, one and a half is nothing.
Lachlan Walker: They want something special don't want to live in Wallangarra Gabbro ... Multi-story building. They want to see a nice boutique project which gives them a little bit of space, whether that's on the deck or on the ground floor, whatever they're looking for it's gotta be something a bit different.
Syd Walker: My view on that space is that those people, currently, and it is a trend ... You're right on the trend, but they don't know where to go if I could say that politely. There's a trend like the Brisbane River, south of the ... It's how weird it is people have lived on one side, have the [inaudible 00:30:43]. But they also ... One particular good mate of mine has decided ... He's gonna buy something up in Sunshine Coast. I'm like, "Where'd that come from?" He said, "Well, the price is right more,". So it's all about how much goes in their pocket in that transition of whatever it is.
Lachlan Walker: And life-
Syd Walker: And life. You've got ... They don't necessarily want to move into the hustle and bustle, but they want to be close to it. I think that is particularly the market ... But also to, dare I say, it's got that demographer comments you were talking about. It's probably not right for Brisbane, but it will head that way in some shape or form. Does that make sense? [crosstalk 00:31:30]
Lachlan Walker: So Syd, maybe you for this one. You've obviously been in the industry for a long time, you've seen some good cycles and some bad cycles, some downturns. I'd be interested to hear what you would say to yourself as a younger you at the age of 22, 23 entering real estate full of zest, full of life, and wanting to take over the world.
Syd Walker: I think firstly, as an individual, if you've want longevity in anything is deal with your own ethics. How are you gonna start your life and look at ... I found it real easy because I was brought up hard, to tell the truth. It's not worth that ... Why do you have to remember what you said unless you're telling lies? It really comes down to your own mettle on what you see and how you go about it. I would say that, and I'll say this regularly anyway, set your foundation right. Understand what you want to do, and if your vision is to go into this
The other great thing about being young and all the rest of this ... These days I think it's a five year compartment in what you look at life. Back in my time, it was a career. You were in it for life. For me to change at the age of 40 from doing what I call a short career in something because the turmoil of a different cycle and ending up in the next one ... I've basically stayed in. I've only had three jobs in my life, whereas today's people every five years they've got to review their life. Whether it's marriage or whatever it is, you've got to work in five year compartments as long as you're progressing along.
The other thing that set me well was an older bloke said, "Syd, you should always find someone to be a mentor," and a mentor in those days was someone you liked or trusted or whatever. It was not what they call today's mentor in which is some guru who sits up and wants to organise your day. Mentoring in my day was someone you trusted, a leader who took a shine to you and gave you some quite tips, which was part of ... Part of that process was: find someone who's doing a really good job in the industry you're in, in property, and pick up their good habits. Their good habits meaning the things that really work. Everyone's got bad habits. I've got them, every person in the world has got bad habits.
If you're really good at picking good habits, and I think I've been in my life, I've set some great sales records and I've been blessed in the people I've met and mixed with. Even today those people who are now retired more recently, every year there's probably half a dozen, still ring me up and invite me to their functions or whatever it is. It's a pleasure to go back and meet with people that drew my life, helped guide ... Part of that is the truth to be able to tell you that you're a dickhead.
But for Chrissake find someone who's better than you, pick out their good points, keep them, discard their bad things, and everyone's got bad things. That's probably the best thing I could say to any person as part of their life. Sadly, which happens is, not necessarily in your family because there's this whole statement that familiarity breeds contempt. When you're hanging around with your own family, it's not necessarily the same respect as you do finding someone outside the family that helps you, guides you through your life. If you get that pathway right, the world's your oyster. All this rubbish about being well-educated ... I don't believe what I did through mine ... I treated school with contempt. When I needed to do education, which is to get licencing, I was top of the class. To me, it's about how you approach.
Lachlan Walker: I think modern day entrepreneur doesn't take to schooling, as in high school, well either. I think it's the rite of passage to be rebellious in high school, because- [crosstalk 00:36:02]
Syd Walker: It's a challenge today's world is, because sadly ... I look at private schools in which I'm the first generation, Lachlan's in second generation. My generation ... the focus was not necessarily on the education. We went there to be educated, but there's the worldly things that were associated with it was what made me. The friends I made and all the rest of it. I developed a proper network, not the telephone book. I met people that I've had relationships with now for most of my life that have been great people and influencers of getting me in the other business ... That networking is something I think as a young person ... and I've driven Lachlan hard on it, because I didn't start until I was 40 ... I've asked him to start at 20. Develop your networks with the people you went to school with who are going to go and become the future leaders of Australia. He'll be 20 years in front of me, that's the same I'd say to any young person. There's probably a few other things I could probably ... But the purpose of the question.
Lachlan Walker: That's good man, I've heard that recently from a few people saying that even the guy that you went to school with who's now a scientist or a dentist or whatever, he can still be worth talking to for no reason that he's going to bring you the next sale or in wide terms the next finance deal, but he's still worth talking to. Just have a chat to him and see how he is and talk about his life and the way the world is. That's very interesting, and the network then grows from there because you don't know how it's gonna happen. I think that's very good advice.
Syd Walker: I didn't appreciate the value of a network until I got sponsored by my company at the time to go to Manly***, which is the management college for Australia. Then a number of years later, I'm looking at a group photo and one of the participants of that photo was a bloke called Ken Talbot. I looked at where he's from, he was from the Mines Department in Queensland. Ken Talbot turned into a billionaire ... pity about going down in the plane in Congo. [crosstalk 00:38:09] The value of meeting people is do not underestimate the person you meet, greet, and where he's going to end up in life.
As a young person, until I got to 40, I didn't appreciate what the relevance of all that sort of thing is. Be mindful of who you mix with, be mindful of who you insult, and be mindful of what happens to you when you're on the way up [crosstalk 00:38:39] and when you're coming down.
Daniel Holden: Well, we don't need the latter but I appreciate that. I think that's very good advice for anyone, let alone a property developer. I think that's good advice for a property consultant, whether you're a town planner, a valuer, an architect or whatever listening to this, I think that's very, very good ...
Maybe I can ask the question again and just get more sense around the property developer, cause I know you've seen many of them in your time. I know you've seen many of them come and go, I know you've seen many of them into the space with all the intentions in the world. I know that you've probably had you're own opinion of them. I'd be interested to see a little bit more pinpointed to a developer, and if you were a property developer right now entering the space in 2017, with your knowledge of decades, what would you say to yourself?
Syd Walker: I would say repetition. Know your market, know your market, know your market. Then get your relationships right. Take advice, be prepared to take the good and the bad. Put the ego in the bucket for a while, try and isolate your ego. I think surround yourself with what I would call good, solid talent. That's where ... Coming back to your space is look at the elements. Find someone who's ****** to work with, and I don't mean one deal, I mean like with us as business people. In a project marketing space it's a good relationship with us. With Lachlan on the advisory side, you've got a Dan Holden who can help you on the front ... I don't care if Dan Holden organises with a- [crosstalk 00:40:52]
Daniel Holden: So you're talking about a business model here.
Syd Walker: Absolutely.
Daniel Holden: A business model that works. [crosstalk 00:40:57]
Lachlan Walker: Strategy.
Syd Walker: Coming into [crosstalk 00:40:57], because you cannot turn up to a bank and ask for them to tell you how things work cause they don't know how to handle you, for a start. One, you need money and how you're gonna handle that, what your investors are. Whether your own money, your family money, or whatever. Then your advisors. You've got to find people like Lachlan that know their business. Then you've got to find at the end of the game when you've got it all together, you've got to find someone like me who will tell you, "That's a dumb idea,". You've just got to find that mix of good talent around you and the last thing you listen to is your own kind. Cause they're full of shit.
I get five developers in a room, I've never heard so much crap in my life about who's got the biggest one. It's just drivel, absolute drivel. Meanwhile, one's bleeding, one's going broke, one's successful, and the other you don't know what the truth is.
Lachlan Walker: [crosstalk 00:41:56]
Syd Walker: It's human beings.
Daniel Holden: It's the egotistical industry, which I guess we're all part of. Developers are a part of it ... Project marketing's a part of it, agency's a part of it, financing's a part of it.
Syd Walker: Sales.
Daniel Holden: [crosstalk 00:42:16] But the whole thing's in sales.
Syd Walker: Finally I've got to say, I did have a development, and I was not good at it, I'll tell you straight up and down. I was better at the marketing at the front-end, but I worked out ... After you lose the money, that I'm better off doing what I'm good at. You need, in that whole space, to understand what you're good at.
The other thing is, some of the developers who I'm mixing with at the moment which I'd give advice to any young blokes starting up is: Stay small as long as you can. Stay small as long as you can, go as boutique as long as you can until you know you're about to go from playing cricket for your state to playing cricket for your nation or playing football for your club ... Playing for your state and then your nation. It's the same thing, just get really, really good at it and understand your discipline and you will win.
At the end of the day, be prepared to go broke. Be prepared to go broke.
Daniel Holden: That's some really good advice there that I'd like to echo again if I could. The first point was: Do the smaller, medium ring for as long as you can. As in, if you're making 300 grand a year because you're doing 18 product at 60k a pop, and I know that math probably doesn't work, but you're doing three projects a year times six apartments and that's making you 300 grand per annum. You were in a salary job at 150 grand per annum, and all of a sudden you're doing really well and everything's going great, don't necessarily just add a zero to make it the next big thing. It doesn't have to happen. You can have a really good business model, a really good life operating in that space, having good consistency with good consultants who give you good feedback, who engage with you because you have a nice, steady business model.
If you go from doing six packs to 50 packs- [crosstalk 00:44:30] everything changes.
Syd Walker: The other thing is, do not chase the cheapest. When I listen to people go, "Oh, I can borrow it off this person at 7 and a half percent and someone else is 8 and a half," to me, you're a Mickey Mouse operator. You're not focused on what the right person is for your needs.
Daniel Holden: But to that point, like you're saying, we were commenting on before we started recording about the builders and the way that world works ... It's amazing how that whole evolution has come about in builders, but I've seen five or six builders go broke in the last six or nine months. Now we're faced with a world where the builders that are now doing jobs are the guys who were there and they weren't the cheapest, but they're now picking up the jobs because the cheapest guys-
Syd Walker: They're charging more for it.
Daniel Holden: The cheapest guys aren't just the ones who couldn't deliver. They went broke- [crosstalk 00:45:31]
Lachlan Walker: It's also, on the agency side, it comes back down to you don't employ two painters for one wall. You never do that. But why do you employ two real estate agents to sell one property? You start to split your market, everything goes badly. Whereas you pick the right person for the right job, and some jobs we won't accept at all or will get forced upon us, all that stuff we turn away.
Syd Walker: I'm fascinated with people who want to have two agents. You talked about earlier on this programme going from small real estate agents then project managers ... I just find it absolutely fascinating how people can employ two agents or three agents and only pay one [crosstalk 00:46:17] and pay one.
I liken that to employing three painters. Employing three painters to paint one wall. I'm only going to pay one of you. What are all three painters going to say to you? But agents, fooled into it, go "Well, why don't neither gets paid?" And the other two ... We're dealing with three dickheads and the painters are brighter than the agents. You've got to work at your fundamentals. It applies to the bank, solicitor, having a very good legal team that knows their stuff to get the contracts right and all that.
The whole process is not necessarily paying stupid money or being over the top, it's all about having relationships all the way through [crosstalk 00:47:02].
Daniel Holden: Good, very good.
I'm going to hit you again. Syd, if there's one thing a developer could do, and keep in mind you're early in the base. If there's one thing you could say to yourself 20 years ago, one little nugget ...
Syd Walker: As far as being a developer?
Daniel Holden: A property developer.
Syd Walker: A property developer. I think I've shot my shot. I think my earlier comments are probably where that fits in that space. If I am trying to reflect on the greatest disaster I ever got into, I got emotionally involved in something. I think as a developer, you get emotionally involved in your decision is right. It doesn't matter what I say to you, you stick to that and know it's the dumbest thing you've ever seen. Emotion is a serious thing about how people file. They're right. Emotion is attached to why I'm right and you are not right, you need to listen to other people.
Daniel Holden: That's very good, and I guess we see that the career developers remove emotion a little bit. They're very smart in doing that. I definitely agree that some of the newer industry people let emotion get involved and think they've made a good decision once so they think it's going to be the right decision again. All of a sudden it's not the same thing.
Lachy, I'm going to throw to you now and say is that the right kind of advice, the advice that Syd has given you?
Lachlan Walker: Mate, I still remember as a young kid coming out of school going to uni ... Syd said, "Don't ever expect anything given to you. You're never, ever going to make it if you think that. You always work hard, you're going to do what you do, you're going to know what you're going to know, and you've got to deliver on what you promise,". That's probably the one thing I've taken forward in everything I do. Don't except the handover when the big man's not giving you nothing. You've got to be invested in everything you do, you've got to believe in ... If you're doing it right then you're going to get results.
Syd Walker: Agree with that.
Daniel Holden: Alright. Well, very appreciative of you guys coming, spending time with us. I know you've built a very good business here, doing pre-sales marketing, doing research, doing the roots up marketing of projects in Brisbane. I think now's the time that you guys are going to shine when all of a sudden the two bedroom shoebox isn't the flavour of the month. You guys are going to come into your own. I'm very excited to have you at this time of the market, very excited to have you here.
The most anticipated question is: what is the best wine or scotch you've had?
Lachlan Walker: This is thrown to Syd for this one, that's his bag.
Syd Walker: I'll give you three- [crosstalk 00:50:26]
Daniel Holden: Well we should try them all. [crosstalk 00:50:32]
Syd Walker: Recently, I spent 14 days in Alsace region in France. 300 vineyards. I've got a fetish for anything Alsace, cause Alsace was German up until World War II. Now it's French, it's on the French side. I've got a very fetish for that wine. When it comes to beer, which I love, dear to my heart, been a drinker. Lachlan used to have his favourite Japanese restaurant in Norman Park, and it always served up these 650 mL tins of Sapporo. 5.2% alcohol.
Lachlan Walker: It was very good.
Syd Walker: As a dead set drinker, coming from the bush and all the rest, that's my beer of choice these days. It's got to be in a tin. It's a metal can, it's not aluminium. It's steel, a beautiful drop of drink.
The third thing is, if I'm having a really great night I love a really classy Jameson scotch.
Daniel Holden: Nice.
Syd Walker: On ice.
Daniel Holden: I've got a nice ice machine and a good bottle of Jameson's next door. [crosstalk 00:51:53]
Syd Walker: Lachy, you?
Daniel Holden: I'm very easy to please, I suppose. I don't mind a good beer, as you'd know. Mate, I'm a rum drinker or ... Don't mind the runs of Cobra on ice, it's some of that natural beer. Thanks, man.
Daniel Holden: Alright guys, I've been very excited to have you here. I think it's been great to get your insight, it's been great to see your business evolve over the last 10 years, particularly now where the market has met your absolute product offering. I think it's really, really exciting. Thanks very much coming and join us-
Syd Walker: Pleasure. Anytime.
Daniel Holden: I hope the listeners have got something out of today. I know I have, I've learned some things. Very excited and thanks very much boys.
Lachlan Walker: Thanks, Dan