DEVELOPING INSIGHTS

Thanks for joining us, Andrew. What exactly does Highgate Developments do?

We are investors first, developers second and builders third. We have used our property portfolio to purchase development sites and turn them into residential lots here on the Sunshine Coast. Increasingly we are building on some of the lots we develop because there is a great opportunity to deliver quality homes without the overheads that a lot of our competitors add in.

We run a number of companies, but you will have heard of Highgate Developments, our parent company, and Highgate Constructions, which trades as O’Hara’s Quality Constructions. Fronting much of what we do is The Grove Residential Estates brand, which we are expanding all the time. We have several partners in our developments, and are very proud of being able to help our friends learn how the industry works. We have also brought in one of our consultants to the team more permanently, which has proven very successful.

We are firm believers that the direct model is the game changer in the economics of property for our customers. If we can bring the cost of development down, if we can build quality at an affordable price, and if we can take some of the commissions out of the process, our customers have to win.

Tell us about your working life?

Well, my parents were self employed and got my brothers and me working pretty young. But formally, after I finished an International Business Degree, I took up a graduate position at NAB. I stayed five years and worked in a number of roles geographically and functionally. After moving to Melbourne with NAB I joined Andersen Consulting, which became Accenture. I stayed there for 17 years, and worked in Sydney, London, Melbourne and Singapore. I started out as a business analyst on IT projects and moved into team leadership, management, sales and eventually into business unit leadership. I finished up running the banking consulting business for Asia Pacific. I also had several stints running IT divisions for major clients, including Chief Technology Officer at ANZ Bank. My final corporate role was running a large part of SAP’s Asian business, working with the largest and most successful companies in the region.

When did you first get interested in the development industry / how did you get your start?

My parents were active property investors, so they always provided great advice and guidance. I started part time work when I was 10, in our fruit shop, in a petrol station, in hospitality and many other things. So I was always a saver. As soon as I graduated from university I started investing in property, a two bedroom unit in Memorial Ave in Marochydore. From there my wife and I just accumulated investment properties for several years.

In terms of development projects, about ten years ago we started buying houses to renovate, and larger blocks with development potential. Our kickstart came on an acreage project at Buderim, which went really well. From there we have moved to projects in Alexandra Headland, Little Mountain, Nambour and Mooloolah Valley.

Who has been the most influential person in your development education and why? Who do you look up to in the industry?

My father. He set the tone for all my financial aspirations and processes. He worked hard, he invested well, and he loved property. He probably would have liked to have done more, but his resources and opportunities were less than I have had. I’ve never seen anyone work even close to as hard as he did – he never stopped. He was working on our farm on the evening before he died.

In the development world, I honestly don’t know too many people. What I look up to though are self-made people who make and take opportunities. People I watch from afar and who I have great respect for include Mal Pratt, Ron Grabbe, Roy Thompson and Harry Reed. Nick Clatworthy was also someone who was very generous with his time and knowledge when I was starting out. He didn’t need to but he gave me the basics and asked nothing in return.

More than anything, I just love learning how to do this job better. Every day is different and presents a new challenge. Solving problems is very rewarding. I would also credit a few of my old bosses and mentors in Accenture for showing me the processes for solving problems and always finding a good answer. I’ve had a long apprenticeship.

What has been your best performing geographic market over the last three years? What has been your most significant / favourite project here on the Sunshine Coast?

We have focussed almost exclusively on the Sunshine Coast although we have explored Brisbane and further up the Qld Coast. We firmly believe in focussing on markets you really understand, literally street by street.

We love all of the projects we have done, financially and also in respect to the transformation we have helped bring to under-utilised sites. Whether we like it or not, our population is growing, and density will have to increase. In-fill type development, although we aren’t strictly changing land usage in some of our projects, is vital. Take, for example, The Grove Alexandra Headland. This was a one hectare site only 900m from the beach. It was steep and we had no means of disposing of its stormwater. There were loads of problems. Everyone laughed at me for buying it. In the end it has turned out to be a great addition to the Alex community, providing a mid-price point for first and second home buyers that didn’t exist before.

Being a Woombye boy, I also love the railway towns. We think they represent great value and the quiet, semi-rural lifestyle that many originally came to the Coast for. While they have seen some price growth recently, there is still a bit to go we think.

The Sunshine Coast is a notoriously cyclical economy. What are the main strengths of the development industry on the Coast?

It certainly looks like the developers here are better capitalised than in earlier cycles. That is probably a result of near death experiences in the past, and also tighter lending restrictions. The stable nature of the town plan also helps – it is very clear what can and can’t be done, so there is less speculation.

The Sunshine Coast Regional Council, overall, and since 2012, has been supportive of what we do, and is pro-business. That doesn’t mean every interaction is efficient or productive but, at its core, this is a Council that understands the economics of local government, and who pays the bills! They also realise that the general public want new unit and housing stock, to match what is being offered nationally and internationally.

What has changed in the last 5 years in the industry here?

Demand and supply have both increased :). We did have a shortage of new residential land a few years ago, and we also lacked migration. Through a variety of public and private sector initiatives and investments, both sides of the ledger have been addressed, meaning our market is very much ‘in balance’.

We have more recently seen a lot more Brisbane and interstate developers and builders coming to the Coast. This is not a bad thing – competition is the best thing for any business. It makes you work harder, be better at what you do and be more customer-centric.

Overseas investment appears to be here to stay in the Sydney and Melbourne markets. Do you see any overseas investors entering the Sunshine Coast market anytime soon? 

I’ve covered developers above, but we are definitely seeing a lot of interstate investors hunting rental yield. There are also owner occupiers coming north to cash in on the affordability we have here. And many are bringing jobs with them, either investing or commuting. Both are great for the Coast.

We haven’t seen many Asian investors yet, but we will, probably in the next cycle. Great returns don’t stay a secret, and nor does a great lifestyle. Put the two together and you have dynamite.

What should investors on the Sunshine Coast watch out for?

The same as everywhere else – paying over the odds for a house and land package and, as Alan Greenspan famously said, ‘irrational exuberance’. If an investment sounds too good to be true, it will be. While our rental vacancy rates have been historically low, supply has increased so rental returns will moderate.

I would also advise buyers to watch for build quality – as markets tighten, corners are often cut, meaning quality can suffer. Stick with tried and tested builders and developers.

What does the next five years look like here on the Sunshine Coast?

The economic plan and infrastructure investments that the Coast has will start showing real benefits in 2018 through to 2020. While inward migration is starting and employment looks ok, our ageing infrastructure has become a real turnoff to tourists and families wanting to relocate. It is cumbersome to get around, we have fewer high quality attractions and places to stay. There are many projects underway or close to starting that will address this – the airport, the Bruce Highway upgrade, hopefully some rail projects, the redevelopment of Sunshine Plaza, some new hotels in Mooloolaba, hopefully the new five star hotel at Yaroomba and many, many more. I also love the expansion work underway at Aussie World and hope the water park on Steve Irwin Way also goes ahead. I’m also hopeful for some inward investment in both Caloundra and Nambour, and for the medical industry to really explode around the new Kawana Hospital.

As a result, I think we will see a fair to strong housing market for the next 18 months. Despite regulators putting the handbrake on lending, there is still demand for good product, and prices here are very affordable. We want to see activity rather than large price growth. There is a surge in renovations all over the Coast, and that means that investors think some properties are below replacement cost. The gap in valuation will be filled by the renovators, and this will then encourage more new builds.

So, if I look ahead five years I see a more modern, functional and confident Sunshine Coast. One where we happily provide world class facilities to local, national and international tourists. One where people come for careers, and not just to retire. And finally, one where some of the most successful companies in Australia are located.

Where will Highgate Developments be in five years?

For the next couple of years we are focussing on our great developments in Nambour / Burnside, and Mooloolah Valley. Both towns have tremendous upsides and are under-appreciated (they won’t be in five years I can tell you). The lifestyle opportunities and laid back living on offer are now being matched by services and things to do. Add to that affordability and we think we have a recipe for success in these areas.

Beyond that we do want to expand our building business, assuming capital is available. We truly believe that the ‘one-stop-shop’ opportunity of being the developer and builder is perfect for customers – simple, accountable and cost effective. But it takes a lot of effort, and we aren’t resourced up at the moment for that.

I suppose the main risk to all this is the macroeconomic cycle. We watch this closely and don’t take too many risks.

What do you get on your soap box about?

Lots of things! I’m pretty passionate, and always want to improve everything – ask my wife!

But in business, I am obsessed about creating an environment that allows people who work hard and smart to be successful. I see lots of people who just give up because there are too many impediments, many unnecessary. Small business employs a massive proportion of the people of SE Qld, but business is still often seen as the bad guys. The bad guys, if there is such a thing, in my mind anyway, are the regulators who want to control every possible transaction or situation for the benefit of the 0.1% of people who might be adversely affected. That is completely the opposite of what I want to see – incentive, encouragement and opportunity, with appropriate ‘insurances’ for the downside.

I am also a passionate supporter of Nambour.  There are so many positives there but it is in a bit of a fight against itself. Its people need to be more confident and sing its praises. Governments, state and local, need to support it too, with investment (eg Burnside – Highworth road link, increasing capacity at the hospital again, retaining Council HQ in the town and possibly creating another Bruce Highway entrance to the town).

Having said all that, I am a massive optimist. Every day I get up wanting to make a difference, to achieve things and to contribute positively. In spite of the annoyances, every day is a challenge to be overcome. This is a great place to live, with lots of commercial opportunities. We need to take them.

October 2017