To see how Asia’s growing wealth is reshaping the global economy and creating enormous fortunes, consider the rise of Australia’s second-richest man
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Australia’s Harry Triguboff Tackles Property Downturns With Strategic Leasing Solutions
Harry Triguboff has learned how to make money in up and down markets. DEAN HAMMER
To see how Asia’s growing wealth is reshaping the global economy and creating enormous fortunes, consider the rise of Australia’s second-richest man, Harry Triguboff.
The 86-year-old has amassed his fortune by building approximately 10% of the country’s apartments—almost 80,000 dwellings.
His privately held Meriton is Australia’s most prolific homebuilder, earning A$485 million ($332 million) in its latest fiscal year on sales of A$1.8 billion, according to Australian Securities and Investments Commission filings. Triguboff’s ownership of Meriton, where he is managing director, gives him a fortune pegged at $10.7 billion.
*Rising housing prices in key Australian cities—up more than 50% from 2012 to 2017—were driven in part by * strong demand from international investors, many of them from Asia. *
CAAN: 2012 happens to coincide with the Liberal O’Farrell Government ‘A Plan for Growing Sydney’ with higher density! It all tied in with the FIRB ruling allowing deve-lopers to sell 100% of ‘new homes’ to foreign buyers …
A PLAN FOR GROWING SYDNEY: 2014
NSW GOVERNMENT UNVEILS PROPOSED NEW PLANNING SYSTEM FOR NSW” 2012
Meriton was an early leader in marketing Australian property to these buyers, with nearly 20% of its sales coming from nonresident Asian buyers. “They like to buy the best they can afford, where they can afford,” says Triguboff of his customers from mainland China. “So that means new. They will pay more for brand new, always. They like brand new buildings.”
Restrictions by Beijing and Canberra were meant to crimp demand. In 2015, on concerns that international demand was making home prices unaffordable for its citizens, the Australian government limited nonresident investors to purchasing newly built properties, vacant land or residences still on the drawing board, or “off-plan.”
CAAN: Those ‘restrictions’ were readily bypassed through a Temporary Visa whereby holders were able to buy an established home while residing in NSW to then demolish the property and build ‘a new home’ with the benefit of gaining a ‘Permanent Resident Visa’!
International buyers face other restrictions: approval from the Foreign Investment Review Board for their purchase; up to 40% deposit on purchase prices before banks will give a mortgage; and various fees, taxes and stamp duties.Today In: Asia
CAAN: Sydney and Melbourne … much of Australian residential property has been highly sought after by the Ultra High Net Worth and High Net Worth from China and Hong Kong … the fees, taxes and stamp duties mean little to these people …
Despite the barriers, Australian property remains attractive to international buyers, particularly from China, who want to safely park funds offshore in an appreciating asset.
Wealthy Chinese can also take advantage of Australia’s investor visa schemes, a pathway to permanent residency for those willing to bankroll Australian-based enterprises.
The Significant Investor Visa, requiring an investment of A$5 million (not including real estate), has been granted 2,022 times since the scheme’s inception in 2012, with 87% of recipients being mainland Chinese, according to Australia’s Department of Home Affairs.
In 2017, international buyers—77% of them from China—bought a quarter of the new housing stock in New South Wales, the state in which Sydney is located and where Meriton is most active, according to Credit Suisse.
CAAN: The author appears to have omitted referencing the large number of Visas that allow residential property purchase including a number of Investor Visas, Student, PhD Student, Family, Parent, Grandparent, Guardian (where a child as young as 6 and their Guardian can buy several new homes each or one established home each).
Purchases from Chinese investors have declined more recently as Australian regulators increased taxes and stamp duty on foreign buyers, more than doubling surcharges in some instances. Simultaneously, the Chinese government introduced stricter capital controls to reduce renminbi outflows.
CAAN: Purchases from Chinese Investors declined during 2018 due to China’s Capital Controls … however recently in 2019 China eased these capital controls!
But Triguboff says that no matter how difficult Beijing or Canberra make it, Chinese buyers will remain attracted to Australian property. “The Chinese always know how to find the way to overcome anything,” he says. “So even though our banks may not give them much money, and maybe their government doesn’t let them take much money [out of China], they usually find a way to invest.”
CAAN: The Morrison Government exempted the Real Estate Gatekeepers from the Anti-Money Laundering Rules (Second Tranche) in October 2018 which allows the onshore PROXY to launder black money on behalf of the foreign buyer … in Australian Real Estate …
Triguboff does well even in rare downturns in Australian property, such as now, due to a leasing strategy that provides profits when demand is weak.
During a similar downturn in the 1970s, Triguboff offset lower sales for Meriton’s new apartments by keeping some of its dwellings and renting them out rather than selling them.
To this day, Meriton retains ownership of slightly more than a tenth of the dwellings it builds, a roughly A$3 billion portfolio of properties that makes Meriton Australia’s biggest landlord.
So when property prices rise, so does Triguboff’s net worth; when the market is volatile, his rental income is the backstop. “Leasing is a huge area for us and one where we are growing,” he says.
Meriton’s yield income is helped by its strategy to build projects in suburbs close to the central business district that command premium rents, according to Michelle Ciesielski, head of residential research at Knight Frank Australia. “This increased rental supply has certainly aided locals wanting to live close to where they work and play,” she says. While other developers have the same strategy, Meriton retains a higher portion of its own units than others for rent, she says.
Triguboff is confident the market will revive soon and prices with it, as bargains lure buyers and banks relax recent restrictions. He’s so confident that Meriton has recommenced construction of several developments that were put on hold amid the uncertainty before Australia’s May elections. Early indications are he may be right: the victorious Liberal Party moved quickly to implement property-boosting measures. And interest-rate cuts by Australia’s central bank earlier this year have already translated into lower mortgage rates.
CAAN: IT is already underway …
HT’S CARTER STREET PRECINCT: SYDNEY OLYMPIC PARK AND THE EMERGENCE OF CHINESE LIVING CENTRES
Meriton was born in 1963 when Triguboff built his first block of apartments—a modest eight units in a working-class Sydney suburb. Though privately held by Triguboff, Meriton’s value is estimated to range from A$10 billion ($7 billion) to A$15 billion—the price Triguboff quoted when mulling a sale of the company in 2015.
Local media dubbed him “High-rise Harry” in the go-go 1980s and 1990s, when he built hundreds of units in high-density developments, most in his hometown Sydney or in Queensland’s Gold Coast. Although the company worked with respected architects such as Harry Seidler, Meriton’s hive-like housing has been criticized as architecturally subpar—former Australian Prime Minister Paul Keating once described such developments as a “disfiguring eczema” afflicting Sydney.
Triguboff has a reputation for being loyal but short-tempered, the latter for which he makes no apology. “You must know how to deal with people,” says Triguboff. “I yell and scream and curse at people, and yet I’m their best friend,” he says. “But my people are very happy with me, and many of them, they’ve worked with me a few generations now. Some, three generations.”
This is one key lesson Triguboff says he is teaching the next generation of the family to assume leadership—grandsons Daniel and Ariel Hendler are heirs apparent. Triguboff’s advice? “Always keep your subcontractors employed and they will be loyal to you,” says Ariel, 26. Daniel, 29, adds another lesson: “Nothing is more valuable than time and to enjoy what you do.” Triguboff says the most important wisdom he has imparted to his grandsons is that “the more money you make, the harder you work, if you want the business to survive and grow.” He adds: “These are hard things to know. They teach you facts in school, but they don’t teach you this.”
Triguboff is a strong advocate of education and much of his philanthropy is focused on schools. In January, he opened the Triguboff Holistic Center for Vocational Training and Entrepreneurship in southern Israel. The center offers job training to the area’s Bedouin residents, particularly women.
Triguboff has also given millions to his alma mater, The Scots College, and supports Sydney’s leading Jewish private school, Moriah College, where he built the Moshe Triguboff Auditorium, named after his father. When Sydney’s Yeshiva schools were in financial difficulty, Triguboff stepped in to buy their properties and lease them back to the schools at a discount.
“I believe that we need good schools,” Triguboff says. “So of course I gravitate to where I went to school, Scots, because I know the kids there, I know the school and I want it to continue progressing.” Yet a greater share of his support has gone to Jewish schools, Triguboff says, because he thinks Jewish Australians should retain their heritage.
CAAN: AS Australia is losing its HERITAGE to overdevelopment … making way for ever more Real Estate Tourists come Permanent Resident Visa Holders …
NOTE: HT’s philanthropy is largely focused on preserving Jewish Heritage in Australia!
Charity begins at home, though. “Of course, I must make sure that I leave money to my offspring,” he says. “You never know what will happen in the end with them. They might fight each other. They might lose everything. So at least, I have to leave them something.”
A telling anecdote about Triguboff: Among the images of the rich and powerful that occupy the walls of his central Sydney office is a framed clipping of the Forbes 2019 Billionaires list, placing Triguboff’s as No. 2 in Australia and No. 156 in the world. Does he put much importance on these rankings? “No, not at all,” quips Harry.