Harry Triguboff’s shrewd foundations

Harry Triguboff did not reach the top of the BRW Rich List by accident. He applied a series of business strategies and techniques which worked and are just as relevant to today’s business environment.

And I might add, as the managing editor of BRW when the first Rich List was published, I am delighted to be able to explain the Triguboff strategies in the light of his success.

A few weeks ago Harry was showing me over his Mascot apartments and we yarned about how he put the Meriton enterprise together and developed it.

We turned on the camera and so on The Australian Business Review and Business Spectator websites you can listen to Harry explain what happened and the values he brought to the business.

In a strange way Harry Triguboff’s success started in China. His parents were Russian Jews who had fled to China to escape persecution.

The Triguboffs in Harry’s early years were poor but later his father did well. Harry would love to go to the shop and work in the business. Indeed when he was five years old he loved counting money, which in those days in China had very little value. But Triguboff was exposed to business and entrepreneurship at an early age. When he came to Australia in 1948 he was fascinated that most Sydneysiders lived in cottages and yet the rent being charged in those apartments that existed was higher than cottages. Triguboff concluded: “So if cottages were so wonderful why didn’t they attract higher rents?”

Triguboff built his first apartment at Tempe and as he developed more he began to realise there was a clear impediment to the apartment market — banks would not lend to women nor investors. And so he believed if he could overcome this blockage he would be able to fund a lot more apartments. He managed to convince St George Building Society to lend to females and as the market grew he convinced ANZ Bank to embrace the concept. At the same time he was also able to get funding from the banks to fund investors. Those banking deals gave him an incredible advantage in the Sydney marketplace. And right throughout his development he understood that it is one thing to have demand for a product and it is another for your customers to be able to purchase that product. And in the case of apartments it is all about banks providing the credit to buyers.

One of the most important attributes of being successful in today’s business is to establish a strong network of people around you. I believe this is going to be a key executive differentiator in future years. Harry Triguboff had a strong Jewish faith and that was a contributor to his network of relationships. But if you are going to succeed in developing apartments you will also need good sites. And here Harry Triguboff did better than most. While he bemoans the difficulty that all property developers have in gaining permission from councils and city planners, his ability to get planning permits was a competitive advantage. Nevertheless council and regulatory groups substantially increase the cost of housing in Australia.

Many property developers in Australia simply accept that they will have bad relations with their workers and subcontractors. But there was one outstanding property developer in Australia who did not accept the norm — Lend Lease’s Dick Dusseldorp. In the 1950s and 1960s Dusseldorp made sure that he had continuing work for his employees and so their loyalty was to him rather than to the union. Lend Lease’s rivals would retrench the workers if they didn’t have contracts, a situation under which loyalty was therefore to the union. Triguboff followed Dusseldorp’s example and began to make sure that he had sufficient land and development projects to employ his people. With good management they responded to Triguboff, which meant he had nothing like the industrial relations problems that so many of his rivals encountered. And Triguboff made sure that if a contractor to a Meriton site was bankrupted his employees were looked after.

Because he has good relationships with his workforce, Triguboff is able to build apartments at more competitive prices than many of his rivals.

Until recently Triguboff and Meriton confined the business to Sydney, where Triguboff knew the scene and where his workforce was based. More recently he has extended into the Gold Coast and Brisbane but he has not ventured into Melbourne.

But whereas most apartment developers sell their developments and then move onto another one, Triguboff retained apartments, particularly when times were tough. So at the moment he has developed some 70,000 apartments and retained around 6,000.

Understanding the moods of customers goes much further than simply providing finance. Triguboff tries to work out how the moods of customers are changing and so a great many more Meriton apartments are now three bedroom apartments as he seeks to tap into the family market. In determining the changing needs of customers he has been helped by the fact that he rents out 6,000 of his own apartments. This enables him to not only to rent to long-term tenants but to develop a serviced apartments business in opposition to hotels. The advent of Airbnb increased his ability to attract more people to his apartments.

More recently the demand for Australian apartments has been dominated by the Chinese. In China there is a culture to leave apartments empty and that is what has happened in large areas of Melbourne. In Sydney, Triguboff has worked very hard to convince his Chinese customers to rent their apartments and gain income. As a result there has not developed a substantial discount in the “used” apartment market, as has taken place in Melbourne. And although the endless delays caused by councils and regulators have delayed Triguboff’s apartment developments they have resulted in continuing Sydney apartment shortages, which keeps the price high and fosters demand for rental accommodation.

For some time Triguboff has been concerned that banks would tighten their lending to his Chinese buyers, who in recent times have accounted for three quarters of his turnover. At the same time there is more difficulty in getting money out of China. Harry Triguboff is a long-term bull in the Sydney apartment market but, given the strong demand we were seeing late last year, Harry trimmed his apartment portfolio so that he has no debt. That means that in a year or two’s time a large number of the Asian investors who have bought apartments from Meriton on 10 per cent deposits may need help if the banks continue to squeeze. Within reason he will be able to provide some of that help — probably in conjunction with his bankers. And his rental service will produce income on the apartments.

Meriton and Harry Triguboff are anxious not to be saddled with a large portfolio of unsold apartments. The shortage of rental accommodation in Sydney will help in that process. Triguboff early last year toyed with the idea of selling his empire to the Chinese. I will conclude with his words on why the sale did not take place.

“We look upon the Chinese and we think that they’re super clever. I think it’s their system which is super clever, which allows them to be clever. But when they started dealing here I saw that to sell to them the company would take a long time to explain and to answer questions.

“It would take too long and the price of the company was going up anyway, so why hurry? And I like doing what I do and then I didn’t really know what to do with the money.

“I have a grandson and he seems to be okay. And also I promoted many of my staff and they are very good as directors now, so I’m much more confident of the company progressing when I am not there.”