McGrath closes offices, cuts executive pay
Estate agent McGrath is closing offices and enforcing big pay cuts as it tries to avoid redundancies.
McGrath Estate Agents has followed other major corporates in closing some of its company-owned offices, while its executives, board, and management will take major pay cuts to ride out COVID-19.
Although McGrath chief executive officer Geoff Lucas reports the national realtor sold 190 homes worth more than $185m on the eastern seaboard in the past week, the board and management have announced a hiring freeze as well as a substantial reduction in wages.
Both Mr Lucas and the board of directors, including founder and director John McGrath, have agreed to take a 40 per cent pay cut during May, June and July.
All staff employed by McGrath at an annual salary of more than $70,000 will also take a 30 per cent pay cut during May, June and July in response to the pandemic.
Mr Lucas declined to be drawn on the number and location of the company offices he has earmarked for temporary closure.
Mr Lucas could not say whether the pay cuts would continue after July: “The environment is changing so quickly (the three months) is the expectation as we see it at the moment but we are cognisant the situation may change either way.
“We are encouraged by the continual improvement in the lowering of the rate of infection … (but) it’s a dynamic situation we need to keep assessing.”
Mr Lucas said the pay cuts would help mitigate the potential financial impact of COVID-19 on the business, and ensure the company emerges from this crisis with the greatest strength. He is attempting not to make staff redundant but said there may be a small number in future months.
“We did the salary reduction to keep the vast majority of the team together,” Mr Lucas said, adding that it was important to have as many as possible staff on the ground for when the pandemic ends.
Mr Lucas said while some company-owned offices would close, agents worked predominantly remotely.
Asked if McGrath would take up any federal government rent relief assistance, Mr Lucas said he expected to find out this week what the Commonwealth was proposing.
“There may possibly be some rent relief for commercial building tenants from the federal government.”
McGrath also instituted an immediate cessation of all discretionary expenditure and non-essential spending such as marketing expenditure, coupled with a minimisation of capital expenditure. The hiring freeze will remain for some months.
“Given the extraordinary circumstances presented by COVID-19 and uncertainty of our operating environment, the impact on our business at this stage is difficult to predict. As soon as there is greater clarity of the implications on our business, McGrath will provide further updates to the market,” Mr Lucas said.
Mr Lucas added that McGrath had moved quickly to use the latest technology to conduct online auctions and virtual inspections within the required safety guidelines. The company achieved a 31 per cent clearance rate of 212 properties at auction last weekend, with about half of them sold via private treaty.
“The last two weekends has been a good litmus test in terms of illustrating how we can continue to conduct real estate and in many cases multiple bidders participated from the safety of their own homes.”
McGrath’s balance sheet is in a strong position with about $10m in cash and no debt.
More Coverage
Room with a view: Tassie east coast gem hits market
This four-bedroom home near Bicheno on Tasmania’s east coast offers uninterrupted ocean views – and even has a dedicated crayfish cooking station. Price: $4.5 million-plus.
’People who take advantage of negative gearing are not the bad guys’
He’s the former radio DJ turned authority on all things architecture and design. Now, Tim Ross turns his attention to how home ownership became an enduring national obsession.