Entrepreneur (Builder) – Meriton Group
‘I only like to be involved when there are problems. When there are problems, I come with an instant solution – and it’s always wrong, but it doesn’t matter. I get all the people around me and I make them all think at once with me and I promise you, our solution is always the best.’
How a child born in China in 1933 and who spent his early childhood in a Russian community south of Beijing ends up as an Australian property legend makes for an interesting story. Trained as a textile engineer, Harry came to Australia in 1948and drove taxis and owned a milk run before building his first block of apartments and establishing Meriton in 1963 at the age of thirty. A rare individual, the founder and managing director of the Meriton Group of companies has been responsible for the construction of almost fifty-five thousand residential dwellings in Australia.
Interview
BRETT KELLY: Is there a driving idea or a particular person or event that’s had a significant impact on your life?
HARRY TRIGUBOFF: When I came to Australia I was a textile engineer, but I couldn’t see any future in it. And that was right. I don’t think anybody made much out of it. So I was looking for different things, I was trying all kinds of things when a friend of mine told me that his father had spoken to the boss of Stockton Holdings.
The old fellow told him that his son should become a builder. So he came to me and he said, ‘What do you think of building apartments?’ I said, ‘Terrific idea.’I was already selling a bit of real estate so I knew a bit. I went and bought my first site and I made more money on that site proportionally than I have ever made again. I knew that was where I had to be.
BK: Excellent. So, is there a saying that really sums up your approach to life or a quote or a motto?
HT: I only like to be involved when there are problems. When there are problems, I come with an instant solution – and it’s always wrong, but it doesn’t matter.I get all the people around me and I make them all think at once with me and I promise you, our solution is always the best.
BK: As a group.
HT: That’s it. That’s how you do it.
BK: Excellent. I think everyone’s read enough about you not to labour the details of your history, but you’ve bought this block of land. you’re not a builder. you don’t have any experience or university qualifications but you now have this block of land. How much debt did you have and how concerned were you about the prospect of your first project?
HT: Right. I went into it because I knew that there was a big demand. Believe me, that demand has never changed from the day I started which is fifty years ago. So that’s the main thing, there’s a demand. You have to have demand. I went to the bank manager in the ANZ and I was lucky. They were training him for big things.His name was Rex Davidson. If you ask anybody in the ANZ bank, nobody had ever heard of him but he ran the bank. And he liked horses. So he told me, ‘I’ll lend you the money, Harry. And when you reach the roof, I’ll come with you. I’ll tell you if you are a builder or you aren’t. And if you are, I’ll give you more money.Then, it doesn’t matter. But that’s when I’ll decide.’ So I waited until I got to the roof. I called him and he had a look, this way and that. He said, ‘Yeah, Harry, you’re a builder. Now I’ll give you any amount of money you like.’ He became the chief lending officer at the ANZ bank. I don’t know if there’s such a title anymore, but that’s what he was.
BK: Did you stay with him for a long time?
HT: For quite a while, but of course, they sent him to Melbourne because that’s the head office. And then, I used to go to him in Melbourne, spend half an hour with him, he’d give me another loan, and I’d come back.
BK: And off you’d go again. you make it sound so simple. Did you hire builders, subcontractors?
HT: I took a foreman. I was lucky he was always drunk. In those days, bricklayers were very hard to get. Then, this young bricklayer came to me, a Scotsman.He was a nice fellow. You see, in Scotland, the bricklayer is the chief contractor.In Australia, it’s the carpenter. So, he was teaching me what to do. Every night he would tell me what materials we needed the next day and I’d get them. He’d use them that next day, and that way, I learned very well. I had no other job and nothing else, so I stayed all the time on that site. I was so dirty, worse than all of them. I was dusty and all, but I learned how to work. After that, of course, I started two or three more jobs at once, but I knew from the beginning – I never started the second job until I’d finished the first. So I got to know the whole process, how to get in and how to get out. And that bricklayer stayed with me until he retired.Now, his son works for me, another son worked for me. They’ve been with me ever since.
BK: Often, as people make money in one thing, they assume that they’re brilliant at everything and get involved in other activities. We’ve seen a lot of people not do so well when they do that. you mentioned that you stayed on the site all the time and, as I understand, in the last fifty years you’ve pretty much stuck to just building residential apartments.
HT: I think being clever is very good, but you must like what you do. It’s impossible to like everything so, if you find one thing that you like, stick to it. And until you find that thing, keep looking. Because the main thing is, you have to like what you do and then the rest will come by itself.
BK: When you started that project, did you intend having your own business and not work in someone else’s?
HT: Yes, I wanted to be by myself. I tried to be a public company. It lasted a few months. That was not my cup of tea. I sold the shares for 50 cents. I bought them back for $1.20. Everybody was happy. No problems. Because I was in love with the company, how could I sell it?
BK: Was it love at first sight in the property industry?
HT: Yes. I liked it. That’s very important because if you like it, people in the business will like you and they will probably work better than if there wasn’t that relationship. It’s very important.
‘It’s impossible to like everything so, if you find one thing that you like, stick to it. And until you find that thing, keep looking.Because the main thing is, you have to like what you do and then the rest will come by itself.’
BK: So, even now as you build seemingly bigger, better, best, you get on top of the project, you’re still there very often?
HT: Yes. Every morning, I’m there. I mean, I go a bit later, now, of course.
BK: A bit later than you did. So today, what does the typical Harry Triguboff day look like? Is there one?
HT: Yes. Every day is similar. I get up. I read the paper. When I’ve finished reading the paper, I take my medicines, I go for a walk. Every day, I go for a walk. Go for a walk, have my breakfast with my dog. Then I go to work. I go around the jobs then I work in the office. I get to work at 11 o’clock or 11.30 but then I stay until 6 to 7 o’clock. I work enough hours. So that’s every day.
BK: That’s the day. Excellent. What do you think are the most critical issues facing Australian business right now and certainly your business?
HT: Well, we are very lucky that China adores us. I like my business; they like this country. It’s not only a matter of money. They like it. So that’s good. They help us.But of course, this is still not their home. Their home is China. And even though we are very successful in selling to so many Chinese now, I am always fighting to get Australians into the market. The market is good when the local people are in it and believing it and supporting it. And that’s what I want.
That is why I’m always fighting the Reserve Bank – its interest rates make it impossible for people to buy. The governor knows it, but it’s not his fault. It’s the whole group of them that run that place. He will leave and another will come.It will always be the same. It will never change. So, there’s this one problem that we have. It’s that we must get those interest rates down.
The other thing is that people have lots of money in super, but they have no money in the bank. And the super funds are not built to help people buy property, so they can’t afford to buy property, which they should buy. Instead, the super funds spend money on shares and other things. So, I want that to be changed.
The third big problem here is that politicians run the place. It’s very hard to be a politician and run it. A politician wants to be popular with everyone. Well, it’s OK to be popular, but there’s very little you can do because you want this, he wants that. What does he do? No good. So, more power has to be given to the doers, to the mechanics. And laws have to be made so that they get the power.The politicians must be prepared to let go of the power so that they can do it. For instance, it’s much easier to work in Queensland than it is in New South Wales.I think that we have sent ten different ministers from here to Queensland to see how they do it.
BK: There is a lot of talk about immigration. What is your view on immigration?
HT: Well, we are a huge country and we need a lot of people. Unfortunately, our philosophy is very much entwined with what they do in Europe and America and everywhere else. This is different. We are a huge country and you cannot run it with no people. I will give you an example. You talk about mining. If you go to Lake Eyre, you will see that there are no roads. There are no railways. There is nothing there. You cannot develop if you don’t have facilities, so we must develop facilities. We won’t develop them unless we have people. We cannot do enough unless we have people. People must come. We need them and it is good that we can pick everybody who wants to come here. But it is no good picking them if they understand cricket or they understand something else. They must be useful.They must be workers. So unless we bring them, it is no good. Of course, for housing, they all believe in housing and they all need housing so it is terrific.
BK: Harry, you have the tallest project in Sydney, the tallest project currently in Brisbane and you’re about to lose the crown to yourself again. Are you competing with someone else or is it an approach?
HT: Always with myself. I don’t compete with others. Others do not exist for me.I do not worry about it. I never diversified. I do not need to diversify. I stick to what I like and I know what I can do. I know what the country needs and what the people want. So I don’t compete with anyone and they cannot compete with me because unfortunately, when they go to a certain site, they become public companies and in public companies, they tell them to diversify. So he might have been good at doing what I’m doing, but suddenly he starts doing ten other things of which probably eight are no good. No competition.
BK: Having had the success that you’ve had, it is understandable that you have that confidence now, but did you always have it?
HT: Probably, always. Yes, no problem. It’s very important, very important. All of you must have confidence when you go to a bank. If you don’t have confidence, then the bank gets more scared than you are. So always be confident. Now, when you work with the bank, you must make them your partner. They must know everything. Give them all the problems, let them work for it, and then when they know your business, they are your friend. But if you run away from them, you’re gone. Absolutely.
‘The market is good when the local people are in it and believing it and supporting it. And that’s what I want.’
BK: Is there anyone that’s really inspired you, whether it was your parents or a friend, someone else in business or society generally?
HT: Well, I look at successful people and I see some of them are still older than I am, they are the ones that give me confidence. If they can do it, I can do it.
BK: The legendary American investor, Warren Buffett, says that he doesn’t believe in diversification. He believes that concentration leads to concentration. So you share that view? In terms of your business, I read an article that mentioned many of your managers provide one-page summaries of their projects or business plans or current status of their project. I was intrigued by that. Can you explain that to me?
HT: Every weekend I take home a pile of papers that I think is very important and I go through them. Some things I don’t understand and some things I don’t agree with, so I make notes. Then, the next week, they fix them, and I look at it again and so on. I continue looking all the time. Now, the page that you’re talking about, that’s different. When I first started, I had one page. Now, I have six pages.That is all I have and that summarises all the movements I have to know.
BK: And what’s in the six pages?
HT: It says how many units we have for sale, how many we have got deposits on, how many we have exchanged, how many units we are leasing, how many units are up to the roof, how many units are started, and how much empty land I have.That is all. Money doesn’t come into it. It’s nothing to do with the money.
BK: I’ve also read that you were very advantaged during the global financial crisis and subsequently because you have little or no need for debt. Can you talk to us about that? you talked about the bank being your friend – it doesn’t sound like you need a friend at the bank anymore.
HT: No, no. They need me. I give them money! Best friend. Even easier.
BK: So now you are a good depositor.
HT: Very good.
BK: There is a lot of talk now globally around suitable levels of gearing on all sorts of assets and projects. What do you think is a suitable level of gearing on the types of projects that you run?
HT: It depends. When you start, you need the bank because you cannot start without the bank 100%. So you get from them whatever you can. You should always pay them back because then they will give you more. You pay them back, they give you more. But then when you reach a certain size, you must decide what you want to do. Do you want to work for them or do you want to work for you? That is when you start getting less into debt. Debt means that you will not grow as fast as you could, agreed? But then, it gives you peace of mind because sometimes, when you are over-extended, it is very difficult.
The banks have a very short memory and that is worldwide. It is not only here. We learn from the others, actually. That is what they do. When there is a boom, when things are easy, banks compete with each other. They want to give you more money than you need and you grow very quickly. Then you are in a big hurry and you grow as fast as you can and they give you more than you have asked for from them. Then if something happens – and in today’s world, it is nothing even to do with Australia, maybe. Greece, I don’t know. Something that is nothing to do with us. Then suddenly a new face appears at the bank and says you owe them money. Seeing that that could always happen to you, you should always be well secured. You should give him not as little as possible, but as much as possible so that everybody is happy. The bank manager deals with you in the beginning but it is not necessarily the bank manager who finishes with you. So these are the things of life. But to start, you need them, grab as much as you can, pay them as quickly as you can and then be comfortable.
BK: Now, Harry, I know that you’ve got some great cars – when is the right time to buy your first Bentley?
HT: Well, first of all, you must be able to pay cash for it because the moment you take it out, it is not worth half of what you paid, you must understand that.Money must not matter to you. I used to have beautiful American cars when I first started. Oh, yes. It is really a nice one. Drive around the Cross in this car, beautiful, very nice. But we didn’t get a Bentley, we went for American cars. I had every type of big American car there was and then I went for Mercedes, but they are a bit dull, you must admit. Good car, but dull. Bentley is a very nice car. I love them, you know. You sit up there and look down on everything. Of course, SUVs now have taken that away, but before that, very nice.
BK: You’re the man.
HT: That is how you do it.
BK: Very good. What is the best and worst client, customer or supplier lesson that you’ve had?
HT: Best time, right. So things were very tough in 1973. Citibank came into Australia. They were going to make a lot of money. Then, in 1974, they decided that I was broke. I proved to them I was not broke. They were convinced I was.I paid them all the money back and around 1975, I think it was, they gave me a cheque for two million dollars because they never believed I would pay them back. So what did they do? They thought that they could stop me from building, but they couldn’t. Because I started the buildings on my money I told them,‘Right, it is mortgaged to you, take this half-finished building.’ So then they started pleading with me not to do it to them. I said I will do it to you because that is the way I will pay you back. I had a list in my office and every day I showed them how I diminished the debt. Every day I diminished the debt, every day. I built one, I sold two. I built one, I sold two. Every day. They were so happy. That was the best relationship I’ve ever had.
‘I don’t compete with others. Others do not exist for me.I do not worry about it. I never diversified.’
BK: Fantastic, what’s the worst?
HT: The worst one I had was with a subcontractor. He was a nice boy, but he was a bit crazy. Now, I have my way of paying. He disagreed with the way I paid him so he came into my room with a gun wrapped up in a piece of paper. It was lucky that the girl who was with me saw him and she started screaming. I had my other fellow there and he grabbed him and took away the gun. His father came to me and he told me that the boy was not right in the mind. He was a good worker, but that was bad – whenever you get a subcontractor, you must be careful.
BK: Alright, talk to us about taxation. What is your view on tax, how has it affected you and how much do you like it. Do you enjoy paying it?
HT: Well, taxation is like this. Tax used to be easy once upon a time. We used to buy loss companies, we used to go into mining. We did all kinds of things, it was very simple. Then they decided to get tough with us and all these big ideas disappeared. As they disappeared, suddenly I owed money to the Tax Department. I think I owed the most money in the country at that time. So they came to me and said, ‘You owe us money.’ Very good. ‘How much money?’I asked and they told me. ‘Bull, it’s not that much,’ I said. So we worked it out and we reduced it.
I learned one thing: I shouldn’t assume that I will not pay tax because those days are gone. There were big companies who disagreed with me and they did not pay the tax and they are still fighting them thirty years later, but I paid the tax after we agreed on the price and I became the best friend of the Taxation Department, best friend.
Since then I pay them tax, but what I do is I keep lots of my properties. If you keep the properties in this country and the capital gain is there you don’t pay tax, which is beautiful. You only pay tax on the rent. You don’t pay all the tax on rent either because you have depreciation. That is the beauty of my business. I build the property, I’ve already made the profit, and I don’t pay tax because I keep it.Then I lease it and I don’t pay all the tax on the rent because of depreciation, so I pay very little tax. I do pay tax though on the ones I sell, alright.
So what we do in my case is I buy a lot of empty land because I think I can get a very good floor to space ratio on the land. The government realises at last how important it is to have housing, so if you can explain to them that what you say is right and what they say is wrong, then you make even more money on that. In the meantime, you keep the land and of course it doesn’t bring an income, so that’s again how you avoid, in my case, taxes. It’s all legal, that’s how you do it.
BK: It’s very interesting. There’s a great book that some French academics published on billionaires. They studied thirty-two billionaires and how they became billionaires. They said that there was a great wealth-driving event at one point and one of the ones that they have demonstrated was that tax is a huge driver. Obviously, if you can minimise paying 30%+ tax, the cumulative effect of that over a long period of time – certainly over fifty years– is enormous. Is there one thing that you think that anyone who wants to succeed in business should definitely not forget?
HT: Well, the bigger you become, the harder you work, so if you think that by being bigger you will be able to relax, you’re wrong. So decide now if you are prepared to work hard. If you aren’t, don’t bother.
BK: Do you still sign all the cheques? I did hear that rumour.
HT: No.
BK: How hands-on are you in the business?
HT: Very hands-on. As much as times allows it.
BK: What about the role of your family and spouse in terms of growing this business? How much of an impact does a business that size have on you and your family?
HT: Well, the first two wives, they didn’t take much interest. Two daughters, not much interest. Our grandchildren – one, the big granddaughter takes an interest.The other three are still too young, so there is still hope. I hope I will change the daughters first. But, you know, to change them also requires a lot of work from me. It is one thing to make money, it’s another thing to make what I do attractive to them. So far I haven’t succeeded. But I keep trying.
BK: Now, you are over fifty, what are your future plans? What are your personal future plans? What are your plans for Meriton?
HT: I will keep on doing the same thing. I think I still have a few years left. You know, build seventy storeys now, eighty storeys, maybe build a hundred.
BK: How high can you get?
HT: As high as the councils approve. They sometimes change their minds. The problem with building tall buildings is it’s not the best way to make money. You see, when you spread the building over lower levels, say ten floors, twelve, fifteen floors, you can build many at once. When you build one tall one like that, you are limited because you can only build in that little space, so therefore it takes a long time. But we are making changes so that we can make it more quickly.
BK: OK, now explain the changes to how large property developments are approved in New South Wales. Can you talk to us about that and also what happened up at Warriewood?
HT: Well, after many years, the Labor government and the state government, understood that councils would not approve large property developments. And if they did approve, it would be in such a way as to make sure that the developer would go broke. That is even worse because the developer puts his last money in, the bank gives him the money and the rest is history.
So then they decided that the state government would approve big projects.That was going very well, but O’Farrell decided that he would say that the councils should get back the power. Of course, he wanted to control them so he said he was thinking of cottages. You see, where you get approvals and cottages, nobody protests. Everybody is very happy because the councils don’t have any money so they approve anything, very easy. What they overlooked is that people don’t want to live where we can build cottages. Cottages were built in the wrong place. I said we should renovate, rebuild, fix the old cottages. We have so many thousands of them, hundreds of them, millions of them, just fix them. Big job.Don’t worry about new ones, just fix them. But now we have the problem. What will happen when the councils regain their power? I hope that we will learn how to contain that power, but at this stage it’s not sure yet how it will happen. So we might have even less production than before. Even though you can produce cottages, which nobody wants, it will be difficult to get approvals for apartments, which everybody wants.
Now, what happened in Warriewood was I bought some land and they wouldn’t approve what I thought they should approve. It had nothing to do with their code so I went to Sartor. He was the minister and he said, ‘I can’t do anything with these guys because they control the upper house.’ McTaggart was a member, he was an independent. Anyway, they got re-elected and now, McTaggart is gone, Labor is controlled and we come up with the same plans, which were approved by the Department of Planning but not by Sartor. They saw the plans again and they said, ‘We’ll approve it.’ I got the approval.
So then the mayor of Pittwater, which is Warriewood, decided he was going to go against us. It was a very interesting case. I had the planning department on my side and the council. Normally it is the developer who is objecting. I love that, you know. It wouldn’t even matter who won, but just that picture. Something I waited fifty years for. I saw the picture. That council on that side, not on this side and now I’m on this side I’m like the council for once. I got approval. It was very dangerous what I did, because in their hearts, the planning department would be on their side not on my side. So since I had the approval, I started building and I built as fast as I could. Then I decided what would the judge do, tell me to pull down the building? Very hard. The council was scared to put an injunction on me because then they would be liable to pay if they were wrong. So, there they are, whingeing over there. Some things are worth seeing in life! They were whingeing and I was building and building and I told them, have a look today, have a look tomorrow. Anyway, thank God the judge decided we were right, 100% right and they have to pay my costs.
BK: What’s your best tip for dealing with council?
HT: The tip with the council is this: they have a code. Now you have to decide whether that code will allow you to make a profit. If it does not allow you to make a profit, then leave the development. That is what I’m talking about.
‘You must build in the right place. It must be convenient …you have to be near the transport, you have to be near the city and you have to be near good schools. If you’ve got those three things, you can’t go wrong.’
BK: If you look back over your projects, some are more successful, some are less successful. Is there a common theme for the ones that go very well?
HT: Yes. You must build in the right place. It must be convenient. That’s the easy thing of dealing with the Chinese. They’re very logical. It’s very easy to understand what they like. They are the main market and they are the ones who will buy from you. So, you have to be near the transport, you have to be near the city and you have to be near good schools. If you’ve got those three things, you can’t go wrong. The next thing is you have to decide on the size of the apartments. If you go to the local agents they will tell you to build mansions. Don’t listen to them.Decide in your mind what you think is the best size. It doesn’t mean it has to be the smallest and it doesn’t mean it has to be the biggest. Usually, if you go for two bedrooms, make them 80 squares, one garage, you can’t go wrong.