It's all about the sub-$500,000 sales: Evolve and Ron Walker's off-the-plan development strategy

It’s hard to separate Ron Walker from Melbourne, politics, big business and money. Walker was lord mayor of Melbourne (1974-1976), federal Liberal Party Treasurer (1988-2003), Fairfax Media chairman (2005-2009), and he’s still a successful company executive.

Since starting his business career as a backyard chemical maker more than 50 years ago, Walker has amassed a personal fortune of $800 million, according toBRW magazine’s Rich List.

“Are you worth $800 million?” I ask in this interview.

Walker: “I’m not prepared to discuss my own personal finances with anybody. Why should I? It’s my private business.”

Does he dispute the BRW Rich List figure?

Walker: “I don’t really care what BRW says [I’m worth]. When the magazine comes out, I don’t say anything. I don’t even read it. But I think BRW do a lot of research as to what business people are doing or not doing.”

Walker also counters persistent speculation that a syndicate led by him wants to wants buy The Age newspaper.

“I don’t want it now; I’m getting too old to own The Age,” the 73-year-old says, despite the continuing rumors. “Time has passed me by. And they [the Fairfax Media board] would want too much money for it. You would have to join it with 3AW (already owned by Fairfax) to make it work in this digital age.”

Walker says he and his then partners Lloyd Williams and Sir Rod Carnegie, as part of property development group Hudson Conway, offered to buy The Age more than two decades when Fairfax was in receivership. “But the receiver wanted too much money for it so we walked away,” he says.

Today, Walker says the Fairfax Media “rivers of gold” aren’t there anymore to tempt him.

“I don’t have the years left to turn it around and make it profitable,” he says. “But I’m sure there’s plenty of other people capable of regaining revenue in terms of advertising.

“I have other interests,” he says, referring mostly to property development. In a wide-ranging discussion with LeadingCompany, Walker reveals the secrets to his success.

Along with partner Ashley Williams (no relation to Lloyd Williams), Walker owns Evolve Development, a Melbourne-based company with about 8000 blocks of land and a $1 billion book of apartment construction.

Walker says a secret to his business success has been forming good partnerships. He describes Lloyd Williams as a brilliant strategist, who brought built-in experience and “rat cunning” to a partnership that lasted more than two decades until 1999.

Today’s partner Ashley Williams, a civil engineer prior to founding Evolve in 2003, had been involved in a string of major projects, including Melbourne City Link and the $1 billion New Quay precinct at Melbourne Docklands.

“Ashley came to me about 10 years ago with a vision to become a dominant builder and landowner and I backed him all the way,” Walker says. “Ashley has 14 young men and women upstairs (at the Albert Road offices) that are all trained and qualified.

“The secret of our business is to keep our young people invigorated. All their views are taken into consideration – it’s just not lip service. We actually listen to what people have to say. I think it’s terribly important to promote the young person of the future.”

Walker says Evolve focuses on building apartments for a sale price of between $300,000 and $500,000. An apartment block includes community gymnasiums and other recreational facilities.

“We don’t want to be in the $1 million-to-$3 million price bracket – that’s a different market,” he says. “We want to cater for the young, transient population.

“We do a lot of research as to what people want and it’s one, two and three bedroom apartments that have all the electronic gadgetry, a kitchen, a laundry and a lift to bring up the bike. They also want car parking.

“I think when people are maturing and finding their way in life, they want to be near the action. So we make sure our developments are close to public transport and recreational facilities that people can walk to, such as the MCG.

“I don’t think young people want to spend time mowing lawns, and a lot don’t want backyards. They will eventually get married and move to a property with a backyard.”
Walker says Evolve sells about 80% of apartments off the plan – “before the first brick goes into the ground”.

“We are terribly risk averse and we don’t want the market to dictate the fortunes of our company,” he says. “I’ve been around for decades and I understand the frailty of the property market and how quickly it can turn.”

Property developers, perhaps by the very nature of the industry, are renowned for going broke. Walker says property developers invariably fail because they are greedy, borrow too much and can’t read the market.

“In business and property development, you need to take a modicum of risk, but you don’t need to make a large bet,” Walker says.

“It’s not worth it. We don’t want to be the biggest in town, or the smallest in town, but we want to stay alive. Businesses go broke because the managers lack the entrepreneurial flair and marketing skills to enable it to survive.”

Walker says the banks are “just as guilty as the borrower” when making loans to meet their short-term budgets, but “know inside” some can’t be repaid.

It was in property development that Walker made his fortune. The formerly ASX-listed Hudson Conway is probably best known for building Crown Casino in the 1990s before the Packer family’s Publishing and Broadcasting Ltd (PBL) took over the casino in 1999. Walker would later sell shares he held in PBL at close to the top of the market for a reputed $80 million, a figure he won’t confirm.

In the 1980s, Hudson Conway was contracted to build a sprawling new head office at Tooronga for the then ASX-listed Coles Myer company.

But bigger and better was to follow when Hudson Conway became the second biggest property owner in England after buying 5500 Courage pubs in partnership with Elders IXL for about £2.3 billion.

To reduce risk, all the English hotels were underpinned by tenants, providing income for business costs.

“A lot of people in the property industry don’t bother about risk – that’s not the way we operated then or now,” Walker says.

Evolve will lodge a submission to build a superstructure over the Jolimont rail yards when the Victorian Government calls for tenders. Evolve will partner industry superannuation fund Cbus and will tender to build a deck over the rail yards, accompanied by an entertainment precinct.

Walker expects the successful bidder for the $1 billion-plus project will be announced next year. He says it’s time to “develop the dream” that has been espoused by every Victorian Premier dating back to Sir Henry Bolte (1955-1972). Walker’s dream includes a hotel, offices, apartments and an art gallery.

“I envisage our building will be a minimum of 70 floors, but that will be a lot less than other superstructures,” he says.

Walker wanted to build the project during John Cain’s reign (from 1982 to 1990), but the former Premier couldn’t deliver the rail yards because of ownership complications; now an opportunity exists for a rail yards development.

“We’re confident it will happen, whether it be Evolve, Lend Lease, Leighton Holdings – somebody will do it this time,” he says.

But Walker is far less confident that Evolve will be the successful bidder. “No, I’m not confident about anything because it’s a tender process,” he says. “Each design will be different.”

Leaders must be willing to make mistakes

 Top leaders share their ideas and aspirations with key staff, Walker says. They have the courage to make a decision and stick to it, but it’s also the quality of the decision. They must have weighed up the likely consequences, but they can deal with the unexpected out of left field. Good leaders guard against complacency.

“A lot of leaders won’t make a decision because they’re afraid to be seen making a mistake,” he says. “And, therefore, they shouldn’t be in a leadership position – rather they should be a follower. Invariably good leaders inspire others to follow.”

He says leaders shouldn’t get carried away with their own success. If they let their guard down, competitors will take advantage.

“Napoleon was a great leader for a number of years, but because of his success, he lost his way,” he says.

Walker considers engineer turned executive and board director Sir Arvi Parbo and G.J. Coles, the founder of what would become supermarket Coles, as among Australia’s best-ever leaders. Sir Arvi because, “as an immigrant, he came to Australia with nothing, got his hands dirty (in mining) and went on to become chairman of BHP”.

“And G.J. Coles was just a standout in developing a retail empire,” he says.

Walker says successful leaders grow businesses through astute investing and a careful watch on the finances. They study trends, such as consumer spending, and financially track what’s happening around the world.

Walker on Fairfax and the media

On December 17, Fairfax Media announced it would sell its remaining 51% stake in TradeMe for a reported $616 million.

As a former Fairfax Media chairman, Walker keeps a close eye on the rapidly changing media landscape. He says downsizing Fairfax mastheads, The Age andSydney Morning Herald, from broadsheet to tabloid next year won’t take readership from the Herald Sun because they are aimed at a different market.

Walker says the Internet won’t kill newspapers, but printed editions of Fairfax papers may be reduced from seven days to two, three or four days, perhaps Thursday-to-Sunday, to cut costs. The Fairfax board will continue to assess print performance after the pay-for-content model is introduced next year.

“I think there will always be some form of newspaper that people can shuffle around on a Saturday morning,” he says. “But I also think Fairfax Media will eventually be broken up, so shareholders get more value than a price languishing at 45 cents.” Fairfax shares closed at 45.5 cents on December 10.

Walker says his strategy at Fairfax was to broaden the revenue base through online offerings, such as the recently sold TradeMe, dating site RSVP and a “host of other internet services”. He says News Corporation founder Rupert Murdoch’s strategy to diversify out of newspapers years ago and establish cable television opened the company’s to multiple revenue and profit streams.

“Seventy-five per cent of Murdoch’s profits come from assets outside the newspaper business,” he says. “Even though I was no longer chairman, I screamed when Fairfax Media recently sold down Trade Me (to 51 per cent) to pay staff redundancies, or reduce debt (Walker was speaking before Saturday’s sale of the remainder of Trade Me).

“It was one of their key profitable assets.”

He believes mining magnate Gina Rinehart, as a substantial Fairfax Media shareholder, is entitled to board representation without having to sign up to a charter of editorial independence.

“I didn’t sign up and I never interfered with editorial control,” he says. “I think if she pledges her support for the journalists, the same as I did, then there’s no difference between her and me.”

Why the loss-making grand prix is great for Melbourne

Walker says 2013 will mark the 60th year since grand prix motor racing was first held at Albert Park. “And that’s a cause for celebration,” he says as chairman of the Australian Grand Prix Corporation.

He is also the public defender of an event that loses more than $50 million a year. But he argues the Formula 1 Grand Prix generates more than $140 million for the Victorian economy and provides a rare opportunity to advertise Melbourne to the rest of the world.

Walker says the Grand Prix attracts 25,000 overseas visitors, who along with interstate guests fill 80,000 hotel rooms, shop at exclusive boutiques and eat at fancy restaurants.

“More particularly, it’s the only free-to-air sports event in Australia that broadcasts direct to more than 400 million people across the globe,” he says.
Walker says $28 million, of the $54 million State Government subsidy, is spent on setting up and removing the infrastructure around Albert Park.

“Now if the race was held at Bob Jane’s Calder Park, you wouldn’t have the infrastructure costs,” he says. “But there’s no point in doing that because you wouldn’t be advertising the city, you would be advertising tree tops and that’s not what we do it for.”

He loves Melbourne and has done since starting a business making dishwashing detergents in “my backyard in Collingwood with a couple of 44-gallon drums and a paddle”.

“I love the enthusiasm of Melbourne people to get things done,” he says. “I love their energy, drive, focus and determination.

“I love the spirit of the people, who have a great passion for what they believe in, such as the arts, restaurants, more importantly their sport and their culture.”

Q: What is your favourite source of leadership inspiration and ideas?

A: I’m a great disciple of Robert Menzies and Winston Churchill because of their decision-making skills in the face of adversity. I like to see people prepared to make a decision in life and stick to it. That inspires me more than anything else.

Q: What two elements are critical to achieving change?

A: Listening to others. Making sure change is for the better and not for change’s sake.

Q: What important qualities do you look for in your direct reports?

A: Accuracy from the person writing it. A report should not be about pleasing the reader. It has to be accurate in explaining the facts, so it can be relied upon impeccably for honesty and integrity in the future.

Q: What makes a workforce productive or more productive?

A: An individual’s energy and drive. The ability to lead others in the pursuit of excellence.

Q: What is the one thing a leader should never do or say?

A: That’s up to the individual and how they operate. There’s no blueprint for that answer.

This article originally appeared on LeadingCompany

Anthony Black is a long-standing finance journalist who worked in newspapers for 23 years. He was Sunday Herald Sun finance editor for about eight years and his reports were syndicated in News Limited papers across Australia. Since 2008, he has been a freelance finance writer and a public relations consultant.