Tim Gurner, a property developer and the co-founder of Urban Inc talks to Ross about how he built his business, and how people of his generation can get into the property market
“When I was buying my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each”
Ross Greenwood: Now, as I told you last night on 60 Minutes, we put together a piece which really looked at the housing crisis up the East Coast of Australia. Now, we know what that’s about. We know that many young people feel as though they’re being locked out of the housing market. We did some calculations, actually, to make the comparison of house prices, wages, interest rates today versus what it was like in 1990, when mortgage rates were 17%.
Lo and behold, guess what we found out? In actual fact, houses are more affordable today than what they were when the rates was 17% back then, notwithstanding the fact that the house prices came down. Because there’s always cycles in markets, and there are times when you can get in, times when you don’t get in. But the problem is maybe today’s generation feels as though it’s entitled to get into the housing markets right now.
Maybe, of course, it’s tough today because the banks are insisting that young people getting into the market need to have, in many cases, a 20% deposit and that’s hard to save. If your house price is, well, even $800,000: that’s $160,000 for a deposit after tax, cash saved up and then on top of that, you have the stamp duty, so it is hard.
Now, for this particular interview, I interviewed a number of people. People who were very much in favor and sympathetic of young people and where they sit right now. I interviewed Harry Triguboff, of course, who has made a fortune, become Australia’s wealthiest man as a result of the building of apartments in Australia, literally; the city that Harry built as we described it as.
But then I also spoke to a bloke called Tim Gurner who is the co-founder of a company called Urban Inc. but is also now the boss of GURNER tm. Now, I got tell you about this company because it’s quite astonishing. Gurner tm has as a pipeline of $3.8 billion in projects under development right now. Now, it generally is in Queensland and also in Melbourne but part of it also in New South Wales. 5700 apartments, 19 buildings under development, think about that. But there are strict criteria about that.
Now, it will be fair to say after last night’s piece that we did, people have not been necessarily that kind or generous to Tim Gurner because he basically said in many cases, younger Australians have not necessarily had the bottle to really try on save as their parents did; and even as he started his business with completely nothing to find himself now as one of the youngest people on the BRW Rich 200. Well, let’s get him on the line and find out exactly how this works. Good day, Tim. How you doing?
Tim Gurner: Good, Ross. How are you?
Ross: Very, well. Thanks for your time as well. Just explain, when you started out your business and your business career, what did you start with?
Tim: I started with absolutely nothing, which has been interesting to see some of the changes . I was very fortunate; I was studying at the time. To be honest, I was pretty bored studying. About one year in, I decided to go part time. I went and started my first job was actually in a real estate agent in Foxboro was the first first job. I lasted there about four or five months before the business went on under.
Then I went and approached a guy called Tony Pride. He got a pretty big business at the time called Wilson Pride, and I wanted to learn from him and get under his wing. I start at the bottom. I remember I was the , and he pretty much telling me whatever I had to do ,had to be done. After about six or eight months, he gave me a pretty amazing opportunity where he said to me, “Look, I want to own a residential property. I want to help you out”. He said, “Let me go and buy you an apartment. I’ll buy it; you renovate it. You fix it up on your time. If we make any profit, we split it 50, 50”.
Ross: That’s not a bad thing for a boss to do for somebody who’s coming through. In other words, he wanted you to get into the property market so he said, “I’ll bought it; you renovate it. We split the profit, the proceeds 50-50”.
Tim: Yes. correct. He owned it at the end of day; I didn’t actually get to own it. But we bought a little flat for $190,000. Literally sanded floors by hand. I painted the walls, the kitchens. We made $24,000 together in about a year, and we split that, obviously. I made about $12,00 out of that.
Ross: What year was that you did this?
Tim: It would have been about ’99, 2000.
Ross: It was not that long really. We’re only talking 17 years ago. While you were going through all of that and as you started to build yourself up from there, how did you do without as you were trying to get yourself on to the next round?
Tim: Well, I was renting. I was living in a shared house at the time. I just finished so I was living with about three or four people .We were paying 100 bucks a week for shared rooms and working very, very hard. I was working there at Wilson Pride. I was also running night clubs at night. I was doing everything I could to make every single cent that was physically possible.
Ross: When did you get the idea that maybe building apartments in the way in which you’ve now got them. This is significant development that you’re undertaking around Australia. We’ll get to the idea behind those apartments because it’s a little different to the normal approach. But just get me to the point at which you start to get bigger, and you start to get this thing on a bit of a roll because that must have taken a bit of entrepreneurialism.
Tim: Yes, it did. Look, I was working at a It is a big public company, and I wasn’t enjoying it at all. I called a guy called Morris Schwartz , who was a big property developer at the time, who was doing some incredible stuff. I eventually got a coffee with him. It took me about five or six phone calls harassing him. I sat with him and told him I thought what he was doing was amazing, and I wanted to work for him and the rest was history. I started the next day. Within twelve months, I had a small percentage of the business, within eight months, I had about 30% of the business ,and together we developed some really amazing projects.
He took me under wing. He taught me what to do. I learnt the hard way. He very much got me in the deep end. I had no idea what I was talking about, and I learned it the hard way. He wanted to do the other things. He want to continue doing big projects, and I thought it was a time to change. I started a business called Inc and actually had a fellow director come into that and another guy, so we had 50-50 in that business.
We bought a little so we were buying of 20 or 30 apartments, 40 . The biggest one we did was 230 apartments in Collingwood. The theory was we wanted to be in the suburbs and doing good quality product, not super high end just really good product that was at a good price point. Together we developed 25 projects over that period of time.
Ross: Just one thing about this, because as you’re doing those projects and as you build up into Gurner itself, one thing that you identify is not necessarily the first time buyer. You’re not building for that first home buyer, you’re building for the empty nester: the person who’s actually coming out of a bigger home out of the suburbs and is then trying to find the classic three bedroom apartment with underground car parking and all those facilities, because that’s where you saw the demand was going to explode as the Baby boomers started to come out of their suburban homes.
Tim: Well, that’s probably been more realistic in the last two years. When we started the business five years ago, we had a pretty rapid growth at the start. I took a lot of risk and in our first year. Majority of that product was targeted towards investment. I’ve got a very strict criteria where we want to buy in the cafe cultures, so it’s all about demographics. We want the population to be about 75% of the population between 25 and 40. Very much in that 1 to 3K from the city in Melbourne up to 5K from Saturday in Sydney and within 500 to 600 in Brisbane just depending on the demographics.
Ross: Do you reckon that that market is going to continue to expand, that there is going to be more of that type of development, more of a demand for that style of housing into the future?
Tim: Yes, absolutely. I think we’re an incredibly immature market. Look at the percentage of apartments to house dwellings. We’ve got Brisbane sitting at 2.9%, Melbourne at 3.6% and Sydney at 10% versus established countries sitting at 30% to 40%. It’s typical Vancouver comparisons; New York City at about 15%, Hong Kong 95%. I think this is very much the start of the apartment boom. I think there is a big shift going on at the moment.
I think the reason why this has got so much press over the last 48 hours is there’s a big sentiment change. People are having to get their head around the fact that houses are becoming unaffordable. There’s no question they are. The next available thing is going to be apartments [crosstalk]-
Ross: Explain one other thing to me, if all of a sudden there’s this move to the inner city where obviously there are facilities and there’s going to be cafes and pubs and restaurants around the place that people are seeking, all those facilities from those apartments. What happens to those outer ring of houses that suddenly are moved out of by those Baby boomers? What happens in Sydney, Melbourne, Brisbane? Because if people start moving into these types of apartments you’re building and out of those traditional four bedroom homes, what happens to those homes? What happens to the prices of those homes?
Tim: Well, look let’s hope that there’s enough supply: that it actually exceeds demand and prices can back a bit. Look, I don’t think it’s going to happen. Personally, I think that when we got 126, 700 people coming to Melbourne every single year, we’re building no where enough homes or apartments. I think the big thing that’s being missed in this whole conversation is a lot of focus about first time buyers for many that is a very important thing, it’s very hard for them.
But for me, I’m much more concerned about the second, third home buyers that have got two kids in school, two incomes, trying to afford a house they can actually live in, and that’s the biggest issue. These Baby boomers that are holding on to houses mainly because of government regulations around mean testing. They can’t have more than $817, 000 of net worth outside of their home. If they sell their home, they’d straight away they lose any government incentive that they had.
I think that’s one thing that people need to focus on. The government has obviously brought in this $300,000 incentive for Baby boomers to downsize. But what they haven’t dealt with is the fact that they’re still going to lose their pension if they do sell the property.
Ross: There’s no doubt. That’s a big incentive that’s going be lost. All right, let’s go to the elephant in the room, shall we. On 60 Minutes last night, you indicated that many younger people, people of your generation, really haven’t gone to the same lengths that you had gone to and others have would gone to, to try and get into the housing market; that many perhaps were over consuming, that you mentioned, of course.
There’s no doubt that others have done so before: smashed avocado, coffees at four bucks, all that type of thing, because they weren’t doing without. I made the observation, of course. They had lived with their parents. They had free wifi; free access to a fridge, all that type of stuff.
In that regard, do you really think that your generation: those between the age of their late 20s and their mid 30s, have really been that indulgent? Is it that bad, that obvious?
Tim: Yes, I think it is. I think the smashed avocado thing I think is just quite hilarious that people love to talk about it.
Ross: It was also a line from Bernard Salt put in The Australian a couple of weeks ago, so there’s no dramas about that.
Tim : Yes, I didn’t even realize that but anyway — Look, for me, probably the Iphone is a better way to look at it. I remember when we bought our first phones, it was 3210, the Nokia and you had that for five years until you could afford something new. Apple brings out a new phone every six to eight months, and if you don’t have the latest, you’re not cool at school or whatever it is: new cars, holidays, skiing. I didn’t get to go oversees until I was about 22 years old.
I think that there is definitely a social issue. I don’t think at all that first home buyers or this generation’s fault. I think that the media, the way that we sell today: Instagram, Facebook, the way the phone phone works, it’s very easy to get in [crosstalk]-
Ross: You mentioned the Kardashians too. That’s another issue. It’s the “look at me” generation, in some ways.
Tim : Yes, correct. Absolutely. The Kardashians are a great example. They’re highly watched in Australia. They would drive Bentleys, Rolls Royces, and their own private jets. People think this is normal, and it’s just absolutely not normal. They’re the .001% of the population. It’s setting people up for very, very false expectations. Then it’s leading to spending for people to actually keep up with the Joneses. I think that’s very damaging in the future.
Ross: I’ll tell you what, great to have you on the program. Great to hear the full story of Tim Gurner, as well. As I say, a man who’s certainly the youngest man to enter the Rich List, the Rich 200, last year. The valuation on that at that time was about 400 million bucks, also. As I say, it’s an accomplishment that’s come from zero in a very short space of time. It’s not without risk, that’s the way, but it does show what can be accomplished in this country today. Can I just say from GURNER tm, Tim Gurner, great to have you on the program.
Tim: Thanks a lot, Ross.