25/05/2004 - 22:00

Lester eyes the finishing tape

25/05/2004 - 22:00


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AS the 10th anniversary of his decision to sell Growth Equities Mutual approaches, WA property investment legend Dick Lester is again contemplating the handover of a business he has founded and grown.

Lester eyes the finishing tape

AS the 10th anniversary of his decision to sell Growth Equities Mutual approaches, WA property investment legend Dick Lester is again contemplating the handover of a business he has founded and grown.

Succession planning is front-of-mind for the property investment manager right now, but the circumstances are much different than when he exited GEM a decade ago, at the time one of Australia’s biggest property trust managers.

These days the baton of his private Lester Group will most likely be passed to family members and key staff in a quiet fashion, as opposed to the much-trumpeted sale to Lend Lease on July 27 1994. It was this transaction that ended his direct involvement with a segment of the industry he literally kick-started 15 years earlier.

The circumstances between then and now are different in another way – by 1994, GEM was almost the last man standing in a four-year battle of attrition, as spooked investors in unlisted property trusts brought the former market darling to its knees.

Mr Lester, in partnership with Greg Paramor, had built Australia’s largest unlisted property trust business, amassing more than $1.6 billion in funds under management and 110,000 investors nationwide before the market turned, coinciding with a televised comment on July 8 1990 by the then recently appointed chairman of the National Companies and Securities Commission, Tony Hartnell, on Channel Nine’s Business Sunday program.

“We went from bright sunshine into night,” Mr Lester recalls, as the market shifted suddenly from positive inflows on the Friday to net outflows on the Monday after the program aired Mr Hartnell’s comments that it may be necessary to suspend the buy-back obligations of some unlisted property trusts.

“We had a good portfolio and good tenants, it was just a herd mentality,” Mr Lester said.

GEM battled through the downturn that followed as rivals, one-by-one, froze its funds. Eventually, GEM succumbed to market pressure to stop redemptions, and moved to list most of the various trusts under its management to provide the liquidity investors wanted as the market soured.

Mr Lester exited gracefully for a figure rumoured in the press at the time to be around $40 million, though he will not discuss the price he received for his business, which still had around $1.5 billion in funds under management at the time.

He is very proud of the way GEM navigated those troubled waters – acting in the interests of the majority and keeping people informed at all stages – believing his investors got a good result under the difficult times that had not been anticipated after the highs of the 1980s.

“Looking back, I think we did a fairly good job,” Mr Lester said, speaking from his elegant office in a Nedlands property the group bought recently, shifting headquarters out of a more central location.

“I don’t think we would have done anything substantially different.

“The most important thing was to keep talking to your customers, give them the truth and give it to them often.”

It is sage advice on crisis management, and it is probably no wonder that someone with his background sits on the board of Wesfarmers, one of Australia’s most successful big companies.

Also welcomed in the Wesfarmers’ boardroom would be his experience in starting a company from scratch, in a market that hardly existed using product innovation and investor relations to become a star performer during a decade of high growth.

And, perhaps, there was more than a sprinkle of persistence in the mix.

Mr Lester recalls trying his luck with the property trust idea in the early 1970s, only a few years after arriving in Perth from Melbourne to pursue real estate opportunities in the high growth market of Western Australia, booming on the back of mining wealth.

His first attempt failed and, for much of the 1970s, that idea remained dormant as he pursued a variety of property developments, many financed by tycoon Stan Perron.

It was not until 1978 that Mr Lester recalls the epiphany from which GEM was created – and it all came from a stroll down St Georges Terrace, a regular catalyst for investment fortune in Perth, and the happenchance of bumping into then Perth Building Society chairman Geoff Gadsdon.

“I was walking east and he was walking west,” Mr Lester said.

They stopped for a chat, and Mr Gadsdon let slip a piece of information that astounded Mr Lester. The PBS had been seeking then premier Sir Charles Court to speak at a function marking the fact that the building society had reached $100 million in capital after 100 years. But getting a date from Sir Charles had been difficult and, in the four weeks of delay, PBS’s funds had grown to $115 million.

“One hundred years for $100 million, four weeks for $15 million,” Mr Lester said, realising that something extraordinary was happening and the time had come for his property trust plan to be tried again.

“We looked into the data and it was the lump sum retirement era.

“People had cash; they had previously had assets, but the economy was changing.

“People were being encouraged to retire with a lump sum redundancy payment, they were receiving this and putting it in the PBS.”

It was from this moment GEM was spawned, starting with an innovation – the split trust which offered income and capital growth units – that took three years to launch on the market on April 1 1981.

Mr Lester will not say the rest was easy.

Getting through the first minimum subscription deadline was done only with the aid of an astute banker, John Hancock at the Australian Bank, now a part of National Australia Bank, which Mr Lester still does business with out of a fierce loyalty born of that original association.

Drumming up business around the country was tough. The travel regime was a brutal cycle of fortnightly trips where Mr Lester said he had worked out his diary to hold seven meetings a day throughout suburban Melbourne and Sydney. And the competitors, like Armstrong Jones, were in the market fighting for every dollar.

“They were strong competition but we were able to beat them,” Mr Lester said.

“We surpassed them because we were better product innovators.”

Dick Lester will be speaking at a WA Business News Success and Leadership breakfast at the Sheraton on June 2.


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