LWP Property Group grew out of Japanese-owned Sanwa Property Group in the 1990s.
LWP Property Group grew out of Japanese-owned Sanwa Property Group in the 1990s.
When Sanwa’s holding company went into administration, the group’s then managing director, Danny Murphy, formed a syndicate of investors to buy Sanwa’s 50 per cent share of Ellenbrook, with LWP Property Group established to take over the management and selling rights from Sanwa.
Ellenbrook was initially created as a joint venture between the Department of Housing and Works and Sanwa.
The Ellenbrook JV employs Ellenbrook Management Pty Ltd to make decisions on behalf of the joint venture and employs LWP as the project manager.
“With Sanwa’s future clearly under a cloud, LWP Property Group was essentially established as a defensive action to enable us to control our future,” Mr Murphy said.
“For the senior management team that had been involved with Ellenbrook, there was also unfinished business to be completed.”
LWP develops large greenfield sites, usually on the urban fringes, rather than small urban infill projects.
Mr Murphy said the company therefore created more affordable products aimed at the lower to middle sector of the market.
With about 1,000 people a year buying land from LWP, which competes with the likes of Satterley, Peet and Stockland, Mr Murphy said the market in WA was improving.
“[It] is opening up opportunities for developers with approvals and finance in place. The lack of bank funding for our industry will constrain supply in the short-term,” he said.
Despite supply constraints, the major challenge for LWP has been to create the right type of funding model for its business.
LWP focuses on master planned communities, which are self-sufficient areas in terms of their community infrastructure, with large population bases, usually 10,000 as a minimum, incorporating about 3,500 dwellings.
“The nature of our core business of creating master planned developments over 10 to 15 years means that highly geared funding models aren’t appropriate for us,” Mr Murphy said.
“In our business the majority of returns come in the last third of a project – with the potential for a lengthy development approvals and planning process.
“Our investors need to understand that this is how we work and are happy to invest for the longer term to secure greater returns.”
As a recently established business in 2000, LWP found it difficult to attract funding.
Mr Murphy said while several options were looked at, the company realised that investment banks exercised a high degree of control over projects and this could constrain the way in which it did business.
LWP decided on a funding model targeting high net worth individuals who come together in funding syndicates.
“High net worth, sophisticated investors who were looking for significant projects to invest in and who understood the risk profile were our ideal funding model,” Mr Murphy said.
“The main impact of our preferred funding model has been that we had to go for measured growth.
“After two to three years, our initial group of investors was sufficiently confident to enable us to embark on other projects, and others came on board.”
The initial group has continued to invested with LWP during the past decade, enabling the company to grow to be the third-largest land developer by volume in Perth.
In addition to getting the right funding model, Mr Murphy said LWP needed a range of projects in its portfolio to balance the financial demands of supporting 10- to 15-year development projects through their earlier phases.
“Our portfolio was expanded to include a number of shorter term, medium-sized projects such as The Vines and Woburn Park to assist with managing risk,” he said.
Despite the challenges of developing master planned communities over 10 to 15 year periods, there are many advantages, according to Mr Murphy.
Key among these was that larger projects were very flexible in responding to market demand.
“They don’t rely on the strength of a single sector – the first-homebuyer market for example – to maintain profitability,” Mr Murphy said.
“If one section of the market goes quiet we have the flexibility to focus on developing products to match the needs of purchasers who are still in the market for land.”
As a result of these measures, LWP has an improved mix of projects and a mix of funding structures that has enabled the business to navigate the downturn more easily than some competitors, ensuring it was well-placed to take advantage of the upturn Perth was beginning to see.
“The benefits with flexibility in product were again evident over the past year. Despite the global financial crisis we sold 420 home sites at Ellenbrook in 2009 – in line with our average over the years of between 400 to 450 sales a year,” Mr Murphy said.
He said the long-term nature of LWP’s key projects enabled it to maintain staffing levels; more than half LWP’s staff has been with the company for five years or more.
This gives the company stability and enables it to capitalise on the collective years of experience and knowledge.
LWP’s turnover has increased from $30 million in 2000 to a projected $200 million in 2010-11.
