12/03/2008 - 22:00

Opportunities and traps

12/03/2008 - 22:00


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Despite having about 250 years of business experience in Western Australia between them, five of the state’s greatest entrepreneurs agree there has never been a time like this, though their opinions differ on where new opportunities may lie.

Opportunities and traps

Despite having about 250 years of business experience in Western Australia between them, five of the state’s greatest entrepreneurs agree there has never been a time like this, though their opinions differ on where new opportunities may lie.

They have lived through numerous booms during their business lifetimes, which in most cases span more than 50 years, yet nothing comes close, they reckon – even if there are concerns about the short-term impact of market jitters experienced this year.

Speaking last week at a roundtable discussion as part of the judging for Ernst & Young’s Champion of Entrepreneurship award, Harold Clough, a former winner of that award who got his start with his family’s business 54 years ago, suggests the recent boom has put the state in unchartered territory.

“This is a time of unprecedented prosperity,” Mr Clough said.

“It is many times better than anything we have seen before.” “The question is how long will it last.” While most in the room felt there was plenty of steam left in the economy and that opportunities would abound in WA for years to come, there were some concerns.

Wesbeam Holdings Ltd chairman Denis Cullity is one who feels that even the greatest boom in his lifetime has its risks.

“It is a delicate time,” Mr Cullity said.

He warned that excessive exposure to debt was just as much of a trap as ever.

Gull Petroleum director Fred Rae is also cautious about the constraints that higher interest rates can create, suggesting the higher cost of money was likely to curb some areas of potential growth, particularly if further rate rises occurred.

“That will annul some of the business opportunities,” Mr Rae said.

But when asked to identify where particular opportunities might lie, the five magnates revealed differences in their investment focus and belief.

Perron Investments Pty Ltd chairman Stan Perron, who has been in business since 1948, is a firm believer in property, a sector which is well represented in the $2 billion empire he has created.

Mr Perron’s property investments include a half share in Perth office high-rise Central Park, as well as several big shopping centres in WA and beyond.

He believes real estate is the basis of all assets.

“There is nothing like real estate,” Mr Perron said.

On this point, fellow real estate investor Jack Bendat could not concur.

Recalling his arrival in WA from the US 42 years ago, Mr Bendat said the young generation faced the issue of high real estate prices.

He said high returns on commercial property back when he was a budding entrepreneur had been eroded to the point where they were now below prevailing interest rates.

The real estate dilemma has been a strong debating point for the past two years as the property boom has created housing affordability issues.

That, in turn, has spilled on to business, as obtaining premises has proved more expensive and staff have sought higher wages to reflect the increased cost of living.

In addition, attracting skilled migrants has also been affected by higher real estate costs.

The entrepreneurs acknowledged that those well placed with real estate investments were doing handsomely, especially in the commercial sector, which had struggled for a decade or more prior to the current boom.

But the issue was clearly troubling to those who saw it as holding back the state, not to mention simply having got too expensive.

“I would not buy real estate today,” Mr Clough said.

“I think it is over-valued.” But Mr Perron maintained that, despite the costs associated with real estate, opportunities abounded in areas like subdivision for entrepreneurial people.

He said that, during the past decade, he had invested in the ideas of at least six budding developers who had come to him seeking capital for their projects.

“They are all millionaires,” said Mr Perron, who revealed one developer made $5 million from the project which had earned Perron Investments around $30 million.

Both Mr Bendat and Mr Perron see the holding of bluechip stocks as a key investment strategy.

Surprisingly for entrepreneurs, many in the room believed government could have a big impact and there was room for the state to do more.

The praise was shared around as the group recalled some of the big changes during their time, with the late Sir Charles Court being lauded for his north-west vision, while Bob Hawke and Paul Keating had won respect from business for championing tax reforms that better rewarded risk takers.

There was a strong belief that WA had emerged as the driver of the country and the place where new wealth could be made – and that the state government had to capitalise on that.

Of particular importance was the effort made to attract business to base their headquarters here, as Woodside Petroleum Ltd had done a decade ago.

Adding further weight to whispers that BHP Billiton Ltd’s move to relocate in Perth was inevitable, it was seen as a prime target for such a strategy.

Inevitably, the number one business nasty, payroll tax, was raised.

This tax could be removed to make WA more competitive in the fight for corporate head offices, the group agreed.

“We have to get more headquarters,” Mr Clough told the roundtable.

“The state government needs to think harder about the things they do.” “All the incentives are in the wrong places.


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