Nov. 24 (Bloomberg) -- In 1963, Harry Triguboff decided to challenge the Great Australian Dream of owning a house on a quarter-acre block.
“I looked around and I saw cottages everywhere,” the 77-year-old billionaire said of his decision to start building. “I thought it was time they lived in apartments.”
Since then, his closely held Meriton Pty. has grown to be Australia’s biggest apartment developer, providing units for more than 150,000 people in the nation of 22 million. In Sydney, about three in every 100 people live in an apartment that Meriton built, to the consternation of some residents and local governments who complain their suburbs have become overcrowded because of his developments.
“He delivers units affordably priced, close to the city center or near railway stations, and he does it on a bigger scale than anyone else,” said Bob Carr, who opposed some of Triguboff’s plans during his 1995 to 2005 stint as premier of New South Wales state. “He’s giving people a choice.”
Triguboff’s strategy is to build the tallest apartment blocks he can get approval for in suburbs where people can afford them. He’s relying on demand in a nation facing a shortage of 200,000 dwellings a year, where the average home costs 6.8 times annual median household income -- more than double the U.S. ratio of 2.9 times, according to the annual Demographia International Housing Affordability Survey.
Where rivals such as Australand Property Group have retreated as debt costs spiked during the financial crisis, Meriton has gobbled up a bigger slice of the apartment market by managing every step of the building and sale process and financing projects internally.
Triguboff today is Australia’s fifth-richest man with a fortune of about A$4.2 billion ($4.14 billion) according to BRW Magazine. To get there, the son of Russian Jewish emigrants has had to battle governments, rival developers, and a cultural preference for standalone homes, he said in an interview in his Sydney office, which is adorned with photos of himself with George H. W. Bush, Bill Clinton, Princess Diana, Shimon Peres, John Howard and other statesmen.
His quest to change the way Australians live is now stepping up a gear as Meriton embarks on some of its largest projects to date. They include the 77-story Infinity Tower, Brisbane’s tallest residential building, and the 2,000-unit Victoria Square apartment development in Zetland, an inner Sydney suburb.
Not everyone welcomes the developments. Gabbi Kearney, a 40-year-old mother of two in Zetland, has reservations about the spread of high-rise buildings in her neighborhood, where Meriton is finishing up the first, 320-apartment building.
“There are more people now and a feeling of being overcrowded,” she said in a park a few blocks from her house as her children played. “There are a lot of renters and university students. It’s not catering to the family market at all.”
Apartments in Meriton’s developments -- which range from A$270,000 for a studio to more than A$1 million for the most expensive three-bedroom units -- generally come fitted with stainless steel kitchen appliances, air-conditioning systems and mirrored wardrobes in the bedrooms. They range from 60 square meters (646 square feet) to 70 square meters for a one-bedroom unit, and up to 130 square meters for three-bedroom apartments.
Buyers tend to be under 40, traditionally young professionals and single people, with many from Asian countries including China, Korea, Singapore and Indonesia, according to the company. Meriton is attracting more young families, as many developments now include child-care centers, it said.
Triguboff was born in Dalian, China, in 1933 and came to Australia with his family in 1948, just before Mao Zedong’s communist revolution. He attended high school in Sydney; university in Leeds, England; worked for a textiles company in South Africa; entered a carpet manufacturing business with his father and brother in Israel (which he left because they “didn’t get along,” he said); then returned to Australia in his mid-20s, where he drove a taxi and owned a milk delivery service.
His youth may help explain a decision to confine Meriton’s projects to the eastern Australian states of NSW and Queensland: “I don’t want to spend my time running around,” Triguboff, wearing an open-necked white business shirt, said in the interview.
After a stint in property sales -- he says he made a “very bad salesman” -- Triguboff tried development instead. He took a loan to buy his first block of land in 1963 in Tempe, an inner-west industrial suburb of Sydney under the flight path of the nation’s busiest airport, and built a block of eight units, learning the construction process onsite.
“In this business, you don’t have to be an architect or an engineer or a brick layer,” he said. “But you have to understand how the money flows. That you can only understand if you’re on the site.”
About five years later, Triguboff built a block of 18 units on Meriton Street in Gladesville, a northern Sydney suburb, which provided the name of the company he registered in 1968.
He listed Meriton on the Australian stock exchange, then bought the shares back about 1 1/2 years later in January 1974 as the company’s success and the appeal of being his own master grew.
In the 1980s, Triguboff decided to only buy during slumps and sell during booms, and to only build in areas that already had infrastructure to support developments. Meriton had enough assets to cover all its debt by the 1980s, and by about 2000 it was debt free and funding its own projects, which proved vital seven years later when the financial crisis hit.
Competitors -- including Stockland, Australia’s biggest diversified property group, and Australand, backed by Singapore’s CapitaLand Ltd. -- moved away from the apartment industry as financing costs spiked. Meriton kept on developing and has now built more than 60,000 apartments.
“In the middle of the global financial crisis, when everyone else was shutting down, he’d built up his business to a point where he could keep building without skipping a beat,” said Aaron Gadiel, chief executive officer of the Urban Taskforce, a developers’ industry group. “He correctly anticipated that demand for his kind of apartments, those affordable to the average homebuyer, wouldn’t slacken.”
Medium- and high-density housing accounts for about 35 percent of sales in Australia’s capital cities, RP Data estimates, up from about 25 percent in 1995. In NSW, 20.5 percent of people lived in apartments in 2008, according to the latest data from the statistics bureau, compared with 14.3 percent in 2000.
The Reserve Bank of Australia raised its benchmark interest rate by a quarter percentage point to 4.75 percent on Nov. 2, its seventh increase since October 2009. Home prices in the eight major cities, including Sydney, had surged 18.4 percent in the year to June 30, according to the statistics bureau.
Sydney’s population is forecast to rise to about 6 million by 2036, according to the NSW Planning Department, from about 4.5 million now. The nation’s most populous state is expected to have a shortage of 232,600 homes by 2020 under current building patterns, industry group Housing Industry Association estimates. Australia’s housing shortage will balloon to 466,000 in the same period, the HIA says, from about 200,000 now.
Triguboff says he can’t convince enough local governments to approve his planned developments, leaving him with cash to spare. To put the money to use, he’s investing more in properties he’s already built, with Meriton owning about 4,000 apartments, an increase from about 500 in 2000.
Meriton declined to disclose its earnings for the last financial year as it is a private company.
Triguboff’s desire to transform the way Australians live -- he has been quoted as saying Sydney has “too many forests and parks” and called for a population of 100 million for the nation -- has seen him butt heads, most notably with a man he describes as a “great friend:” Carr, the former NSW premier.
“He’s gung-ho for population growth, to grow bigger and bigger,” Carr said in a phone interview. “I have severe reservations.”
Harvey Rose, the mayor of the northern beaches suburb of Pittwater, is among those currently resisting Triguboff. Meriton is planning a 16-building development there, nine of which would be five stories. That exceeds the current three-level limit in the area, and the proposed number of units is about three times the current density limit, Rose said.
“Meriton’s proposal is totally out of kilter with what Pittwater’s about, and will be opposed by an overwhelming number of people in Pittwater, and all of the council,” Rose said in a telephone interview.
Triguboff remains a hands-on managing director, visiting building sites daily. About a dozen people, in charge of construction, planning, property management and other parts of the business, report to him every day with poster-sized sheets detailing progress of their divisions. Triguboff, who doesn’t use a computer, reviews these and adds feedback.
Kent Medwin, one of three winners of the “Win a Week With a Billionaire” competition sponsored by BRW Magazine, shadowed Triguboff in September. He said the biggest surprise was Triguboff’s involvement in the finest details of Meriton projects.
“He’s engaged in the color selections and designs, elevations, right down to the fine details, unit layouts, bedroom sizes,” Medwin, 32, who runs Rock Property, a residential property investor and developer in Hobart, Tasmania, said in a telephone interview. “What he enjoys most is the building process. He’s a builder deep down.”
Also on display was Triguboff’s legendary abruptness.
“He doesn’t use a lot of words and the words he does use are often four-letter words,” he said. “New staff are probably a bit shocked by it, but most of them seem used to it.”
‘Bigger and Bigger’
Triguboff is married to his second wife and has two daughters, none of whom have any interest in the business, he said. One of his four grandchildren, Ella, 25, holds promise as a potential successor, he said, “but I want her to be involved in more things first.”
Until then, Triguboff, who says he’ll never retire -- “they’ll have to carry me out” -- plans to keep building, making Meriton “bigger and bigger.” He occasionally looks back, visiting apartment blocks the company built decades ago to watch residents go about their lives.
“I just enjoy looking at them,” he said. “I’ve changed Sydney. It’s my city, my people. I’m theirs. We belong to each other.”
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