Blackburne weighs in on apartment industry

Source: Business News

Paul Blackburne says not relying on other people’s money to fund his developments and having a stable income stream from property management are his secrets to his success.

The Blackburne managing director spoke at an Australian Institute of Management WA event this morning, sharing his trajectory to success.

Prior to working with his father John Blackburne at his property management and sales business in the early 2000s, Paul Blackburne spent five years travelling the world.

He said during that time, he learnt to live on very little.

“I think traveling and backpacking is very similar to running a business in that it’s learning how to get a lot from very little,” he said.

“You’ve got to spend less than you get back …I think I lived off $50 a day for five years.”

He added that the people skills he acquired through travelling helped in business too.

Blackburne has developed several high-end developments around Perth since its inception in 2003, settling on more than $1 billion in property in the past 12 months.

Its latest development, a $380 million, 229-apartment project in Claremont, is due for completion this month.

Mr Blackburne established the business after he bought part of the rent roll from his father’s company, via a $600,000 loan.

Property management remains a key part of Blackburne’s business, with about 1,200 properties on its books.

Mr Blackburne said he avoided using other people’s money to fund the company’s developments.

“One of the secrets … to [our] success as a developer, as opposed to others is, I’ve never used other people’s money,” he said.

“Unless you’re forced to where the landowner doesn’t want to sell the land, and they want to put the land in as equity, [I’ve] never used other people’s money.

“I’ve only really realised the last year or two that most of our competitors use other people’s money.”

Mr Blackburne took advice from his father to retain the property management component of the business to smooth market fluctuations.

“That’s been an important part of the business … having property management [and] strata management,” he said.

“[It] makes you act differently in the boom, because you go ‘I know that I can take some risk, if it doesn’t work out, we’re not going to have to shut the doors and lay everybody off, when the boom comes back again, we are going to have to rehire everybody,” he said.

“We’re there waiting.”

Mr Blackburne warned that in another couple of years, some developers could come unstuck.

“I think [in] the next two years, we’re going to see a lot of developers go under,” he said.

“Builders you’re already seeing go under.

“When I say go under, I mean they’ll just shut the doors, because usually they don’t put their own money in, it’s other people’s money they lost,

“They don’t go bankrupt, they just sort of give up. I think that’ll happen the next few years, with rates doubling and building prices up … it’s just not viable to use other people’s money.”

He added that the fact developers were relying on other people’s money contributed to the current shortage in apartments.

Blackburne plans to start construction on its West Village project in Karrinyup later this year.

The company is also working on a 250-apartment project in City Beach and has its sights on South Perth following the purchase of property in that area.