When faced with a major property market downturn, property developer Illan Samuel decided not to follow competitors by diversifying into alternate revenue streams. He tells My Business why and how this strategy is working for his business.
Mr Samuel (pictured) has operated his residential development company, Samuel Property, for 10 years, and has a small team of four employed directly within the business.
The business operates “primarily” within the residential market, specialising in high-end property within the inner and middle ring suburbs of Melbourne.
A slowing property market in Melbourne — CoreLogic says residential property prices have slumped by 8.4 per cent in the year to 28 July 2019 — has caused the industry to take a long, hard look at how to remain financially viable.
Stay true to your value offering
According to Mr Samuel, many have sought to diversify into other types of property development and construction, but he decided to stand firm.
“We chose to focus on our strengths, being residential, and do what we do, but better, as others sought to adapt on the run, with varying success,” he said.
“Primarily, we steered away from secondary locations, even in desirable suburbs 24-plus months ago seeing the early signs of a slowdown.
“As a result, we have weathered the downturn well, selling to buyers who move to their own beat and don’t necessarily have to refer to their banker if they can afford what we are selling.”
Mr Samuel added: “The lack of market confidence has led to a lack of market supply, so bucking the trend and releasing projects regularly with momentum has served us well.”
He said that the strategy has paid off to date, with the business maintaining its pipeline of work “consistently two to three years ahead of our current position”, allowing to ride out the softer market conditions.
“And we are always looking ahead to understand how our cash flow looks at key points of time,” Mr Samuel said.
“Primarily, we are turning over more dollars as our developments get larger; that is, end values of $45 million for a development versus early days of $10 million for a development. Essentially, the same amount of work, just a bigger and more valuable project. Money makes money.”
Stay on good terms with financiers
On the subject of money, Mr Samuel was asked how he has approached the delicate issue of accessing finance, at a time when lending — especially for residential property — has remained tight.
The developer said that building strong relationships with contacts in the finance industry has meant they have been “looked after”.
“We take what we do seriously (this isn’t a hobby!), and in turn, those we deal with within the finance industry have looked after us on a deal-to-deal basis,” Mr Samuel said.
“We haven’t put our head in the sand as the traditional banks have been harder to work with, but we also haven’t stopped transacting or taken freely available money — but at really high rates.”
Advice for others in business
According to Mr Samuel, anticipating a downturn and planning a response well ahead of its eventuality is the key for all owners to build a strong, sustainable business.
“Essentially, [we have used] a balanced approach planned well ahead,” he said.
“The strong will always survive. Play the long game and trust the process — whatever your business might do, if you are passionate and work hard, you’ll make your own luck, downturn or not.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.