Lessons from an Australian real estate doyen
Bill Moss built a lucrative property business within Macquarie Bank. Here's a few of his lessons.
Macquarie Bank's rise has been shaped by two (unrelated) Mosses. The best known is Allan, the chief executive who preceded Nicholas Moore (who will be replaced later this year by Shemara Wikramanayake). The other is Bill.
Bill Moss joined Hill Samuel (which became Macquarie Bank) in 1984. He grew the group's real estate business from scratch to $30bn worth of managed investments at the time of his retirement in 2007. He is a true giant in the real estate industry.
Learning from experienced executives such as Moss – both successes and failures – is among the most valuable sources of knowledge for investors. And in his autobiography Still Walking, he provides many great lessons from his career in real estate and at Macquarie. There are also plenty of important (and inspirational) life lessons thrown in for good measure.
Here are a few nuggets of wisdom.
On the risks of investing in property, he provides several warnings.
‘If land and property prices go up without an underlying increase in population be cautious; it is probably a bubble.'
‘Debt, when available at high gearing levels, drives values up; when it's not, values are driven down. Access to borrowed money is the blood supply of all real estate markets; turn off credit and they die.'
And when it comes to market corrections, there is, he says, ‘no logic'.
The big picture
The best way to improve your forecasting, says Moss, is to get out and talk to people, consider a range of opinions, travel and see markets firsthand.
Many market participants make assumptions, he suggests, and take what they read at face value. Instead, he believes that success (whether it be in real estate or business) comes down to asking ‘why?'.
Moss's predictions were matched by his willingness to act. He innovated when the market was expected to turn to change Macquarie's products and offerings.
‘You had to always be thinking where real estate markets would be in 18 months' time … As a result, we survived when our competitors fell – at which point we then turned our attention to making money from the ruins around us.'
Skills to succeed
Moss's abilities are rare, but they can be developed. He believes that success in the real estate sector requires a combination of traditional property expertise, along with strong financial skills and an ability to understand societal and demographic changes. All three are needed otherwise ‘you inevitably end up with problems'.
Moss's contrarian and pragmatic approach to real estate investing largely reflects our own at The Intelligent Investor. We've remained cautious during the present run-up in commercial and residential real estate prices, but there have nevertheless been opportunities to buy the likes of Sydney Airport (ASX:SYD), ALE Property Group (ASX:LEP) and Scentre Group (ASX:SCG), each of which are held in our Equity Income Portfolio (which is now listed on the ASX under the code INIF).
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