The tortoise and the hare of real estate

Australia’s booming real estate business is, to a large extent, the story of the tortoise and the hare: two families, the Hookers and the Whites, and more specifically, Ray White and Leslie Joseph (LJ) Hooker.

Between them these two franchise operations now have close to 20 per cent of a very fragmented industry and turn over $50 billion worth of real estate a year, but they represent two very different ways to grow a business and two very different outcomes.

One of the families – the Whites – kept 100 per cent and grew slowly (the tortoise). Ray White is now the largest real estate network in Australia and is preparing for an orderly succession to the fourth generation of Whites.

Les Hooker started in 1938, 36 years after Ray White, and took it public in the 1960s to get capital for growth (he was the hare). He tried, unsuccessfully, to take over Ray White, but made many other successful acquisitions and turned Hooker Corporation into Australia’s largest real estate developer.

Then twenty years later in the midst of the 1980s takeover madness, Hooker was itself taken over by property developer George Herscu, who thought the company wasn’t nearly ambitious enough and managed to blow it to smithereens within a few years.

The LJ Hooker network was bought out of receivership by Suncorp, which ran it as a mortgage lead generator for 20 years, before selling in 2009 to a syndicate led by Les Hooker’s grandson, also named LJ Hooker – except it’s Leslie Janusz, and he’s called Janusz. He now owns about 10 per cent of the business with 19 others owning the rest.

LJ Hooker has been rebuilt under the chairmanship of Greg Paramor, the former CEO of Mirvac, and the great rivalry between LJ Hooker and Ray White is alive and well, and is at the heart of Australian real estate.

Today’s story is about the one that’s still a family business -- Ray White, now controlled and run by the founder’s grandson, Brian White, along with his brother Paul, his three sons Sam, Dan and Ben and Paul’s son Matt. This year they will sell about $30 billion worth of real estate, on which the network of 1000 offices will make a bit less than 2 per cent commission.

Raymond White started in 1902 selling livestock, real estate and anything he could lay his hands on, from a shed in the railway yards at a place called Crow’s Nest, just outside Toowoomba in Queensland. In 1922 he moved to Brisbane with his four children and specialised in real estate.

As often happened then, it was his sons, Alan and Max, who inherited the business while his daughters, Joyce and Marjorie, got other assets. Alan and Max ran the business together and it was they who met with Les Hooker at their office in Brisbane, when the big charismatic “southerner” tried to buy their business.

It was 1954 and Brian White was 13 at the time. He remembers coming home from school to a house full tension as his dad paced the floor, wondering what to do. The dreaded “southerners” had discovered Queensland; should we sell to them or not?

Then Alan called a family dinner and announced to the table that they weren’t selling: Ray White would remain a family business. Brian remembers this as a seminal moment. They were telling Les Hooker to bugger off – Brian was galvanised by it.

Eventually, when Brian was in his 40s and still galvanised, he and his father bought out Max and decided to attack LJ Hooker in its home base – Sydney. They converted to a franchise model for the capital instead of floating and then bought the national real estate network called ERA.

ERA stood for Electronic Realty Australia, and you might think that meant it was ahead of its time, using the internet technology to sell real estate way back in the 1980s. In fact “electronic” referred to the fax machine: whenever someone listed a house with a branch, it was faxed to head office. That’s it.

Eventually Brian’s brother Paul, who had been farming, decided to join the business and bought a small stake. Now they are co-chairmen, both in their seventies with sons in their forties ready to take over – although they might have to wait a while yet.

Sixty years after his father knocked back Les Hooker, Brian White is still galvanised every day – “I haven’t really worked for 40 years,” he says, “because I love what I do” - especially now with Chinese buyers wearing a groove in his carpet with money spilling out of their pockets.

Australian real estate is undergoing an incredible boom, through an unprecedented combination of Chinese investors and DIY super funds. But above it’s all about the Chinese, who seem to be trying to get as much money out of the country as possible before the government stops them.

The Ray White network sold $3 billion worth of real estate in October alone. This year’s turnover is likely to be $30 billion, up 20 per cent on last year.

Of the firm’s 1000 franchised offices, 275 are outside Australia – 130 in New Zealand, 130 in Indonesia and a few in Lebanon, of all places. Although Brian doesn’t like talking about numbers: “I’d rather have no offices than bad offices”.

The future is clearly in China and Ray White recently had the biggest display at the Beijing Property Exhibition and will be opening an office in China soon.

Meanwhile LJ Hooker, now a close number two, is being successfully rebuilt by Greg Paramor, CEO George Chmiel and Les Hooker’s grandson LJ (Janusz) Hooker, and is also working hard to service the Chinese investors.

It feels a bit like the 1980s all over again, except this time with real money, not debt, and sensible, passionate real estate agents, not wild men like George Herscu. Could be an interesting few years.