WBP Property gets in position
Expansion is the last thing on the minds of most entrepreneurs in Australia's property services sector, but Greville Pabst (right), chief executive of Melbourne-based firm WBP Property Group, hasn't given up on growth just yet.
On 2 February, WBP formally opened its first office in Perth, following a merger with local property valuation firm Suburban Valuations. Pabst says the launch of the Perth office was crucial to complete WBP's national network
"Generally if we open somewhere, there's a good chance our national clients will give us the business. Our clients, like the banks, don't want to have thousands of agreements with different firms. They want to deal with fewer but larger firms," he says.
"There's a lot of consolidation and rationalisation going on. You need to join or be strategically aligned with a national group in order to win national contracts and, frankly, just survive.
"I think that's what Suburban saw in us. We have a large, national client base that we can import. And they have a couple of clients that we would like to have on the eastern seaboard," Pabst says.
WBP has also recently opened offices in the Victorian regional town of Ballarat and in Tasmania. Pabst admits the downturn and resultant squeeze on smaller property service players makes this an ideal opportunity to grow market share through acquisition, but the cost and availability of capital remains a big obstacle.
To get around this and continue its expansion push, the company is keen to push into regional areas using a licensing model, whereby existing valuation companies will come under the WBP umbrella, access its systems and pay the company a license fee.
"That's a good way of expanding quickly without the need for a lot of capital."
Growth in a recession is nothing new for WBP. The company was established in 1992, in the midst of Australia's last big recession, after Pabst and co-founder Patrick Brady were retrenched from their jobs.
Getting established in that environment was no easy task, but the rise of non-bank lenders such as Aussie Home Loans and Wizard sparked a property boom that lasted more than a decade.
In September last year, WBP placed 28th on SmartCompany's Smart50 list, with revenue of $11.54 million and average annual growth of almost 47%.
But it is a very different story this year. Pabst says activity is down around 15% to 20% as a result of the credit crisis and cooling property markets. "Like everyone else, we fell off a cliff," he concedes.
What about the lessons learnt from the last recession?
"You tend to make the same mistakes again," he says. "When you are a fast growing company, how do you have that mentality to say ‘slow down'?"
What Pabst and his team did do was act quickly, starting the process of reducing staff numbers and operational costs in April 2008.
"We did see the signs very early on and acted before the end of the third quarter of 2008, whereas I think a lot of businesses are only making changes now.
He is confident this hard work is now done.
"We are getting ourselves into a position that when the rebound does come we've got our model right."
A new part of that model is the company's expansion into property management and leasing. Last year WBP acquired a commercial property rent roll from national property group Retail Realty, which included a number of retail properties and shopping centres, and the company hopes it can cross-sell valuation and property advisory services to rent roll clients.
"We see some really good synergies between that business and our valuation and advisory business," Pabst says.
He believes the property sector recovery is likely to take some time. While activity at the affordable end of the housing market has held up quite well - thanks to the increased first home buyers' grant and falling interest rates - the top end of the market has fallen sharply.
He is confident that house prices will remain reasonably steady, the market will take longer than expected to recover.
"Unless unemployment gets to double digit figures, I don't think you'll see property get slammed," Pabst says. "I think we'll go through a period of sustained low growth until confidence returns."