[+] ‘Grab the Reins, Hold Tight’: Fouad Deiri

Chairman of prolific Sydney developer Deicorp Fouad Deiri caught some laughs comparing construction to the “wild west” at The Urban Developer’s Sydney Residential Development Summit on May 8. “Running a construction company is not that different to riding a horse,” Deiri told The Urban Developer founder Adam Di Marco on stage at the summit. “I have got a horse that I have had for over 20 years—when we’re up in the mountains I grab the reins and strap them round my arms so tight, because no matter how long I’ve had that horse and know that horse, if a snake or a roo pulls out he’s going to rear up. And construction is no different. “You’ve got to grab the reins and you’ve got to hold tight. Something might be thrown up and you have to be prepared.” The rise of the builder-developer A builder by trade, as well as an animal lover and trail rider, Deiri spoke at the summit about the major challenges facing the development sector in NSW, and how being a vertically integrated builder-developer insulated them from some of the headwinds. “We’re always cautious, we’re always risk averse. We tread carefully as much as we can,” he says. Licensed real estate agents as well as developers and builders—Deicorp keeps everything in house. ▲ Deicorp chairman Fouad Deiri in conversation with The Urban Developer ’s Adam Di Marco at the Sydney Residential Summit on May 8. “You really need that integration, from site acquisition to handing over the keys for purchase. “A lot of these larger projects have been knocked about during Covid, and unless you are integrated, you can’t make these larger projects work.” But Deiri admitted that NSW is not a state conducive to new entrants. “I say this with regret, because the industry needs more developers and I just don’t see how. This housing shortage is a major problem and I think it will only get worse.” Affordable and social housing One of the biggest factors impacting ownership and renting in NSW, and indeed the rest of the country, is affordability. Deicorp had a long history of working in this space, Deiri said, with long-running partnership with the likes of the Aboriginal Housing Company delivering projects such as the 62-home Pemulwuy project that helped transform the old Eveleigh Street into a new community for Aboriginal and Torres Strait Islander residents. “We love working with people we can help, and assisting where we can,” Deiri said. But this can become more and more difficult in the current high-cost environment, even with major planning and policy changes being introduced—major changes are being made to the Housing State Environmental Planning Policy (SEPP) to encourage more affordable homes by allowing increased floor space ratios and height, particularly in infill areas and transport-oriented developments (TODs). “We’re trying to solve these problems, but these policies … they haven’t been talked about overnight and the problem we have now with the sector, which no one saw coming, is that construction costs [skyrocketed] and that happened over an 18-month period. “So at that time when they were coming up with solutions for affordable housing…the cost base to deliver apartments was [down here], and now it’s up here. ▲ Renders of Deicorp projects (clockwise from top left) Melrose Central at Melrose Park, Hyde Metropolitan in the CBD, and Marquet and Mary, Rhodes. “That’s the challenging problem the Government, any government, is facing [to deliver more housing]. “These reforms won’t come through in a matter of months, like the Government might like, because there are some real challenges to deliver on these reforms with cost escalations.” Addressing affordability Deicorp’s strategy has long been diversification, not just in terms of Sydney locations, but also in different project sizes and housing typologies. “We’ve been following train lines from the start, we try to be up close to transport-orientated suburbs but one thing about Deicorp, we’re not focusing on one area of Sydney. “We have projects scattered around, whether it’s Tallawong or Marrickville. “Out there, 70 per cent of our buyers are first-time buyers and owner-occupiers. We’ve actually sold apartments where they have walked into the display suite [at another location] and couldn’t afford it, then have gone out to Castle Hill because they are working in Parramatta and bought there. “We average about 100 sales a month, and it’s a lot of work and it’s a lot of good people constantly chasing data... “But what appeals to me the most is that most of our buyers are owner-occupiers and first-time buyers ... and what we’ve got is variety within our products.” Keeping costs down is a huge part of why Deicrop’s model works so well, Deiri says, even with a staff of 200 across multiple business functions. “What is challenging is to keep them affordable, it’s important to get the land at the right price and to be able to build them within your own organisation like Deicorp does—it gives us that advantage. “We also still have the same contractors as we’ve worked with [for years].” Deiri said that although there were major struggles, the development industry in NSW was entering a new era, in no small part to the efforts of the likes of Building Commissioner David Chandler, who has announced his retirement . “I don’t think I’m doing much different today than I did 20 years ago,” Deiri said “We are doing volume, but whether it’s a block of 50 or 500 [or even 1600, like at its massive Hills Showground development ], the basics are the same. “Those are the two important rules—stick to the basics, and stick to what you know. “When you move outside that, you have problems. It’s getting a lot more complicated out there, and the rules are changing rapidly.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] ‘Grab the Reins, Hold Tight’: Fouad Deiri

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