Developers ‘Buddy Up’ to Keep Building

“You don’t trust me at all, do you?” the developer says. “Well, I’ll tell you what,” replies his new builder buddy, “you make it through the year without sending anybody to the wall, especially me, or yourself, then I’ll start trusting you.” Switch out the pair of mismatched cops chasing bad guys in the Hollywood buddy blockbuster Lethal Weapon with a development duo and that’s how the script would likely play out. Not on the mean streets of Los Angeles, however. Instead, in the volatile landscape of South-East Queensland’s development sector—where the times are as tough as they get in terms of stacking up and getting projects out of the ground. It’s all a matter of trust. With no signs of the construction headwinds abating anytime soon, developers in the fast-growing region are increasingly drawing on the power of friendship. Buddying up to maintain momentum in project pipelines, they are heeding the oft-uttered words of not only US presidential candidates but also the likes of billionaire Warren Buffet, widely considered the greatest investor of all time. If you want to go fast, go alone. If you want to go far, go together. Collaborating with trusted industry colleagues—including family and longstanding friends with skin in the game—is by no means a new phenomenon in the development sector. But few would argue it is now becoming a necessity to get projects up. Good mates since their early high school days, Consolidated Properties Group boss Don O’Rorke and Hutchinson Builders chairman Scott Hutchinson, have paired up on more than 200 projects during the past four decades. ▲ Consolidated Properties Group boss Don O’Rorke and Hutchinson Builders chairman Scott Hutchinson. Main image: The pair’s Monarch Residences. “It’s not like Scott and I looked at each other back then and said ‘Let’s build buildings together for the rest of our lives’—that was not a conversation we would have had,” O’Rorke muses. “Obviously, however, over that period a level of trust and mutual respect builds up. That has always been part of our relationship but it is even more important now because construction is so volatile. “The two big issues the industry is facing are productivity—things just take longer and cost more—and capacity. We don’t have the capacity as an industry to deliver the demand that’s out there. “And the collaboration piece is what it’s all about…I just think in these times when there is an undersupply of construction services, you’ve got to look for the edge. And the edge is relationships. “So, if you want to be on the right hand side of the ledger—that is, those that are getting their stuff built—you’ve got to be collaborative, you’ve got to give people enough money, enough time and be respectful. “Otherwise, you’re on the left-hand side of the ledger, which means your project’s just not going to get built.” The latest to join the sector’s buddied-up ranks are Pikos Group founder Pedro Pikos and Aniko Group managing director George Mastrocostas, who will spearhead development of the $350-million Gaia residential development on the banks of the Brisbane River. Pikos says the partnership was formed off the back of an intergenerational friendship between the Pikos and Mastrocostas families. “Gaia is able to be delivered because of that 25-year friendship between our families that has stood the test of time,” he says. The Brisbane-based development and investment group was founded 35 years ago and has completed 65 projects worth $2.7 billion and has $1.2 billion of projects in its current pipeline. “We’ve developed an extensive relationship network,” Pikos says. “It’s these close relationships and depth of experience we can now rely on and trust in these challenging times.” ▲ Aniko Group managing director George Mastrocostas and Pikos Group founder Pedro Pikos with a render of the $350-million Gaia development. “This partnership reflects the resilience and co-operation required to deliver ambitious projects like Gaia.” A decade in the making as Pikos pieced together eight lots to amalgamate a 5285sq m site fronting the river, the reworked Gaia development at 108 Lambert Street, Kangaroo Point, will comprise 215 apartments across two towers. Pikos says the decision to partner with Gold Coast-based Aniko Group reflects the tough construction environment that is undermining feasibilities and forcing an increasing number of projects to be shelved in the River City. “It’s incredibly challenging to find a builder in Brisbane,” he says. “Contractors are openly preferencing public sector work and as a result, the private sector is finding it difficult to lure them back to residential development. This is contributing to the sharp fall in the number of apartment projects being delivered in South-East Queensland, at a time when we are facing our worst housing crisis on record.” Pikos says being able to draw on the longstanding relationship between the two families, and their combined industry experience, had “presented a way forward” for Gaia. In response to the project’s scale and complexity, Mastrocostas has partnered with former Condev chief executive Neal Moores to form M2M Constructions—a for-purpose construction entity dedicated to delivering Gaia. “For the foreseeable future, we can’t see the market accommodating the traditional delivery model that we’ve all become accustomed to,” Pikos says. “In these challenging times comes the need for innovation and fresh thinking.” Pikos and Mastrocostas are expected to break ground on Gaia next month. Meanwhile, on the Gold Coast, two other families that play together are staying the course together through the tough times. Gordon Corp boss Tim Gordon and billionaire pub baron Bruce Mathieson have unveiled plans for a luxury sequel to their $300-million The Mantaray Marina and Residence project under construction on The Spit. ▲ Gordon Corp boss Tim Gordon and billionaire pub baron Bruce Mathieson. The duo have lodged a proposal for a nine-storey development comprising 47 high-end apartments on a 2185sq m Palm Beach site fronting the Gold Coast Highway and exclusive dunal strip of Jefferson Lane. But it seems that’s just the beginning for the partnership. “We’ve got other future projects we’re working on currently with the [Mathieson] family that’ll come to market over the next two or three years,” Gordon says. “Trust and transparency—they’re the key. “It’s not going to get any easier out there. It’s going to continue to be difficult, particularly in South-East Queensland with the government work that’s coming on. Then you’ve got the Olympics and all the infrastructure and new stadiums to be built. It’s all going to layer on top of each other. “So it’s all about building relationships and delivering projects through those relationships … that’s a big part of the market in the current environment. “It’s all about the people. You get the right people together, things work. You get the right partner, like the Mathiesons, it gives you a certain level of comfort and makes life a lot easier. “There’s inherent benefits there. Having the Mathieson name involved in a project gives it greater credibility…and when you call on financiers it does significantly help. Bruce has owned and developed over a thousand pubs in his time and is a significant shareholder in Endeavour Group and Star Entertinment Group. So it opens enormous doors.” Gordon buddied up with Mathieson on the ultra luxury The Mantaray Marina and Residences project five years ago while having a beer on a Friday night at the Mermaid Beach Surf Life Saving Club. “That’s where it kicked off,” he says. “But we’ve been having a drink and a punt and a run on the pokies occasionally at the same surf club for 20-odd years. We lived in the same street in the same neighbourhood and crossed paths all the time. “And now it’s also become a wonderful working relationship—a partnership of integrity and honesty and transparency. All those things are really important to both groups … and also Bruce and I drink the same beer, Carlton Draught.” ▲ Frank Licastro’s Frank Developments has teamed with cousin and builder Joe Licastro’s Signature Property Projects on Della Rosa at New Farm. With boutique residential projects under way in inner-city Brisbane and on the Surfers Paradise beachfront, developer Frank Licastro says drawing on trusted industry connections has been crucial to progressing projects. “It's a matter of trust, absolutely,” he says. “And if you can get through a time like this, then it shows market confidence. Especially with buyers paying top-end money, you’ve got to keep up that movement on site and having a partnership is definitely key.” Licastro’s Frank Developments has teamed with cousin and builder Joe Licastro’s Signature Property Projects on Della Rosa, a four-storey project comprising 12 apartments on a 1074sq m site at 121 Oxlade Drive, New Farm. His workbook also includes the 25-level tower Mira Residences with 11 double-storey apartments along Garfield Terrace at Surfers Paradise for which he has had to put together his own construction team. Not only have the partnerships helped with funding and feasibilities, Licastro says, but also “we’ve been able to pull time back as well and get things done a lot faster”. “Joseph’s construction background, but also having that development mindset and design eye, really brings something to the table,” he says. “It's always been a bit of a dream for us to have grown up in New Farm and to do projects together in New Farm…to continue, I guess, both our legacies in the area. “So we've probably got another three projects planned together, which are to come in the near future.” Licastro says the collaboration with his cousin “helps us cover a lot more ground together”. “Because we know each other's strengths and weaknesses and keep in our lanes, it kind of makes it a little bit effortless in a way…having that sort of trust streamlines things a lot more throughout the process. “But I’ve heard it also can go very wrong if you don’t have that relationship.” O’Rorke says he genuinely believes the industry has entered “a new era of the relationship between builders and developers”. “It’s a sellers market for construction,” he says. “There is much more demand for construction than there is supply. The old days of developers lording it over builders and treating them inequitably are over. ▲ A render of the Licastro’s Della Rosa four-storey residential development at New Farm. “So, you either sort of get on the program, or you don’t get a builder. “It’s an interesting conversation to be having at the start of the Olympics build,” O’Rorke says. “How are we going to deliver the Olympics that we’re so excited about that has an absolute, finite completion date? I’d like to think collaborative contracting will have a significant role and will be here to stay. “Everyone I think now realises you've got to work together to get projects up.” But he says with government jobs offering guaranteed payment and good margins to builders “those of us in the private sector will have to work hard on our relationships to get stuff done”. O'Rorke pulls no punches when asked how difficult it would have been to turn dirt on Consolidated Properties’ $450-million, 224-apartment project Monarch Residences on Brisbane’s riverfront at Toowong without his enduring friendship and working relationship with Hutchinson. “Impossible,” he says, given the prevailing industry challenges. “We had to spend more money [on construction documentation] before the job to get to a price than we’ve ever done in our 45-year history. “But we would never have got the project off the ground without Scott.” And therein also lies the reason why the buddy movie is one of Hollywood's most bankable film genres. Here endeth the lesson. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Developers ‘Buddy Up’ to Keep Building

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