Property Section, Australian Financial Review,
published 17 October 2006
By Kathryn HouseJohn Hindmarsh is tapping into China's love affair with cars and its changing socioeconomics with a portfolio of car parks and retirement villages.
Two decades ago, Canberra property veteran John Hindmarsh was among the first tourists to visit China as the communist state opened its doors to the West. Today he is at the forefront of a new charge into China by businesses keen to tap into one of the world's emerging economic powerhouses.
In the past four years, his Hindmarsh group has amassed a major car-parking portfolio in China after aligning itself with Kingdy Parking, Beijing's largest private car park operator.
Within four years, Hindmarsh expects to have as many as 400,000 parking spaces under management in five cities as China's love affair with cars puts an estimated 1 million new vehicles on the road each year.
And it is not just car parks in Hindmarsh's sites. Within the next 12 months, Hindmarsh hopes to open its first retirement village in Shanghai to tap into what is one of the fastest growing property sectors in Australia but still a very embryonic market in China.
"There's a great social change going on", says Hindmarsh.
"The one-child family results in a large number of grandparents being supported by a smaller number of children."
For the wealthy Chinese, particularly those in the political arena, Hindmarsh says this has resulted in a shift away from the traditional nuclear family support network. Hindmarsh wants to be at the forefront of that shift.
Hindmarsh has aligned itself with a Chinese partner - one which has already been a joint venture partner in one of the company's Australian projects - to develop retirement villages throughout the region.
The first is expected to open next year in Shanghai and will accommodate about 400 units.
At the same time, Hindmarsh is pursuing ambitious plans for its China parking business.
Hindmarsh already manages and/or owns about 11,000 parking spaces in Australia under its EziPark banner.
In the past four years, it has built a 40,000-strong car space business in China, which it expects to increase tenfold by the end of the decade.
It has not been all smooth sailing.
Hindmarsh admits that with the Chinese, particularly government officials, not "exactly happy about paying parking fees", the company has put a strong emphasis on introducing the sophisticated equipment it uses in its Australian car parks so customers feel like "they're getting something for their money".
While all its parking equipment is manufactured in Europe, Hindmarsh wants to establish its own capability in China and potentially import equipment to Australia.
For Hindmarsh, the key to success in China has been finding the right partners. "I don't think anyone going into China can do it on their own," he says.
"What you might agree even in one district in Beijing might be completely different in another.
"You really need someone who understands the political environment…there's a fair bit of trust involved."
Another key for Hindmarsh was hiring a key Australian-Chinese employee to help bridge the cultural and business boundaries.
"Without having someone of that nature on board I wouldn't even have contemplated China."
Being from Canberra has also been of significant benefit in his eyes. "The Chinese see it as the political heart of Australia and they put some reliance on that relationship," says Hindmarsh.
The Australian Capital Territory government has given the company a subsidy under which it allows ACT companies - mostly university groups - to use its Beijing and Shanghai offices.
For Hindmarsh, the expansion into China is all about diversification.
Like many businesses, the private Hindmarsh group flew close to the wind in the early 1990s when the Australian property market collapsed.
The saving grace for the group, which was founded in 1979 as a construction company, was its American property interests.
Before the market tanked, Hindmarsh had bout 500 US condominiums.
With the US property market recovering before Australia's, Hindmarsh was able to renovate and on-sell the units and cover its local commitments. "It saved our bacon," says Hindmarsh.
"It took five years to crawl out of the hole. Like just about everybody in the property industry I was heavily overstretched by the early 1990s.
"You can either sink or you can swim. The survival decision is a pretty easy one."
Architecture was Hindmarsh's initial focus but he never finished his university course.
Instead, he switched to a building course at the University of NSW realising that he was "more focused on the delivery than the design".
From university he moved to Papua New Guinea where he worked on building an army camp outside Port Moresby.
Then it was on to the UK before Hindmarsh relocated back to Australia and shifted to Canberra to work for AV Jennings before launching the Hindmarsh Group.
The harsh lessons of the early 1990s led Hindmarsh to significantly diversify the business. It now has five divisions: construction, property, retirement, venture capital and parking.
Funds management is the next avenue of opportunity and last month the company launched its first property fund in a joint venture with Babcock & Brown.
Hindmarsh says his goal has been to "aggressively embrace the market opportunities".
Last financial year the company generated revenue of just over $200 million, double what it did three years ago. This year, revenue is tipped to be about $240 million.
Construction is still the highest revenue raiser but it is, Hindmarsh acknowledges, a low-margin business.
The real profit driver is development - projects like the group's joint venture Flinders Link office complex in Adelaide, which is in the process of being sold for a record price of more than $150 million.
Hindmarsh is also prepared to take some chances.
Through his Australian Capital Ventures business, he has invested in a range of start-up companies over the past four years.
It is not just philanthropic - the business turned its first profit last year - although Hindmarsh says "watching the younger entrepreneurs and their energy is incredibly rewarding".
One of his investments is Simmersion, a Canberra-based company that has developed a three-dimensional urban modelling tool.
It allows developers and town planners to see their projects in a highly realistic virtual environment and assess issues such as overshadowing to help speed up the approvals process and offset potential legal actions. Hindmarsh is using the technology in one of its few Sydney projects, a boutique apartment development at Elizabeth Bay.
Other endeavours include a push into the Australian retirement sector.
The group is developing five retirement communities, four in Canberra and one in Adelaide. They are all targeted at the top end of the market.
While Hindmarsh employs the traditional deferred management fee structure in its villages, the company is assessing different possibilities, such as shared equity mortgages.
"We're all searching for the right model," says Hindmarsh of the Australian retirement village sector.
"We're going right back to square one examining every possible option."
The company is also looking to develop a different style of village to cater for the "active aged". "Downsizing doesn't seem to appeal a lot to people," says Hindmarsh.
"There is a very strong market for people who are in the higher socio-economic group to buy 150 to 200 square metre properties and they still want their two cars," he says.
Another focus has been aligning with major Australian universities wanting to generate extra revenue from their land banks.
Hindmarsh is also in the midst of constituting a company board which will have at least two independent directors.
A step towards listing?
Not at this time, with Hindmarsh believing the group is not of the size to attract serious institutional support.
"There's this balance between access to capital and the flexibility you have as a private company and I've largely opted for the flexibility," Hindmarsh says.