The Way Forward

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-By John Boley

Michael Elliott is a busy man with a mission. As chief executive of MAE Synergy Pty Ltd, he wants to grow the company and its partners to become no less than “the largest provider of affordable housing in Australia.”

That’s quite a target, but Michael repeats this several times during our all-too-brief chat. A progressive building company or developer in, say, Western Australia or Queensland might wonder, hearing this Victorian company announce its intentions, if he intends to provide new competition in an already difficult market. But no, competition is not what Synergy wants to provide.

Synergy wants to get together with suitable companies nationwide via a mix of acquisitions, mergers and partnerships, streamlining the operations involved in land, development and construction and bringing as much as possible of the ‘back-of-house’, non customer-facing part of the business under one roof, as it were. Michael accepts the comparison with the medical profession, where the concept of general practices run as a series of independent but interlinked companies enables the doctors themselves to spend more time with patients and less with paperwork and to ensure vital activities such as accounting and compliance can be kept up to date more cost-effectively by specialists in those disciplines.

The common thread here with the building industry is that the various compliance issues – many but not all OH&S-related – are increasing almost daily. For an individual small-to-medium sized company it is becoming increasingly difficult to keep up with the regulations, and increasingly expensive to either employ or outsource the expertise to deal with it. Michael Elliott is convinced now is the time for builders to form a kind of collective. “It’s the better way to go, with lots of people all driving in the same direction.”

He himself is (‘only’, one is tempted to add) 33 years old and grew up in the Melbourne suburb of Sunbury. After leaving school, he wanted to taste the “real world” and spent a year concreting. “I was doing factories around the ring road, that sort of project. I thought it was good, so I borrowed 5,000 dollars cash, paid a deposit on a block of land and resold it before title and before it was due to settle and made a decent profit on it. I did that three times and was able to buy my first development site. It was heritage-listed; I thought it was a bargain and didn’t realise what that meant.” Unable to afford assistance or consultancy for planning and other preparations, he did it all himself and then went to a bank to get a loan. “They said ‘we won’t touch you’. So I had to organise my first syndicate. Went to get prices from builders and I almost fell off my chair! I thought ‘there goes all my profit.’” Learning the hard way, we might say, Michael obtained his building and commercial licences and real estate permit and started MAE Pacific in 2003. The company has grown considerably since then, offering affordable houses across Victoria.

A little over a year ago, with the mission to become the largest provider nationwide firmly in his sight, “we merged with a publicly listed company from Malaysia to provide the support through capital to achieve this vision, a five-year plan to achieve that national footprint and scale. What we would like to achieve is to replicate the success that the publicly listed company had in Malaysia and get ourselves to a scale of an IPO here in Australia within five years.”

Michael emphasises his own mercurial background to point out that he is looking for people in a similar mould to join the mission. “What we are looking for is generally young. They don’t have to be actually young people but at least young at heart, people with energy, people who really want to achieve a bigger vision. I think we can all do that together. To achieve all the synergies that scale brings really requires people that have a vision and want to be part of something more.” This is not about how to build a house. It’s about an attitude to business survival and growth in the challenging environment of the next few decades.

“I think that we are visionary,” says Michael without any sense of immodesty. There is no other company, he believes, that has come from a residential background like this with the intention and plan for a public listing. Others have done similar things but always starting more from a commercial background, he says. Now, “we have to form partnerships and merge with other entities that we don’t yet have in Victoria and also entities in other states to achieve a national footprint.”

So will Synergy go out and market the homes that consumers can see and order on its websites across the nation? No, says Michael firmly. He is not trying to foist a kind of ‘standard Australian home’ on either consumers or potential business allies – quite the reverse, in fact. “We have often seen other builders who have gone interstate to seek to grow and have failed dramatically.” Usually this is because they “try to impose what might suit Melbourne and Victoria, and those systems and processes don’t actually suit Sydney or Brisbane, or the climate, or the house type, or what the clients actually want there.” Rather than impose a standardised package, “it is more about wanting to implement our system, and about the scale of operations – wanting to find builders who already have the systems suited to their particular market to form part of our group.”

The subtext suggests that ideal partners for Synergy are likely to be already successful in their own territories and at least moderately ambitious. Michael points to his already-successful partnerships with Hermitage Homes and Vibe Homes in Victoria as proof of the paradigm. A business which has a vision, with good systems and processes in place, which may have reached a point where growth is difficult and perhaps where capital is a constraint, is likely to benefit most from partnership of some kind. A typical family building firm that has reached a plateau of relative security and contentment is less likely to benefit – “why would you join up and do anything with us to grow?”

Another feature of Michael’s system is that “what we are providing through our journey is a defined exit strategy at a defined point in time [perhaps 20-30 years hence] which is our IPO event. That way people have somewhere they get a realisation of all their hard work. They can stay in if they want or they can know that they have made a good return on all their hard work at that point in time. This is another key factor that has interested a lot of people that I have talked to.”

Like most of the schemes involving GP medical practices, ownership does not have to be relinquished. “They are all driving their own business units as they were before joining us. What we are providing is the things people don’t like in business, such as corporate governance, compliance – the paperwork, basically, the things that everyone hates. We can provide synergy at the back end in all of that stuff. If you have got an extra zero on a piece of paper it does not mean you need another accountant.”

Will companies that sign up need to rebrand themselves as Synergy? Certainly not. “We really don’t want that. Why would we? If you buy or partner with a business because they are successful and they have got brand equity and everyone knows who they are, why would you go and upset that?” It is not about ego, it is about “smarts”, Michael explains. It will be good for everyone if they are able to add a ‘By Synergy’ logo somewhere down-page, for example, that would emphasise a partner’s strength, support or capital backing. “But the main thing is the current brand and who they are. If it was a family, it is still a family that you are dealing with – all that changes is that now they have extra support.”

Michael chooses his words carefully but makes it clear he believes the building industry could do with some more progressive thinking. “If you just talk residential construction, what advances have we made? Energy ratings, or build methodologies, or rapid construction processes? This is the only ‘boutique’ industry where you actually build the product out on site. If you look at the way almost anything is produced these days it is manufactured in a controlled environment to maintain quality and then delivered out in a scheduled timeframe.” But construction is a kind of cottage industry carried out on the customer’s site. You can’t change the basics, but in recent decades “we have not advanced very far, I don’t think.”

Ambition is tempered with a sense of perspective. “We don’t think we are going change the world, but we would like to make some difference. We would like to think that we can improve the way we sell homes, through more effective pricing, better quality and maybe building in a quicker time frame as well. We really believe that.” Michael wants to do for the building industry what innovative people have been doing in other industries. He makes the point already proven by Steve Jobs at Apple: “he never did market reviews to ask what the public wanted because they didn’t know what they wanted until it was designed and marketed to them. I am not saying we are another Apple, but surely we can advance this whole industry – and it’s due for a change.”

Home Automation

Call it ‘domotics,’ and you are likely to receive a blank stare, but refer to it as ‘smart home’ or ‘home automation,’ and you will get a nod of acknowledgement. For the past few years, consumers have heard the word ‘smart’ attached to countless products and services, from food and drink to snacks like popcorn and mobile phones, which no one seems to refer to as a ‘cellphone’ anymore. Yet what, exactly, constitutes ‘smart’?

July 14, 2020, 1:26 PM AEST