In today’s show we talk to former Olympian Mark Stockwell who has taken his family development company to new height.
Kevin: My next guest is Mark Stockwell. Mark is the managing director of Stockwell, a Queensland business based in Brisbane that focuses on property development, design, and construction, and also funds management. He is responsible for a number of great developments around South East Queensland.
Mark, thank you for your time today on the show.
Mark: My pleasure. Good to be up early.
Kevin: Yes, indeed. It is good. It’s a nice start for the weekend. Mark, I want to talk to you about your developments and what’s coming through the pipeline, but just before we do, you come from an exceptionally competitive background. We’ve talked about that on the show before. As an elite swimmer, you represented Australia at the ’84 Olympics. Was that ’84?
Mark: That’s right. You’re a sporting historian, as well.
Kevin: Yes, well, a good producer. Also the ’86 Commonwealth Games. How has that prepared you for business?
Mark: I think, by far, my biggest influences were my father and mother; I grew up in a business family, but through sport, it opened a lot of doors. But the thing about doors opening, you have to be able to walk through them, know which ones to walk through, and when you get in there, to behave in a way that you can get the business done.
Those things about patience that you learn, being dedicated to an outcome, the extreme patience you have to have when you set your mind to say, “In four years’ time, I’m going to go to the Olympics; I want to be the best in the world,” those sorts of things, you do take a lot of confidence into business, and you do take a lot of personal knowledge on how to cope with pressure situations, how to stay calm when the GFC is falling around you, because in competition, when you’re standing up in front of 20,000 people and they’re all cheering for the Americans or something, you have to be able to sit there and stay focused on what you’re doing. Those sorts of things, I think, have really helped me a lot in business.
Kevin: You mentioned there about your parents. I believe they formed the company Stockwell Property Ltd. There must have been some great conversations around the kitchen table as you were growing up about what they were doing. Did that contribute to where you eventually went?
Mark: There were two things. One is I used to get dragged around construction sites with my old man. Then when he was busy, he used to throw me in with the supervisors, and they would drive me around in the utes, and I was on the two-way radio, thinking, “How special am I?”
The other thing was my mother was the company’s secretary and involved in the business. Back then, in the ’60s and ’70s, there weren’t too many women in high-profile positions, so she was a bit of a suffragette in her own way. As a result of Mum being involved in the business, it was always discussed around the kitchen table. Work and life have always been intermingled in the Stockwell household.
Kevin: Of course, your mom and dad were very successful with the business, as you have been, but you’ve taken it into different directions, as well, like funds management and so on. How did you identify a hole in the market, and why did you diversify that way?
Mark: Into funds management?
Mark: The big thing for us has been looking at what are other income streams and other businesses that we can be involved in that use our core skills in building that business? So, it’s not like we’re out there in new areas. The funds management ticks both of those boxes in the sense that we use all our property knowledge, because at the end of the day, funds management, it’s the property that draws in income. That was that.
We saw the opportunity where interest rates were dropping. What we knew about interest rates dropping, we could lock in to long-term debt, five-year debt, and actually, as the interest rate becomes less and you gear it the right way, you can return a greater cash return to your investors.
So the investors are sitting there saying, “I want an 8% return,” but you can actually go and gear an asset at a 55% loan-to-value ratio paying 4.5% interest, so you have a 3.5% margin that gives you the opportunity to play with. That’s really the opportunity that we saw and jumped on that.
Kevin: Of course, there have been some big challenges in recent times. We’ll cite APRA and its tightening of the investor market – that has to have some impact on your business – and now the discussion is around negative gearing. I guess they balance each other out a bit. What is your feeling on negative gearing?
Mark: My feeling is governments can’t help themselves. Negative gearing and property investment is the cornerstone of an investment strategy for just about every Australian household. Once people and families own their own home, the next thing they’re looking for is that investment asset. I think because people feel comfortable with residential, it’s an obvious investment.
Negative gearing really does fire the whole economy. I sit there and I scratch my head, and I think construction and property is the one area that’s actually working for this country at the moment. From a state point of view, the state government should be outraged about this because what’s going to happen is it’s going to have a direct impact on their stamp duty returns.
If you talk to the Treasurer of Queensland at the moment, the thing that’s holding up the budget for the Queensland government is stamp duty that’s being driven out of residential development in and around the CBD of Brisbane.
You have a situation where construction jobs and government revenues, particularly at the state level, are going to be impacted. That’s going to help the federal government at their level, but at what cost? I think groups like the Property Council and businesses like mine, I sit there and go, “The one area that’s working, why do you want to mess with it?” I’m not a big fan, Kevin, as you can tell.
Kevin: I can tell that, and that’s echoed right around the country, I think. I’ve had commentators tell me it’s a bit like low-hanging fruit; it was one of those easy ones to pick on that’s going to get you some votes. Maybe not. We’ll have to watch that, anyway.
Mark: I just think there is a lot of middle Australia who actually own an investment property. At the moment, there are not too many properties that have to rely on negative gearing because interest rates are so low, but when that moves again, it creates that buffer for investors to cope with rising interest rates.
I think here, again, maybe part of it, what the government should be saying is, “In GST, instead of 15%, it should be 12%. Super, we should take a little bit there, and negative gearing, we can look at something there,” but to go and hit one sector over another is not very wise, I don’t think.
Kevin: Yes, because negative gearing doesn’t just apply to property, of course. That’s the one that they tend to pick on all the time. Negative gearing goes across quite a few investment asset categories.
Mark: Yes, that’s true.
Kevin: Mark, great talking to you. Thanks for your time. Much appreciated.
Mark: Thanks, Kevin. Cheers, mate.