Investor In Focus - John Monaco
From buying his first property in regional Western Australia at just 22, John Monaco has taken a family commitment to property investment and turned it into a large-scale commercial and residential portfolio and a successful property development business.
Not even Perth drivers hogging the right lane have been able to slow down this country boy turned major property developer.
From buying his first property in regional Western Australia at just 22, John Monaco has taken a family commitment to property investment and turned it into a large-scale commercial portfolio and a successful property development business.
He shared with Australian Property Investor Magazine his strategic and philosophical approach to national property investment, whether alone, with family or in a business context.
You’ve built up a quite formidable portfolio of residential and commercial property but your formative years were more humble. Where did you grow up and what did you learn from your parents about business?
A strong work ethic and good values!
And the importance of education. Even though my father finished school in Year 4 to work on the family farm in Italy, he was a strong advocate for all his children obtaining an education.
My parents immigrated to Australia from Italy separately and met and married here. Neither spoke English on their arrival and yet they were able to learn enough to get by. They were sent to country WA and my father worked in the timber industry on weekends and on a farm (in Hamel, near Waroona) during the week. He would finish work on the farm on a Friday night in Hamel, jump on his motor bike, ride to the timber mill in Manjimup and then get back to Hamel on a Sunday night to start all over again on Monday morning. Eventually he married and bought his own farm. I still remember his excitement when he paid off the farm. My mother raised five children and worked tirelessly on the farm.
How did you move from gaining a Curtin University business degree to buying your first property?
My parents sold the dairy farm in Hamel to Alcoa in 1977. We then moved to Bunbury. Eventually, the family built a block of units in Bunbury and continued to acquire other residential properties in Bunbury. That was the start of my interest in property. I completed my degree at Curtin in 1985 and two years later, at 22, I purchased my first home.
For how long and how many residential properties did you invest in before venturing into the more adventurous realms of commercial property investment and development?
The residential properties acquired in the family partnership were done so by my mother and on her passing in 1989 (my father died in an accident in 1979), the asset pool was evenly distributed to each of the siblings. Eventually our eldest sister married and the four remaining siblings purchased her share. In about 1993-1994, my brother and I acquired the interest in the properties from my other two sisters. In 2002 we divested all residential properties. This took about two years to complete.
In June 2003, I started a role as CFO of National Lifestyle Villages (NLV), a business where land acquisitions and capital-intensive developments form a significant component of their business model. I was responsible for organising due diligence and financing of land acquisitions and was heavily involved with developing the villages. I also gained valuable experience in lease development and negotiation. The learning that took place in my various roles throughout my career assisted greatly in knowing how to conduct due diligence. Completing a thorough due diligence process without this type of experience is fraught with danger. It’s a bit like “you don’t know what you don’t know” and that can be dangerous.
In late 2004, a medical centre was the first commercial acquisition. This was my first taste of commercial at a personal level and given the experience I had attained in my earlier career in Australia and overseas, I was in a great place to proceed with the due diligence in a well thought out manner.
Family partnership and collaboration has always played a big part in your strategy. Are you all still speaking to one another and what advice would you offer for those conducting property deals with family and friends?
Regardless of whether it’s family or friends, I have learnt that it’s important to have some rules of engagement and a formally agreed exit strategy in mind before you start investing together. People’s agendas and what’s important to them change and this drives their decision making. Issues such as retirement, partners being in different stages of their life cycle, partners wanting to use their equity to do something else, children and wives/husbands inter alia all come into each investor’s consideration. When multiple people become involved in any decision-making process, it can make acting expeditiously frustratingly difficult. This can lead to conflict. If the exit strategy isn’t in place, it can make the unwinding of the business partnership problematic.
Another consideration is that in partnerships, each partner normally brings in different skill sets. Sometimes, a partner(s) may simply be a silent partner and the partnership is run by the other partner(s). In all instances, determining the appropriate levels of remuneration commensurate with their skill set is important. This analysis should be completed at the beginning of the partnership and reviewed regularly. Having an independent party determining the remuneration is a sound approach.
You’ve been a significant investor in commercial property in Western Australia. Tell us about those investments and share a bit about the research process you apply in determining their viability.
I tend to make decisions as to whether I intend to pursue the property within a few minutes. I can quickly determine what’s important to me about the property and whether the property achieves that expectation. The feel I get from a property is a major determining factor. Once I am comfortable with the property, I then undertake a more detailed due diligence to avoid any unwanted surprises.
I recall seeing a property not that long ago which from the outside had a lot of kerb appeal. On further investigation, the multi-storey property did not have a lift and to have one put in was going to mean that a disproportionate amount of the Net Lettable Area was going to be lost. The current owner had also sold off its capacity to add additional floors, which meant it wasn’t going to be possible to add value to the building.
Having invested so heavily in Western Australia, what has been your exposure to other states and are there plans for further expansion east?
As I have been running the investments autonomously, I felt in 2013 that my exposure to the WA market was too high. That was when I started looking on the East Coast and conducted numerous due diligence investigations that helped me familiarise myself with the market. In 2014 I found a property in the Melbourne CBD that I thought would make a very good long-term investment while balancing out the overdependence on the WA market. That has proven to be the case. While there has been a falling and now stagnant WA market, the market in the Melbourne CBD has more than balanced the reduction in equity.
I will continue to look at opportunities I consider to be good long-term investments. When it comes to new acquisitions, a building will either appeal to me or it won’t. For example, I loved the architecture of the Melbourne building and its characteristics. In going through it, I could see that it had great bones although it needed some work. I was able to determine what was required to improve the return on that particular property.
For 13 years, you’ve been Director of Monaco Developments. Tell us about the company’s main objectives and how has it been doing business during such an economically uncertain time?
Monaco Developments at its core is about new developments. It commences where the client thinks about wanting a purpose-built development to when they move in to their new development. My objective is to make that process hassle-free for the client, with all the responsibilities resting with Monaco Developments. I help the client by providing them with what they want in a new build while mitigating the impact to their business and their staff. In a lot of cases with new developments, staff members of the client are asked to project manage the development. This takes those staff away from their core business. Unfortunately, this is not what they’re good at and leads to major cost overruns and an inferior finished product. My approach ensures there is minimal impact to the client’s business and the client gets what they want.
To date this approach has worked incredibly well. The highest percentage of variations on a project to date is 3 per cent and these were all due to changes requested by the client. It is really important to note that all developments I have been involved with have been completed on time and on budget.
Once the project is completed, I will generally retain ownership of the property in the long term and add that asset to my portfolio. I have in more recent times however agreed to completing the project for a client and handing the completed project to the client. In those cases, they will fund the complete development.
In recent times and due to the pandemic it has been more difficult to evaluate projects, particularly with the interstate travel bans. This time has allowed me to reflect on current investments and look to the future. There are currently several opportunities with new developments and existing builds that I am exploring. The bureaucracy surrounding developments continues to make them more difficult than they need to be. Hopefully there will be some changes to cut red tape. The lengthy decision-making processes of local governments are another frustration.
With adult-aged children, what are your lifestyle goals from here and how does the future of your investing help achieve those aims?
I genuinely love what I do. I really enjoy the interaction with clients and the builder alike. I love being able to achieve a great outcome for the client while working towards completing their development. I am very decisive and so I deal with issues and questions as they arise. Instinctively, I have found that being open and honest with all the parties involved with the development is by far the best way to proceed. This approach has eliminated cost overruns and unwanted surprises for the parties involved.
I don’t aim to be the biggest builder but I aim to deliver a project that the client is going to be incredibly happy with. From my perspective, it’s pointless taking on too much work and having a disgruntled builder or client with the flow on effect that it damages my reputation. These values continue to drive me. I don’t see this changing and can see myself running Monaco Developments for a long time.
I have two children who have both done incredibly well academically and most importantly, are great human beings. I am incredibly proud of them both. I look forward to continuing to be part of their lives and seeing them continue to progress their careers.
If you could live anywhere in the world with all your family friends, where would you choose?
I’m a pretty simple guy and I really enjoy Perth and the south west of WA and what it has to offer. I travelled extensively in my mid 20s and after those adventures found I liked being back in WA. Perhaps in due course, I would like to spend some more time in New York and Montreal with extended family, which is where three of my father’s siblings settled. The idea of some extended stays in Italy where my parents came from is attractive.
What’s your favourite and least favourite thing about living in Perth?
What I really liked about growing up on the dairy farm was the greenness of the countryside in winter. The rolling hills and the greenness was just stunning. We don’t have much of that in WA except for winter in the south west. I particularly enjoy driving down the South West Highway in winter from Pinjarra, passing through Waroona and Hamel and through Harvey and Brunswick on the way to seaside Dunsborough. I would encourage people to take that route on their way down south.
My least enjoyable aspect of living in Perth is the lack of courtesy on the roads and, more specifically, drivers not following the “keep to the left” rule on highways. With that being my least favourite aspect of Perth, it highlights how much of a great place it is to live.