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Cedric Fuchs co-founded Charter Hall in the early 1990s as a multi-disciplinary property company. The property scene was grim. There was a 20% vacancy rate in the nation’s CBD office buildings. The steel-framed Harry Seidler designed Grosvenor Place, once the toast of the town, was worth just $475 million after being valued at $1.05 billion three years earlier.
Times were tough and business hard. Maybe because the $22 billion assets under management Charter Hall (ASX: CHC) of today was conceived in such challenging times, that the firm has been so resilient and successful.
Indeed, many industry observers agree the Charter Hall ethos traces back to these challenging times and the values of Cedric Fuchs, who officially retires this month, and his co-founder, David Southon, who left Charter Hall one year ago. The robust assessment and management of the risk involved in every key decision quickly became the defining modus operandum of the business, and endures more than a quarter of a century later:
“Certainly conservatism, or risk aversion is, deliberately, a critical and defining trait of this business".
“The Charter Hall management and boards over the last 27 years have made the preservation of capital a fundamental tenet of our philosophy and this thinking permeates everything we do. We pride ourselves in our properties having the longest WALEs (weighted average lease expiries) in the sector, the strongest tenants and some of the lowest gearing. The latter may mean our headline return rates can be eclipsed by more highly geared operators but we are happy to cede that territory to others who want to take bigger risks, with other people’s money. We very consciously chose to occupy the blue-chip end of the spectrum and it has served us and our investors very well. And is likely to keep on doing so.
“One of my mantras from day one has been to ask everyone here involved in each potential investment: ‘Would I put my own money in this fund?’ If the answer is ‘no’, don’t do the deal.
“A corollary,” says Cedric “is that Charter Hall always put the business’s capital alongside investors’ money in each fund, trust or syndicate we manage. And our key staff put their personal funds in the deals they work on. The management-speak these days for this is alignment. Our staff and corporate interests are aligned with that of our investors – I believe this is another critical ingredient of the Charter Hall success story.”
It’s often said both inside and outside the firm that Cedric Fuchs and David Southon are the source of the Charter Hall DNA.
“If we are, says Cedric, “the third enduring characteristic of Charter Hall that I am proud to be associated with is our corporate culture. It’s one where giving back to the community is embedded in what we do as an organisation, and individuals, through a variety of formal and informal programs, as is the emphasis we put on work-life balance. One example is that everyone at Charter Hall works from home regularly.
“I think I, and anyone working in Charter Hall, have pretty much won the lottery. Nearly every day I marvel at how lucky I have been to live in Australia, where we have never had a civil war, where we prosper, and where we have a health and education system and social safety net that is envied by most other countries. We are not perfect but I truly believe we are among the luckiest people on this earth and that is what drives me in many of the ‘off-field’ or charitable things I do. I am very happy to be leaving Charter Hall in a state that reflects many of my personal values. Warren Buffet and Bill Gates are successful guys who recognise how lucky they have been to be good at an activity that meant money flows to them and their philanthropic activities and their vow to give most of their money away should be an inspiration to the very well-off, wherever they are.”
Another personal and commercial credo that Cedric feels compelled to raise in discussing his storied journey in the Australian property industry is the importance of truth. “It’s something I harp on when mentoring young people in business. It’s at the heart of ethical behaviour and it is also a great tool. The truth doesn’t vary so takes away reliance on memory. It depresses me, and clearly a great many others around the globe, that in the greatest democracy in the world it has become a debased notion at the highest levels. One can only hope this is a passing phenomenon and not a tipping point to a very dangerous place.”
On the happier subject of nominating some of the positive tipping points in his corporate journey Cedric nominates 1997, the year that an Australian institution backed his fledgling company to launch three development funds by investing $300 million, resulting in $1 billion dollars of end value development; the hiring of David Harrison as joint CEO in 2004; the floating of Charter Hall on the Australia stock exchange in 2005; outstanding relationships with the banks during the GFC as a result of the firm’s successful track record and conservative management; and, lastly, the opportunity to purchase the Macquarie Group property platform in 2010 in their post-GFC rationalisation. “That transaction catapulted us to another level, brought in some more great people to the business and helped elevate us to where we are today.”
Cedric is quick to point out he will not be severing his ties completely with the business he helped build from scratch:
“I will continue to mentor young people within the firm and I will continue to entrust a prudent portion of my life savings to the management of Charter Hall, like many other mum and dad investors, Australian institutions and wholesale investors from 17 countries around the world.”
After a pause he notes, with just a hint of melancholy: ”Come July I think the hardest thing to get used to will be not saying ‘us’ and ‘we’, but that’s OK. It’s been the greatest of journeys, one I would never change, and one for which I will be forever grateful.”