Kerry Stokes

“He has what New Zealanders call mana, a short word long on meaning: the clout, charisma and credibility of the chief. It can’t be faked.”

“poverty pinched harder in other ways, such as being short of cash to feed the coin-in-slot gas and electricity meters in the house. Coin-fed meters were probably a better system for the hand-to-mouth lives of the poor than today’s forms of credit that lead to mounting bills. ‘Gas was threepenny or sixpence,’ says Stokes, miming feeding the hungry meter. ‘Don’t worry about credit — it just stopped!’”

“Beyond the timeless equation of supply and demand were the many but sometimes predictable variations in human nature. The man who splashes out on a crayfish is at heart much like the one buying a sports car, a penthouse or the biggest boat in the harbour. He’s a buyer with money burning a hole in his pocket — he has already displayed a tendency for impulse buying that can be tapped again.”

“‘You never told anyone what you got or what you had, as there was always someone waiting to take it from you.’ This lesson would stay with him long after he left the streets behind.”

“giant he recalls only as ‘Clarrie’ took him under his wing. Clarrie was, according to his protégé’s haphazard memory, a barrel-chested bull of a man ‘about six foot four’, originally from Tasmania. He wore a boiler suit buttoned to the neck and a porkpie hat, was the strongest man in the crew and reputed to have once been a champion shot-putter. This made sense, because he appointed himself as the wayward teenager’s coach. Clarrie wasn’t your average itinerant labourer, and he must have seen the spark of something better in the boy too. ‘He took me aside and told me I had a foul mouth and since my vocabulary was so poor I used to cover this by swearing. He told me I had one choice: his way or a clip over the ear and if that didn’t work he’d slap me around a bit. Clarrie always got his way without having to fight anyone. I was very impressed.’ The giant Tasmanian’s way was a small Spirax notebook, a pocket dictionary and a pencil. His instructions were to learn three words a day well enough to put them into a sentence that made sense. ‘He said he didn’t care how I wrote something so long as I knew what I had written,’ Stokes would recall. ‘Every time he heard me swear he kept his promise and I’d get a slap over the head — on one occasion a short right to the face that put me on the ground with the taste of blood in my mouth.’ Another time, Clarrie heard him swearing and said, ‘Give that dictionary back to me. It cost good money.’ The boy got the message. The three-words-a-day routine became a habit. It seemed Clarrie had picked him for a self-improver. When the season’s work ran out in the wool stores, Clarrie and some of the others joined a small shearing contractor’s team. Some could shear; others would be shed hands and rouseabouts. Clarrie suggested there might be room for Kerry in the team, so he went. It wasn’t until a long time later he worked out that Clarrie might have kept an eye on him because he knew Matt.”

“to survive you have to ‘buy right’ so that when you sell you still have your stake.”

“‘He told me to make sure you can get away from any situation because you never know who you’re going to be fighting.’”

“A grin sneaks over his face as he recalls this a lifetime later. No coup is so long ago or so minor that revisiting it doesn’t please him. Pulling off the job with Ron Shaw was another example of something he would do all his career: harnessing the fear of failure to overcome whatever obstacle is in his way. ‘Sweaty palms’ is his shorthand for it.”

“‘I didn’t have the affection and support of a big family, but that meant I was not distracted. I had focus. I rarely started anything I didn’t finish.’”

“But he also had something not all salesmen did: the gift of seeing things not just as they are but as they might become.”

“‘Stop thinking about yourself and focus on helping solve someone else’s problem and you’ll make money.’”

“In 1962, it was known as ‘buying on the never never’. It didn’t worry him while he was earning enough to meet the repayments because he’d stuck to his rule of ‘buying right’. He reasoned that resale value looks after itself if you buy cheaply enough. It would become his signature: to see a bargain where others didn’t — and to sell out before the pack.”

“Instead of driving to and from the office by the same route the way most people do, he took different ways every week so he could see fresh country and opportunity. One morning he detoured through Thornlie and saw ten acres for sale. There was water lying on the ground after heavy rain, which would explain why no one wanted to buy the land, even at £150. It looked swampy and the low price might make buyers even more wary. But Stokes saw something that the merely prudent didn’t. He realised the block was not particularly low-lying, and went to the Lands Department and asked to see hydrologic maps of the area. These showed that the water table was not high at that spot: the surface water covering the block was only run-off, and would soon dry out when drains were dug on other land being developed nearby. He bought the land for £100. Six months later, new drains had solved the problem and he sold the land for ‘a couple of thousand’. Multiplying his stake twenty-fold was good but the lesson learned was better. After that, he always had an eye open for waterlogged land that could be fixed — ‘meaning it was a drainage problem not a water table problem’. That knowledge would lead him three years later to a 50-acre paddock in the Kalamunda hills that was going cheap for the same reason. By the time he had it paid off he could afford the fix — huge trenches deeper than the clay subsoil.”

“Each experience reinforced the pattern. All his life, he would hunt bargains — and knowledge. He set out to learn how much he didn’t know, then to find someone who did.”

“His greatest skill, perhaps, was in finding the right people. Or, as his old friend and long-time employee John Ashby puts it, ‘the right person finds him’.”

“‘I said, “Going pretty well, Harold?” and raised the idea of a partnership. Harold said, “Maybe very long-term”, but I kept going.’ Stokes told Seymour he wasn’t after higher pay or more commission, but ‘What about a part of something?’ ‘I was expecting him to say “Five per cent”. But he said, “Finish up on Friday”. I’d just talked myself out of a job I loved.’ He later found out Seymour’s brother was returning to Perth and wanted to join the family firm. Something else struck him, too: he’d bought the same model Holden as his boss, but newer. The power of positive thinking was all very well, he realised later, but trumping the boss’s car and hitting him for a share of the business might have been a step too far. It was a hard lesson about the risks of bluffing and big-noting, one he never forgot.”

“Stokes & Associates came up with an angle no-one else in Perth had: they sent out hundreds of form letters, designed to scoop up any sellers unhappy with their current agents’ efforts along with house owners who had not considered selling before. This was to sidestep the hidebound ‘gentlemen’s rules’ of the established firms represented by the local real estate body. Stokes recalls: ‘The institute got its nose out of joint because you’re not supposed to contact sellers already with another agent. So I sent out letters to everyone.’ Exploiting this loophole outraged established agents”

“Around the time Stokes had arrived in Perth, another young entrepreneur had tried something that had caught many people’s attention. His name was Alan Bond. He had bought rural land cheaply at a place called Lesmurdie, on hills overlooking the city. Bond called it Lesmurdie Heights Estate and advertised his subdivision on television. In one weekend he and his wife Eileen took so many cash deposits she would later compare it with ‘selling fish and chips’.”

“Stokes’s imagination bolted with him. For once, ‘sweaty palms’ were not his friend. He feared that if the old charge surfaced during the hearing, his new enemies could use it to destroy him.”

“Stokes encouraged him to study positive thinking techniques revealed in the book How to Make Friends and Influence People and another called How to Succeed with a Positive Mental Attitude.”

“Adamson mentioned to Stokes that at the top of every profession were chief executives who spent most of their time ‘communicating ideas to someone else’. What mattered most was to communicate well; specialists had knowledge but the communicator was king.”

“Potential profits were huge but the cost of buying and holding the land was too much for the pair, so Stokes devised a way to share the load with their clients. As he’d done at Spearwood, he would give a generous, non-refundable deposit — often enough for the seller to secure a house — and promise the balance in a set time, usually a year. Sellers had the security of vendor terms, meaning the title did not change hands until the balance was paid.”

“Stokes and Bendat made their new relationship official. They took over a hire purchase company, Zimpel Finance and Investment, from an old client of Ellis Rhine’s, exchanging property and cash for a controlling interest. It was the first step towards building a public company that would buy, build and manage shopping centres.”

“‘When the market thinks your business is worth more than you do, go public. When it goes the other way, buy it back.’ It’s a variation on the real estate maxim of ‘buying right’ that he’d learned in his early days in Perth.”

“They renamed the company Consolidated Properties and Investments Ltd (CPI) and listed on the Perth Exchange in the new year of 1971. Stokes was managing director and Bendat the chairman. They announced the new company would move from hire purchase to shopping centres and other development. They increased its capital from $500,000 to $5 million, with Zimpel shareholders getting two 50-cent Consolidated Properties shares for every $1 Zimpel share.”

“Pitching for the job in 1966, Bendat had predicted the Plaza would attract an extra $3 million to Bunbury. By 1971, it was pulling in an extra $10 million. It was the sort of ‘mistake’ they could live with, and profit from. Shopping centres were virtual gold mines — and real gold mines were good for shopping centres too. Bendat and Stokes’s next purchase for their public company was in Kalgoorlie, one of the world’s greatest gold-mining centres.”

“Within three months, Consolidated Properties had bought shopping centres worth $2.25 million, producing income of $241,000 a year. In each case the deals were anchored by contracts with a supermarket chain, either Woolworths or Coles. The Subiaco Football Club connection with Woolworths’ Roy Liddell had made them bombproof. The financial deals were getting more complex but at street level the business model seemed simple enough. Build a supermarket and the people will come: first the smaller tenants then the customers.”

“‘Owning a shopping centre isn’t an investment — it’s a business,’ he would say. Running them meant acting as a ‘super’ storekeeper managing scores of tenants, each a small business with the potential to fail and disappear. An empty store at a shopping centre didn’t just mean reduced rent returns. It was like a missing tooth in a smile: it looked bad, and had to be replaced as soon as possible to keep up appearances. For the management, it was more like running a busy hotel than being an absentee landlord. The more centres Stokes and Bendat’s company owned, the more tenants they had to manage to guard the rent return underpinning the company’s value.”

“They were pioneers in the west, doing much the same as Frank Lowy had been doing with his Westfield group in the eastern states, which in turn was an adaptation of an American template. Tenants paid either a base rent or one calculated on turnover, whichever was greater. They also paid the outgoings such as maintenance, rates, taxes, management and insurance. If tenants thrived, so did the centre owners. Only a sustained financial downturn that squeezed daily household spending — what Stokes calls a ‘major’ in business shorthand — could hurt them badly.”

“DOING BUSINESS IN Kalgoorlie raised other possibilities. To Bendat, a mining town bursting with single men and where brothels and two-up were legal seemed the ideal site for a casino. In May 1972 Stokes went to an international shopping centre convention in Florida. On the same trip he toured other parts of the United States and Europe to look at gaming but returned unpersuaded. He was no Puritan and liked to gamble at games of skill himself, but it seemed to him casinos lured gullible people who lost money and hard people who preyed on them.”

“The idea of making money by ensuring other people lost theirs didn’t appeal to him; the whiff of organised crime behind the glitter and glamour of Las Vegas and some other gambling destinations spelled trouble he thought that he and Bendat could do without. They had agreed that as long as they were partners they would not do anything that both did not support. It would be after they split in the 1980s that Bendat got his wish to invest in gaming — eventually making a reported $24 million out of a timely stake in Perth’s Burswood casino.”

“STOKES HAD FOUND his niche: arranging finance. The series of interdependent deals involved in each new venture was a puzzle to solve, like a Rubik’s Cube in which each square represented shares or property or mortgage loans or rent worth hundreds of thousands of dollars. To keep expanding the company, they needed more money, and they were having trouble finding it in Australia.”

“Where the most money was, Stokes decided, was Hong Kong. There was a bank there with more money than some small countries. Its name was distinctly Chinese, but in 1972 the Hong Kong and Shanghai Bank was ‘the most Establishment bank you could possibly be’, Stokes would recall. As he remembers it, the sort of Englishmen who ran the bank acted as if they were defending an outpost of a vanished empire.”

“‘If you use the media to grow it will eventually destroy you. If you don’t use it, you don’t lose it. Banks and the people I deal with don’t want publicity.’”

“Stokes and Bendat were under pressure to perform as directors but there were compensations apart from their relatively modest fees: their private businesses thrived. They had already owned some properties before the float — primarily the shopping centres Stokes had retrieved from Merifield at the start of the decade — through family companies or other entities associated with them. Others they bought or built along the way. They had prudently sold several privately held properties as the market fell and kept, bought or set up independent service businesses that profited from running the shopping centres.”

“Jack Bendat & Associates built and refurbished Consolidated Properties’ property assets until Bendat and Stokes set up a building division under another name. In 1973, CPI took over Modernair, which handled the huge air-conditioning contracts needed for the shopping centres. They expanded it to handle all the other elements used in commercial-scale air-conditioning: sheet metal, heavy steel and copper piping, fibreglass ducts and so on.”

“By then they had achieved a business structure in which the public company was the mothership supporting their private companies. The two biggest of these were West Australian Property Management Pty Ltd, which managed the shopping centres, and the ABC Building Company, which did their subcontracting work.”

“‘Out of problems come opportunities.’”

“THE BARE BONES of the coup were later exposed in the takeover documents required to be lodged with the Perth Stock Exchange. The two family companies that Stokes and Bendat controlled, Retford and Villaro, had borrowed $2.8 million from Hill Samuel and lent it to North West Mining. In return, North West Mining agreed to transfer 1,430,309 CPI shares each to Retford and Villaro. According to the lodged documents, the market value of properties owned by CPI on 28 February 1977 was about $21.5 million. The statement said this was more than $4.5 million above the value recorded on the company’s books. The new valuation boosted CPI’s net assets from $1.49 per share the previous 30 June, eight months earlier, to about $3 per share. At a glance, the North West Mining offer of $1 a share had seemed generous because it was more than the most recent market price of 70 cents. But it was well below the asset backing of $3 a share — which was why the Hong Kong bankers had resisted selling their holding at $1. But for unsophisticated shareholders, rattled by three years of bad news, it was a chance to get out at what seemed like a profit. After all, the company’s recent track record had been patchy: with sales from as low as 20 cents and up to 63 cents on the eve of the offer. For reasons carefully explained at annual general meetings, it had not paid a dividend for three years. Failed and struggling shopping centre developments in the middle of a recession had shaken shareholders’ confidence and here was a way out.”

“The Perth Stock Exchange raked over the various entities behind North West Mining’s offer. Stokes and Bendat were linked to a 47 per cent slice of CPI shares through two other family companies, the Stokes family’s Vetlabs Pty Ltd and the Bendats’ Paulla Investments Pty Ltd (named after Bendat’s fortunate adult children Paul and Laura). As with Retford and Villaro, the issued capital of these two family companies was held in trust by Stokes and Bendat’s tax advisers, their solicitor Geoffrey Cohen and an accountant called Harrington. The stock exchange was uneasy about the ‘Russian doll’ layers of ownership and control of the various companies involved in the takeover, and whether minor shareholders had a clear understanding of what was happening. The exchange chairman noted in a public statement that Stokes and Bendat would obviously have influence over the trustees but concluded that the two businessmen did not technically control the trusts themselves. ‘Shareholders would no doubt be able to view the acceptance of the offer . . . in this light,’ the statement concluded. Turning to the valuation of the shares at $1, the exchange conceded the transaction did not need compulsory valuation by a qualified valuer or at least two directors — but stated it was disappointing that the CPI board had not sought an independent opinion of the offer. ‘Despite the controversy,’ Bill Rayner would note later, ‘shareholders voted with their hip pockets.’ On 29 June 1977, the company announced a 98.6 per cent acceptance of the North West Mining offer. Game, set and match to Stokes and Bendat.”