Bendat

"In 1972 Stokes was travelling overseas to seek investment. Soon the Hong Kong and Shanghai Banking Corporation was involved as a shareholder and provider of mortgage finance, and a group of investors from Bermuda were represented on the board. So began a pattern in Stokes’ business career: shuffling assets between public companies he controlled and his private companies, always with the result that he increased his personal wealth. Those who knew them at the time say that Stokes and Bendat were on a learning curve. ‘It would be, “Oh, can we do this?” They didn’t really have a strong sense of the rules, but they both learned fast.’ The 1972 CPI report shows that the board approved the purchase of Dianella Plaza from a Bendat and Stokes company. ‘The Chairman, Mr Bendat, and the Managing Director, Mr Stokes of CPI, are also directors of the vendor company, and because of the situation, both abstained from voting in the Board’s decision to acquire this project.’"

"Perth FM radio was a source of effortless cashflow for the Bendats and the Stokes, but their involvement was as investors, observers and learners rather than managers. Treasure ran the station, and as directors Stokes and Bendat attended board meetings, listened and learned. ‘Brian Treasure taught me everything I know,’ Bendat has said."

"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."

"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."

"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."

"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."

"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."

"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."

"The decision was good news for Stokes and Bendat. The transaction got the green light and the shopping centre barons became small media players with large ambitions. They were elected to the South Western Telecasters board soon afterwards. Each denied wanting to control the company, saying it was just another investment opportunity. Stokes was quoted as saying he was surprised that outsiders like him and Bendat could spy so much potential and yet ‘so few local people’ seemed to be buying shares in the broadcaster. They wheeled out their families’ respective investment companies Vetlabs and Paulla Investments, which had been used to take CPI private not long before. Between them the two companies bought a block of 500,000 South Western Telecasters shares, which was more than 20 per cent of the broadcaster. By then other companies associated with them had already crept into the share register. By late 1978 Stokes and Bendat controlled 37 per cent of South Western Telecasters. Enough to make their presence felt in the media world."

"IN THE NEW year of 1978, Stokes and Bendat decided to sell the Bunbury Shopping Centre, by then owned by a subsidiary of CPI. It had been Bendat’s first building venture in his adopted country but he wasn’t sentimental. The centre faced increased competition. It was nothing the pair couldn’t handle but they had other plans. They wanted $1.5 million to sink into ‘new ventures’, a local newspaper reported that summer. In fact, what they wanted was in plain sight of the shopping centre."

"By 1979, the Superannuation Fund’s executive had decided it should cut out the middlemen and become a player. They wanted to own shopping centres themselves rather than lending to those who already owned and managed them. The stakes were higher but so were the potential rewards — or so they imagined. Stokes had been looking around for companies to buy himself. But the superannuation fund’s appearance in the market as a self-managed group, waving a metaphorical cheque book, made him consider selling instead. Everything has a price, and those in charge of the Commonwealth Superannuation Fund Investment Trust had $2 billion to throw around. They were presumably well-qualified people of integrity but they were, at best, public servants out of their depth, in charge of what an auditor-general would later sourly call a ‘milking cow’. For Stokes and Bendat, the milk was mostly cream."

"Stokes and Bendat had turned a $2.8 million loan into ‘paper’ worth $8.5 million. This gave them effective control of assets that were soon worth at least $20 million, yielding some $2 million a year in rent. It was good to buy back the farm when…"

"The fund chairman opened negotiations by saying he wanted to buy the shopping centres at a discount. He and his fellow directors were determined that their first venture look good. The custodians of the superannuation of tens of thousands of Commonwealth employees could not be seen to do anything risky or that didn’t pay well. Stokes’s view of what happened next is that he and Bendat worked out a way to keep both sides happy. Not everyone would agree with this later. Stokes and Bendat outlined a deal that saw them get paid less upfront than the going market price, a figure based on a multiple of rent returns. Stokes explains: ‘The shopping centres were selling at a yield of about 8 per cent — roughly the value of the rent roll multiplied by twelve, so if you got $10 million rent a year then to buy the building is $120 million. But the super fund wanted to give a better immediate return to its members, so it needed a 10 per cent return, not 8 per cent. We said we’d share the future in return for giving away a bigger share of the present.’ Bendat and Stokes agreed to sell the shopping centres for ten times the annual rent value instead of twelve times — a big discount that came with some long and lucrative strings attached. Lucrative for the sellers, that was. ‘We finally did a transaction where we shared in the rental income and some of the capital growth, so that after five years we shared 50–50 in any rental increases and at the end of ten years we’d take a share of any increase in capital value.’ This arrangement would be ‘locked in’ for thirty years."

"The fund managers grabbed the discounted purchase price along with the back-end deal that meant Stokes and Bendat were betting that the market would rise. If the six shopping centres at stake did not rise in value, and rents likewise, Bendat and Stokes would have effectively given away two years’ worth of rent, which was several million dollars. This was not as much a gamble as a calculated risk. The partners backed their judgment against the fund managers’ anxiety to make the deal look attractive to its members. They were confident of the bet. For one thing, their stable of support businesses was still managing, maintaining and cleaning the shopping centres. They reckoned no one understood the housekeeping side of the business better than they"

"‘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."

"The station was pitched at 18- to 39-year-olds, baby boomers and their children who’d mostly grown up listening to rock music and, since 1959, watching television. Stokes, who turned forty a month after the launch, had just drifted out of the demographic. Bendat was old enough for his children Paul and Laura both to be in the target market. This wasn’t a shopping centre; they had to trust the experts they’d hired to make it work."

"Stokes and Bendat thought they’d been patient long enough: it was time to throw the switch to profit. Stokes recalls: ‘It lost three times as much as we expected the first year and people said of course it would, because you are not selling ads! The second year it lost twice as much as the business plan said. The third year it was off to the races. We creamed it.’"

"Stokes’s recollection is that he told Lowy, ‘With the price you want for your stations I’d be better off selling you mine.’ And he did, selling him his basket of media properties all rolled into BDC, the jewel of which was the new Perth television licence. The price of some $330 million was on condition that Stokes accept a promissory note for $190 million for a year, and Lowy give Stokes or Bendat first offer to buy back Golden West if he decided he didn’t need the regional network as much as he needed the money it was worth as a stand-alone business. The deal they struck meant Lowy would pay out the other BDC shareholders — notably Bendat (with 12 per cent) but also cashed-up Elders identities Peter Scanlon and Bob Cowper as well as members of the public. Stokes owned the lion’s share but agreed he would wait if Westpac would guarantee the money. Westpac did."