McGrath pulled out of the American Spruiker All Stars Tour in 2004 after I complained to ASIC to "close it down." Denise Brailey
Westpac exits broking alliance with McGrath real estate
31/01/2006
Westpac is selling its 20 per cent stake in McGrath real estate back to John McGrath.
Westpac bought the stake in 2001 for four million dollars but the strategic alliance faltered 18 months ago
when home loan referrals to Westpac dropped from 100 per cent to 15 per cent as McGrath moved to use
brokers.
How John McGrath investors lost plenty on property
Date: April 18 2016
Elizabeth Knight
- McGrath shares crash http://www.smh.com.au/business/property/mcgrath-shares-crash-after-resuming-trading-20160418-go8ov6.html
- Plunge looks toxic http://www.smh.com.au/business/property/mcgrath-shares-crash-after-resuming-trading-20160418-go8ov6.html
When one of Australia's most renowned real estate spruikers teamed up with a bunch of investment bank spruikers to float the real estate agency on stock exchange there was always going to be a fair bet it would end up in tears.
Those tears are now being shed by the investors in McGrath Ltd who pumped in $288 million to buy shares last December which are now worth $127 million.
This high-profile real estate group McGrath Ltd has fallen victim to Australia's deflating property bubble.
And those who took shares in the float have broken several of the cardinal rules of investing – including buying business rather than brand, and buying at the top rather than the bottom of the industry cycle.
Monday's statement from McGrath revising down its earnings and revenue forecasts for the tail end of this financial year was ignominious indeed. But to many experienced investors it will come as no surprise.
Opportunistic float
The timing of the McGrath float was opportunistic and extremely lucky for the vendors and its principal, A-list man about town, John McGrath.
McGrath took $37 million out of the float which got underway close to the pinnacle of the property bubble – even though there were some early signs that the heat could soon started seeping out of the property market.
Banking industry regulators had already started to tighten bank lending parameters and the the first of the big four banks, Westpac, had edged up its interest rate.
But the broader sharemarket to a large part glossed over these early red flags and remained caught in property euphoria.
Not an ordinary cycle
This enabled McGrath and its investment bank sponsors to price the float at top of property cycle prices.
And it wasn't just any property cycle. It was one that saw prices move up by 50 per cent in three years.
There was no room in the McGrath float price for a slowdown in the market, only for super success. And certainly nothing in the listing price to absorb "unforeseen" deterioration in the property market.
But property markets have always been particularly cyclical.
For McGrath an unforeseen low volume of listings and sales emerged in March which have continued into April and they don't look likely to get any better.
This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited.
[ SMH | Text-only index]