Real estate - a family affair

Angus Raine tells Deborah Light how he got the property bug and stayed with it

GEORGE FETTING

ANGUS RAINE

Age 46. Lives Sydney’s Eastern Suburbs. Appointed 2006 CEO of Raine & Horne, Australia’s third largest real estate franchisor.

He is the fourth generation of his family in the business, which turns 130 years old this year. First paying job: washing cars for $10 a pop.

IF YOU’RE IN A FAMILY business – and want it to last beyond a generation or two in relative peace and prosperity – you might garner a few tips from Angus Raine. He’s the fourth generation in the company that bears his name so you’d guess he and his forebears have learned a thing or two about staying power. The corporate graveyard is crowded with dynasties, felled by bad succession planning, greed, disinterest or plain incompetence. Yet the company Angus Raine heads celebrates its 130th birthday this year and was recently inducted into Family Business Australia’s Hall of Fame.

Maybe it’s in the blood. “In a lot of family businesses, if you grow up around a kitchen table with it, you get infected; it’s part of your DNA,” he explains. Picture his introduction to real estate: aged five, crouched over a slide-carousel in a darkened auction room – “terrified” he’d press the wrong button – as his father Max flogged property after property to Saturday crowds.

His three sisters weren’t interested in the business, but the bug bit Angus later, in his teens, when he’d go to suburban auctions with his dad and they’d bet on how much a property would sell for. Whoever got closest won 20 cents. “It took me quite a while to realise I had the disease,” he laughs, remembering. “Real estate was the perfect fit for me. I was blessed because a lot of people in family business may not want to be in the family business, frankly.”

Raine might count himself lucky but there’s more to it, of course. For a start, he’s distanced himself from any suggestion of nepotism since early on. “I went out and did my own thing, I built my own brand.” Where his father specialised in residential property, Angus set out to master the commercial side and, aged 18, he also left home, reasoning: “It was probably a good thing to toughen up.”

His name made it difficult to get a job because, to potential employers: “I was either the black sheep of the family or a spy. This is a super-competitive business so knowing one or two little things can make a lot of money for the competition.” A small specialist firm gave him the break he needed and he was later head-hunted by a larger rival. “This was the ’80s, a bull market for property; you could sneeze and make money. Because this is a commission structure after about six months I was earning $45,000 when I was about 20. I remember my father saying: ‘You’re not worth that!’ – which means ‘Well done!’ in Australian dad-speak – and I said ‘Well, obviously I am.’ I wasn’t working for my father, so someone else thought I was worth it. Very important.” Down the track, Angus counted himself successful at building his brand when business acquaintances were regularly surprised to learn of the family connection. “Nobody assumed that I was a Raine of Raine and Horne. They nearly fell off their chairs.”

The whiff of favouritism can cripple a company – especially in sectors like Raine’s where poaching is rife, he believes. “In some family businesses, every man and their dog are working there and, dare I say it, they’re probably not qualified. If you’re looking for a job and there’s any number of cousins in a company, someone from a non-family background will see there is definitely a glass ceiling, which is a real drawback in retention and recruiting. It’s not a problem here. We’ve had non-family CEOs running this business since the 1960s. There are non-executive board members. We run it like a corporation, not a family picnic, and that’s a reason we’ve been around for so long.”

He’s a big fan of paid advice anyway. Outside consultants were brought in a decade ago, for example, when Raine recalls: “We were treading water so we had to make some tough decisions and, to my father’s credit, he realised that. They don’t pull any punches, particularly with family businesses, they’re paid to tell you what you probably don’t want to hear. They don’t care.” More broadly, he observes: “You don’t know everything. You look at your weakness and plug in two non-executives [directors] to fill your weakness. Me and my father, cut from the same cloth, we’re not good with the figures, or tax or governance – all that nasty stuff that most salesmen run a mile away from – so it’s good to get advice externally. It’s also why we have external directors.”

The pressures of working together for patriarch and protégé can and do destroy family businesses, Raine acknowledges, but says of his own father: “We have a very good relationship. We’re lucky that it’s a franchise model so it doesn’t require a lot of capital. You’re not in the boardroom – me the young bull with the old bull – saying: ‘Dad, we have to invest $15 million in new plant and equipment.’ That’s where the rifts can happen.”

The major headache for any family business remains succession planning, he believes. “It’s how to treat the siblings and it’s even harder if you’re not doing all that well. People aren’t getting dividends. When they look at carving things up, they’ve got to sell the company, which is not a good scenario. Over a 30-40-year period they should be taking as much capital out of the business as possible – and not squandering it, investing it in other areas, so you’re not just looking at the business – there are a lot more assets.”

And he warns: “Once you exit the business you’ve got a pile of cash and you go ‘Whoopee!’ That money can disappear very quickly on bad investment choices within one generation, if you don’t get the right advice – because you only know what you’ve been doing well.”

Another recommendation: consider a course at Harvard Business School. Raine took a consultant’s advice to up-skill himself for the boardroom, aged 39, and hasn’t looked back. Designed for entrepreneurs with what Raine describes as a “heavy leaning” to private and family companies: “It costs a lot and it’s a month a year for three years so, in order for you to take that time off, you have to have your corporate structure in place and the confidence to leave your team in charge. In a nutshell, it gave me a helicopter view on how to look at trends in the industry and strategies to move forward. It was an amazing experience.” A big bonus was his fellow students: 160 business contacts from 34 countries with whom he meets and consults regularly.

If you’re planning to go into the family business, don’t hurry, Raine advises: “When you’re naturally suited to a career – and your family is in that business sector – then you have to look at things longer term. A lot of people are desperate to get into the family business but, if you look at your actuarial tables, you’re going to be working until you’re probably 70 – because it’s your business. Don’t rush into it because – if you have the right corporate structure, the right strategy, the right people running it – it will always be there. And once you’re in it’s very hard to get out; you’re going to be in there 50 years. Don’t rush into it; you’ve got plenty of time.”

Besides, it’s no bludge. Estimates are that family businesses account for 70% of all businesses in Australia and employ 50% of the workforce. Plus, says Raine: “There are statistics to say they work far longer hours and far harder than other sectors.” In his own profession: “Real estate is seven days a week, mentally it’s about eight days.” Makes you wonder how he found time to meet his wife, occupational therapist Natasha. “She’s very lucky!” he shoots back. “Old lie.”

Of his three daughters and two sons – aged seven to 15 – Raine thinks statistically at least one will be bitten by the same bug that got him but it’s too early to tell. On what he teaches his kids about money, he says: “It’s about how you act with it. A lot of people do the opposite of what they teach their kids. They’re getting the wrong message and kids are very bright these days.” What message do his kids get from him? “They’d say I’m very tight with money. Definitely.”

When it comes to his own investments Raine chooses real estate, as you’d expect: “You stick with what you know.” It started with his first buy at 18 – a protected tenancy for $84,000 which delivered him a bundle when that tenant moved on. He used cash he accumulated washing cars topped up by a family loan – and he still has the receipt book recording his weekly repayments. But on the question of equities versus real estate for investors, Raine recommends both.

“Australian consumers are very sophisticated in world terms. I think our superannuation regime has really benefited Australians; they think long-term about their finances.”

After “significant pain” for the property sector for the last three or four years, with sales volumes off by 22%, Raine expects some “For Sale” signs to show up among competitors. He’s in the market, ready to buy and mildly upbeat about where property is heading. “Just about every market is showing signs of recovery – very slow but I don’t mind that, I’m happy,” he beams. “I’d rather a gradual incline. Peaks and troughs aren’t good for my heart.”

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