Finding new strengths in a changing market
Qattro is a premier South Australian property developer and construction company that was founded in late 2006. The company was eventually bought out by Brad Jansen and Mark Gardiner, and control of the Qattro group is split between the two. Jansen, who is the Managing Director of the group, says that this move has enabled them to take a very hands on approach to the day to day management and operation of the group. He stresses that the running of these operations would be impossible without Mark Gardiner, the other half of his team. “We have had to make room for each other in terms of personalities, egos, and work style and adapt to each other,” he says. Jansen has had a strong background in management, but, he says his educational background is in accounting. “I never looked at accounting from a tax point of view, but purely from a business management one. So I have a history of managing businesses, with the position I held prior to this one was one where I was managing about 200 employees around Australia,” he says. “What ever the product or service, I like to think that the principles that go into managing a good business do not change; it is about adapting to that product or service and applying these good practices,” says Jansen.
Jansen credits his partner, Mark Gardiner, with a strong entrepreneurial streak that he has demonstrated throughout his career. “He has owned a number of businesses over a period spanning three decades including Construction and Property development in the UK as well as heading up a Private Wealth Management group for a Middle Eastern client. These enterprises have taken him to live and work across three continents, arriving in Adelaide from the United States some 6 years ago. When he came to Australia he started off in development again in Adelaide,” says Jansen of his business partner. Their paths crossed and the partnership quickly formed. “We share the load day to day, and work on different aspects of the business. Mark has been the key strength behind new land acquisitions, and he has this ability to sniff out a piece of land and then envision the development that could go on there.”
Offering the full service option
Jansen has taken the lessons learned and applied them to Qattro, and when he and his partner looked at products and services, they wanted to make sure that they left no gaps in what Qattro could do. As an integrated property development services and residential construction group, Jansen says that they really stress their ability and integrate all of their capabilities into a single stream, but that each part of the group can manage specific projects on their own. “We really look to provide a full property development service,” says Jansen. “Our typical client is someone who is already successful in their own business and they are looking to get a return on their capital through property. We don’t take their money from them as such – as we are not an investment house, but we offer the service provision in managing the project.” This process includes multiple stages including the initial project planning, the land acquisition, the preconstruction process, through to the final construction and sales at the completion of the project. “A client can come along and treat those services as a smorgasbord. They can say: I can see the entire meal out there, but I only want that bit there,” says Jansen. Qattro often gets experienced developers inquiring after their services looking only to engage their construction services, explains Jansen. “They will bring the preconstruction pack to us, and we will quote it up and then build the houses for them, and that will be the transaction with them,” he says. “I would define our focus as medium density infill, so I would say we are primarily engaged in suburb regeneration. So we operate in the established Adelaide metropolitan area, we do not generally operate in the green fields type work, other than leveraging off our relationships with the larger land developers to acquire medium density sites within their master plans.” he says.
Jansen says that this is one of the most lucrative parts of their business operations now, but that was not always the case. “Qattro started out purely as a project developer using private equity and bank funding to develop in the residential space. We outsourced to various builders around Adelaide and found that we lost a lot of control at that point of both costs and scheduling,” he says. Qattro realised that of course the builders they were working with were making a margin on the work farmed out to them, and that with this difficulty they were experiencing they resolved to cut down project costs and scheduling issues by bringing those functions in-house. “We discovered that if we brought it in-house, we could inject about 10 to 15 per cent of the build cost back into project finances, while at the same time maintain better control over scheduling, costs, and overall quality,” says Jansen. One of the first things that he did when joining the group as an employee was to create a construction division, with the initial idea being that it would be solely dedicated to projects initiated by Qattro. “The GFC of course came along, and we realised as a property developer, where cash flow is paramount, we had banks all of a sudden tightening their criteria for lending. It then became blindingly obvious that we needed an external revenue stream to complement our proprietary book, so we started offering our construction services into the market as a builder that specialised in medium to high-density construction,” he says.
The way Qattro entered the market they made very sure that potential clients understood that they were not catering to retail space for owner occupiers or house and land packages, but were instead purely connected with developers for the express purpose of offering their abilities to the market. Qattro was in the unique position that would often play against other companies to whom they were an unknown in the early days. Being relatively new on the scene with an undefined track record, they had maintained lean operational numbers. This meant that Qattro was free to redefine itself without contradicting its image, and small enough that it could make this radical change to its operations quickly.
“We began to generate construction contracts where we would carry the development risk, and this allowed us to generate a day to day cash flow,” says Jansen. This portion of the business began to take on a life of its own, and quickly became a large portion of their overall business. It also gave them the much needed freedom they needed for a cash source outside of what the banks could provide. This strategy served Qattro well throughout the worst of the GFC, and saw them coming out the other side with a more diversified company, ready to take on new market challenges.
Building the Qattro brand
“Our build capacity per-annum is about 225 dwellings for our construction division,” says Jansen. “I would say about 35 per cent of that capacity was consumed by projects on our own development book, and 65 per cent was engaged with external contracts.” Obviously this gambit has paid off for Qattro and helped, not just carry them through, allowed them to thrive during some of the most economically difficult times in the last 50 years. They are currently involved in at least 40 different projects at different stages of development that represent about 200 dwellings. “I think it is always tempting to become a bigger player when you see the other developers around town doing 10 storey apartments, although that has a lot of nice romantic ideas that go along with it, we are really going to remain disciplined and stick to our core business. Rather than expand on that we are going to look at a number of projects that are smaller projects,” he says. The reasoning behind this, says Jansen, is that many of government sponsored projects in the Adelaide under the 30 Year Plan fit in to the range in which Qattro operates. Jansen sees that this means that Qattro may see many other developers coming down to operate on the smaller level, but that they, already occupying that space are strategically positioned with a good reputation and demonstrated capabilities.
Betting on the future and coming up a winner
Leaving this space at this time does not seem to be in Qattro’s best interest. “These will be situated along transit corridors, so in other words the government has picked some key areas and routes that have upgrades planned,” says Jansen. “This will give a lot of opportunity to our core products in this area where we will build medium density around that.” The other advantage they have found in sticking to their core abilities in the market is that it offers Qattro the ability to develop a very unique product. “It is not an apartment or a house, but it offers the advantages of both. So it is very attractive to people looking to downsize, or people entering into the home market looking for their first home, or investors, it hedges their bets both ways,” he says. “They still get a little courtyard, their apartments are still big enough where they can get a couple of entertaining rooms in the space,” he also says that this compares to the apartment sized living spaces currently being developed that measure only about 64 square metres, Quattro’s medium density townhouse product usually measures around 140 square metres.
Qattro has prided itself on building relationships with its clients, and have been very successful at it. According to Jansen this is important to the future of the company, and that the business relationships that they establish now, will carry them into the future. “We find that we are working with the same clients over and over,” says Jansen. “The day will come when those clients, will actually account for annual capacity. The decision will be at that point, as a business, do we want to expand that capacity and take on a greater infrastructure. So instead of having that capacity for 225 units, we could look at expanding it to 300.” Jansen says that their current hope is to get to that point where they are maxing out their capabilities with their current client list, and then consider the possibilities from that point.