October 20, 2025 • 40 mins
Luke Altschwager is the Managing Director at Palm Valley, and he’s partnered with Mick Fanning to build the Gold Coast’s first wave pool.
In this episode, Mark sits down with Luke to unpack the massive transformation of Parkwood Village — a project that fuses sport, business, and entertainment into one of the most ambitious developments in Queensland.
They talk about Luke’s business journey, the risks, financing hurdles, and the surf technology that’s set to change the way people experience the Gold Coast.
Check out the Palm Valley Gold Coast website here: https://palmvalleygc.com/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Luke Alshwager, welcome to the mentor thanks for having us well,
but we're welcome back.
Speaker 2 (00:04):
We have met before, yeah, yeah, maybe a year ago,
about twelve months ago. Yeah, and you came into a
weekend of small business owner of business owners generally come
to my farm and with our mate Jonathan Pas who
ran it, and you guys will guess you just say
my place.
Speaker 3 (00:25):
Now. We stayed in town, right, he stayed in town,
and then we sort of used your house as the
retreat and sort of the business sort of peace. And yeah,
it was amazing.
Speaker 1 (00:34):
And thank you very much.
Speaker 2 (00:35):
And I remember, I remember you well, and I remember
what you were doing at the time, and that's one
of the.
Speaker 1 (00:39):
Things I want to talk to you today. So you're
about today. You're the co founder and directed Palm Valley,
Gold Coast.
Speaker 2 (00:45):
But maybe just explain the precinct we are in now.
Speaker 3 (00:49):
So yeah, so I guess, well physically so we're located
on the Gold Coast. So Parkwood Village is formerly a
golf course called Parkwood International and I bought it with
some partners in twenty ten. Former golf professional you were, yeah,
had an opportunity like a lot of touring professionals. Create
(01:10):
didn't quite get there, and where I needed to move
to was into the golf industry. All I knew was
golf became the club professional here and had.
Speaker 1 (01:16):
Not, so you were the pro in this club.
Speaker 3 (01:18):
Yeah. I had an opportunity to buy the course and
this back in two thousand and nine, so I settled
it in twenty ten. And my sort of vision was
to create community golf courses traditionally had been very close shop,
very private, don't come in the front gate. And what
I saw when I was playing around the world was
it was the opposite. Let's bring him in, Let's bring
in whole of family. And so that's what Parkwood Village is.
(01:39):
And back in twenty sixteen, we I bought the Gold
Coast Titans in so it was an opportunity to really
diversify our customer base and create not only Alice Club,
but a high performance center for the footy club. And
they were going through some challenges.
Speaker 1 (01:53):
This is an NROL club, National rugby league.
Speaker 3 (01:56):
Club, yeah, and so the rugby league club obviously Land
Rugby League and the Gold Coast so it's a big
opportunity for us. It helped us reposition the site and yeah,
and that was really the unearthing of what the site
potential was. It's like, it's more than a golf course.
What does that look like?
Speaker 2 (02:13):
So if I could just go back one step, because
you were being quite modest in your explanation, then so
there was here a golf club, it's probably Approach International
Pipe Put International Golf Club. And then you have integrated
into that the Gold Coast Titans and aural rugby league side.
(02:37):
This is there, what their head offers or their training
center or yeah.
Speaker 3 (02:40):
So what we did was once we identified it. Obviously
golf golf as a business model is there's been some
challenges in it through the years, and so we've made
the golf course profitable. But really where the opportunity was
was in the land value, and that land value was
mixed use in commercial sport and rerec makes sense. So
we built a sport and rec center about four thousand
meters and we put the Gold Coast Titans High Performance
(03:01):
Center and their administration in there. So from a rugby
league point club, their head officers here, the hundredd staff
are based here, their training facilities are here.
Speaker 2 (03:11):
This is the football club football club, not as a
league's club.
Speaker 1 (03:14):
Not as a football club.
Speaker 3 (03:16):
And then as a part of that deal, we said
to them, well you don't really have a league's club,
so why don't we become at least your community.
Speaker 1 (03:22):
Club or that so premises.
Speaker 3 (03:24):
Yeah, so the fans had a place to come and
hang out, and so that dialed up our hospitality menu.
So part of those two things, and then the ancillary
off that moved into like medical and ancillarious cuscan radiology, physiotherapy,
all of those things. So it was a really nice fit.
And I wouldn't say it was by design. It was
a little bit of we'll suck at and see and
(03:45):
it really started, Okay, there's something in this mixed use
within these green heartbeats of the city, and that's that's
how we got here.
Speaker 2 (03:53):
So priborly, when it was before all those iterations.
Speaker 3 (04:00):
Park Valley, Park Valley, so it was Parkwood International.
Speaker 2 (04:03):
Parkwood International, park Wood International. It was just basically pro shopping.
Speaker 3 (04:09):
Had a decent clubhouse. Like most clubs if you go
to a traditional golf club or a member based golf club,
it was a big clubhouse with not much going on. Firstly,
so you had a licensed premises that really wasn't being
run like a licensed premises. Then you had naden whole
golf course.
Speaker 1 (04:22):
It means that's you're rating tole so to speak.
Speaker 3 (04:23):
Yeah, yeah, clubhouse. You can have a beer.
Speaker 2 (04:27):
It was just having a beer and biscuits or something.
Speaker 3 (04:29):
And like most clubs, they weren't really making money, so
your shrink service barely a menu. And so through This
is back in twenty ten, and so the golf course
had been here since nine to eighty seven. The Japanese
built it.
Speaker 1 (04:44):
So that was the Koma Goo Goomi days. This is
when the Japanese were investing.
Speaker 3 (04:47):
Heavily in the golf course in the mid.
Speaker 1 (04:49):
Eighties to ladies, yes, I remember it.
Speaker 3 (04:51):
And then they exited en Mass and so what we
had was back in the late eighties and we had
all the major golf courses being built by the Japanese
at that point. And so we had par Meadows, which
was an iconic course that Greg Norman, they had the
first million dollar even and so they built Parmettos, they
built Parkwood, and we were the really first two resort
style facilities on the Gold Coast. Where Parkwood was sat
(05:13):
at that point was really rural bushland outside of the coast.
When we're three point ninek longis from Southport, so we're
in the middle of town. But back then for the
local gold Coasters, there was a town.
Speaker 2 (05:23):
Yeah, and it was pretty It would have been pretty
pioneering stuff.
Speaker 1 (05:27):
Then to build a golf course.
Speaker 3 (05:28):
Totally, I mean, there was no commercial basis for it.
I mean, I think they'd owned it from eighty seven.
I think they sold it to a Korean group in
two thousand and five. They wouldn't have made profit through
that period. It was they built something, and it was
built well. I remember when we did some renovations, we
looked like a podium deck out the front of this
thing was a four hundred mili slab, like there was
(05:50):
no everything was built right, like the fridge Backer House
is still working today. Like when they did things, they
did it really well. So we're really fortunate there. The
base golf course, it was good, the route's good. It's
in the bottom of this little valley. And so as
a golf pro was I mean, for me, it was
a big opportunity. I'd sort of had a career that
(06:10):
didn't quite cut the mustard, and I need to get
a real job at the back end of my playing
and to have an opportunity to buy a course. At
the time, I was sort of reading a book about
what I now understand our options and how to buy
stuff with no money because I had no money.
Speaker 1 (06:24):
Yeah, golf course wouldn't have been cheap.
Speaker 3 (06:27):
And so at this point I probably wasn't thinking about
buying a golf course, but I was trying to trying
to sort of grind my way through and find my way.
But being a club pro here and then at an
international purchases international owners at the time they wanted to sell,
I'm like, I'll buy it.
Speaker 2 (06:43):
Can we just stop there? From a lucas A lot
of people would like to know how this sort of
thing works. So just to paint the picture a little bit,
here are twenty years ago yep, round about twenty years
ago form a golf pro, still golf pro, being on
the professional circuit, but probably it wasn't making a.
Speaker 1 (07:04):
Very well paid golf making the amount of money you
wanted to get.
Speaker 2 (07:07):
And it's a tough business and it's very competitive obviously,
both on a global scales, not just here in Australia
and particularly here in the Gold Coast. An organization like
some Japanese or organization decides to as part of you know,
the investments in Queensland, which there was lots of them.
Speaker 1 (07:23):
They built lots of golf courses here, but this is
one of the first ones they built.
Speaker 2 (07:27):
Which, by the way, you know, to give people context,
if I go east from here for kilometers, I'm on
the coast. Yeah you're I'm I'm at in South Stralia. Yeah, yeah, correct, correct,
right there, right there, I'm in I'm swimming in the water.
So but then when this was built, you would have
been thinking to yourself, well, this is a back and
(07:48):
were really I'm now I've been now pointed to be
the surfer, the to be the golf pro here.
Speaker 3 (07:53):
Yeah. Well, I mean there's a bit of a it's
for me, like for kids that grow up with the
aspirations of men. I mean I was the guy that
I want to be number one in the world. So
there's a bit of arrogance for I don't know what
you want to call it. If you can believe, yeah,
if you can believe, you can be the number one,
and I generally did, and I hung it all out there.
I left school young and that was all I wanted
(08:14):
to do, so to have the ambition or arrogance, whatever
you want to call it, to say that you're always
like it's hard to not look with a big lens.
And so coming back to being a golf pro is
a fall from grace a little bit, and it's not
I mean in my head at the time, it was
I look at the.
Speaker 1 (08:31):
Visional Golf proposed for a professional.
Speaker 3 (08:33):
Golfuring professional, so Greg Norman, you're out of Scots and
those guys through to a traditional club professional. And at
that point, if someone had asked me when I was
wanting to be a touring professional, you want to be
a club bro, I mean, that's the you nearly felt.
It was like the failed golf pro tour professional. So
so for me that transition, like a lot of athletes,
transitioning is sometimes not as easy. But I was very
(08:55):
hungry and I hadn't really tasted success as a player,
so I was like, what next, And so I think
as I took the club pro job on where I
was working for the club, I hadn't really turned that off, right,
It was like, what's next? And when I.
Speaker 1 (09:09):
Am looking all the time forwards next.
Speaker 3 (09:11):
I was at the time, Yeah, I couldn't. I was insatiable.
I wanted to find work. Yes, and I've been like
that even in my carrent I mean, how we got
to the wavepiol and when we get to that. But
I'm always looking for how to grow. And what I
had to do was temper that as well. Right, what
the club Pro job did put my feet on the ground.
It made me slow down. I had to serve the customer.
Speaker 1 (09:31):
I had to earn a wage.
Speaker 3 (09:33):
Yeah, I had to earn a wage, and it was
to be honest, it was the first time it had
to really earned a proper wage early days with your
little part time jobs and stuff like that, but it
was the first time I was paying rent. And because
you're bunking in houses your mum and dad anyway, you
can survive, and sponsors get you through year golf career.
And so the park would thing if I in the
revision mirror as the club Pro was like the making
(09:55):
of the early making of business knowledge for me because
it was simple as you walk in and selling you
a Mars bar a green fee and a bottle of
coke or a bottle of water. Lessons maybe, yeah, and
some lessons, but the primary income was I sell I
buy the bottle for two dollars. I sell it to
you for five dollars, and I do that a few
hundred times a day. I'm mostually making some good money
(10:16):
because that's how cloud pro contract works. You're not in
a salary scenario. You own the rights to the pro
shop revenue.
Speaker 1 (10:21):
Wow, wow, I did you know that.
Speaker 3 (10:23):
Yeah, So that's the traditional way of a club row.
So I had the I was servicing the golf course
and they outsourced that to a professional, and so I
was in a small business overnight with no overheads though, right,
I don't have to pay rent, don't.
Speaker 1 (10:36):
Have to verable cost. It's a veriable cost.
Speaker 3 (10:38):
Yeah.
Speaker 1 (10:38):
As you as you own, you pay.
Speaker 3 (10:40):
Yeah. And what was really interesting about that was it
taught me to first low down and you can't do
ninety things at once and getting and making a monthly
profit which then became my salary and ongoing. So there
was a real shift from that, which was partly what
I thought negative at the time, and in the revision
(11:01):
Merritor was the making of my base fundamental of how
to grab something that doesn't make profit and turn it
to profit.
Speaker 1 (11:06):
That's interesting. They're too late every month.
Speaker 2 (11:08):
It would have been accounting, so someone would have said, look,
you know you sold one hundred bttles of water.
Speaker 1 (11:12):
And each bottle cost you two bucks.
Speaker 2 (11:13):
It is two hundred, and you sold them for five
hundred and the surrounded profits like you would have got
into this mad.
Speaker 3 (11:18):
I didn't know what a balance sheet was when I started.
I couldn't have told you what a balance sheet was
if you'd ask me. P and L, like I said,
left school young. So it was a real birth of fire.
But I got it quickly. I had that intuitive nature,
like you walk in, like how much money can I
extract out of you from my pros?
Speaker 1 (11:33):
When the rents sort of hanging off it?
Speaker 2 (11:37):
You know, you got to pay rend or whatever you
got to do, or you buy food, you got to
buy clothes, or you want to go down the pub
with your mates, you got to pay you away quick.
Right now, you work that shit out pretty fast. Yeah
and L has become second nature.
Speaker 3 (11:46):
Yeah, and it really did. And I didn't even it
was non sophisticated, but it was commercially on point. And
as I've become more sophisticated, I look back and there
like I got that quick. I got the commercial side
of it quick. Scaling then was a whole different thing.
Speaker 2 (12:00):
Yeah, but hard to scale one one of yourself. So
and then during that period, Luke, you do you get
to know the people who owned own the place a
little bit?
Speaker 1 (12:13):
How did that all come?
Speaker 3 (12:14):
So, like a lot of the international owners in many
asset classes, there's an owner's rep typically is the one
you're interfacing with. And so they had a couple on
the ground that really didn't know anything about their property.
And do you mean so that two staff that were
probably sent from at this point that was career and
I'd played a little bit on the career. I played
some events up in Korea at the right at the
back end of my career, and I loved it, love
(12:36):
the food, love the culture, And that's how I really
owended up here. And so there was a couple of
stuff that had here but really didn't know what golf
operations was. It was a hard business, right, Golf had
been overdeveloped and the revenues were declining at the time.
And so I knew the owner's reps and they had
(12:57):
a couple of purchases come through property buyers, yeah, potential
purchases of the property, and I went, well, I'm I
could see it was very difficult for them to sell it.
So for what they paid, they paid five point five
million dollars I think it was from the Japanese and
they were losing at least half of me and maybe
(13:18):
seven hundred a year. I didn't have full visibility on
the number, but they were definitely losing money and the
service are going down. The quality, of course is going down,
and so I could just see that vision I've had
from when I was living and working way. I just
need to open this gates up. They need to make
it full community and family.
Speaker 1 (13:31):
Can I just stop?
Speaker 3 (13:32):
It?
Speaker 2 (13:32):
Is the reason why this place was losing money? Whatever
the amount doesn't really matter that much. But was losing money?
Is it because golf was on the decline or was
it because this place wasn't like at a standard where
you could get more people in.
Speaker 3 (13:50):
So it's probably both both. Golf was declining, which at
the moment it's going the opposite. It's growing like I've
never seen it. Is it. It's blowing up COVID. What
COVID did golf and the young people, it's phenomenal, right,
And I'm really enjoying it too, as a kid who
grew up in the game and now I'm forty eight.
I'm like, this is awesome watching my son who because
Bronnie James and lebron James are playing, he wants to
(14:12):
play golf. Fantastic. But I think it was both. I
think when you have a tired asset this, when you're
not reinvesting, eventually it dies. If you just think of
it like a restaurant, right, if you're not doing an
FF and sort of fit out properly every sort of
five to seven years, then you're not going to you're
not going to be there.
Speaker 1 (14:28):
And you're talking about there is stuff in the inside
the clubhouse.
Speaker 3 (14:31):
Yeah, all the amenities, yeah, the amenities, new bathrooms, Yeah,
just if you don't walk in and if it's not
on point. If you look at the great hospitality people,
they do it well and they always do it really well,
and they are constantly innovating around that. Well. This golf
course win this since nineteen eighty seven and it was
now two thousand and ten. Yeah, and it hadn't had
a dollar spent on it in real terms, and so
(14:52):
that was part of the problem. The second part was
it was running a business model that didn't exist really anymore.
Like a lot of golf clubs. So it was all
members in private and a little bit of public occasionally.
Speaker 1 (15:03):
So public weren't able to just turn up another game.
Speaker 3 (15:05):
They could, but it was not advertised and branded like that,
like they were open. But most clubs, or most most
of the market believe like you have to have to
be a member to play golf most courses. There's a
few public courses in every city, and so it played
like a members club. And so as we got here
and were part of the shift was to how to
(15:27):
bring more people in. So immediately looking at things like
the hospitality elements.
Speaker 1 (15:32):
This is before after you bought so well a little
while while before.
Speaker 3 (15:36):
So that was but I was teetering on the edges.
I was playing with very little money. I think I
borrowed twenty grand from my parents to fit out my
pro shop, painted the walls myself, normal small business story.
But once we had control of it, then we could
start moving the big pieces on the paper. But at
that point we'd had a bit of momentum around membership,
(15:56):
and I felt at the time my vision was sort
of weddings, community, miniature golf, bringing other things in, things
that were very operationally focused, and my partners were incredible.
The guys that we bought the golf club with a
friends of a family, very high level pitch, I want
(16:16):
to buy golf course pretty much looking at me like
what are you thinking about? Like yeah, and under and
as you know when you bringing these guys were sophistical.
They founded a company called health World Inner Health plus
these guys Michael and Leon Brosnen and the Grant family
Allen Grant. So they sent old Alan Grant down, a
gritty accountant that had worked years and years for our
(16:37):
with the boys and helped them form this company that
was exceptional. And the brief was nearly like do whatever
you can to tell Luke when not buying it. And
by the time I'd had an hour with Alan, He's like,
we're buying it. But really what that was it was
a land purchase. You're buying fifty six hectares for not
a lot of money, but they gave me enough rope
(16:59):
to not blow it up and a lot of money
over the years over the first five or six years.
And it took us about that to really get it right.
And that was I think Michael has said it a
few times over the years. It's like we probably spent
three million on your education to understand how to unlock
the value of the site. But that was really where
the nuts and bolts were. Was the pro shop year
(17:19):
or eighteen months was really really critical for me. And
then it was a how to scale and grow it.
It's like, okay, we'll put weddings on. I think at
one point I got to sixty weddings, but I was
still losing money. Yeah, it was like I didn't understand
the control elements of the hospital. I understood golf, but
I didn't know hospital. So I was like, okay, now
I'm going to every hot So I was in every
wedding and a touch like get really dirty, understand it,
(17:40):
better tweak it a bit more. Okay that now profits
ad the mini golf and so we just started and
it was all operationally focused and that titans sort of
opportunity or the master planning opportunity was where it really.
Speaker 1 (17:51):
So how did you think about I might just quickly
go back to the purchase.
Speaker 2 (17:58):
What do you do when you're in an environment where
you see there's an opportunity, but at this stage you're
like an non employee that like, yeah, sort of like
an employee, you know, the.
Speaker 1 (18:06):
Golf pro at a golf club.
Speaker 2 (18:10):
How do you broach to the owners that, look, I
might be interested buying this.
Speaker 3 (18:16):
I guess it's that same kid that wants to be
a golf professional, right, Like for me, it was I
probably didn't know what I was really asking what of
myself even like I'm going to buy this? There was
did you?
Speaker 2 (18:27):
Yeah?
Speaker 3 (18:27):
Yeah, I just went to the owner's rep and I said, look,
i've seen you taking that through. I'd love the opportunity
to buy it. And I had read I can't even
remember the name of the book, but it was it
was a book about options, and I was trying to
buy a house or real estate. How do I get
my foot on a piece of land? And so at
this point I'm reading the book and I'm pretty dyslexic,
and so a lot of my readings all being done
(18:48):
by ebooks and podcast audiobooks, and so I'm reading this
thing and when I grab something, and so I don't
often go through books like that. I don't think I
read a book at school. But when it when it
bites me, it bites me, and I'll read it. I
will hardly sleep that night. And that was me looking
for a thing I didn't think it was the golf course.
I probably thought it was a house or a flat
(19:09):
or something like that, and so, but it applied. I
was like, well, hang on, I'm the club pro. I've
got a contract over this. It's gonna be hard for
them to sell it without me embedded in it. So
I've sort of I've got some leverage here. I don't
really know what it is, but after the couple visits through,
it's dried up. No one wants it right, it's a
fifty six hectare loss making machine. And so we offered
(19:31):
him a price. We've got to agree on the option,
and I'm good to go. My partner's going to come
in and sort of spot me some cash. And then
just before the that we're done on that contract, they
pull out. They want a straight cash settlement. Well I'm
bugget I don't have four million dollars. So I called
Michael and the guys and I said, well, look that
one went out and they just said, we're a bit
(19:52):
high than that number, and they said, just offer them
a low bull. We'll pay cash. And within I remember
going from one minute be buying it under an option
to we're definitely not buying it to offer him a lobel. Yeah,
maybe we're in and and my partners are unbelievable with me.
I mean they were really good and they're still my partners.
They're great people. But they put Alan Grant put me around,
(20:18):
a really old school quality financial guy, and so they
grabbed that creativity and the kid that wants to do
everything at high energy and then go and put an
account next to him, who it makes me walk through
the panel line by line, adjust for every number as
it would. Right, Yeah, it was and it was exceptional.
And they knew what they were doing there, right, because
I think they knew my personality and a trustworthy sort
of person and so they got that. They just said, well,
(20:41):
we'll just leave Alan with him. And Alan was one
of if he passed away a few years back at
ninety three. And yeah, so that was the approach, the owners,
wrapping it up in a way that gave them some
security over it. At the end, he risted, yeah, and
they were these were these were handshake sort of deals too.
These boys were not we didn't have a shareholders we're talking.
I mean, I'm only forty eight only, but these were
(21:04):
like deals you hear about like that's the sort of
people they were. And it was like, but we'll back you, Luke.
And but once you get in for more than double digits,
once you pass ten, like, the deals get a little bit,
a little bit.
Speaker 1 (21:15):
More robust's a bit more scary.
Speaker 3 (21:16):
Yeah, And even then I'm saying, let's get some shareholders.
I wanted to protect them, right, and we've had this
wonderful partnership. But the Koreans were great to deal with.
They just didn't know the asset they had and the
planning piece. I remember going through the office and I
found this master plan and it had a name on
a dredge in Bell and it was a town planner.
And I didn't even know what a town planner was. Right,
(21:37):
I'll just hit a golf ball, right, and now I
serve a few beers and someone I'm gonna call this
guy and he moved on and Peter Bell as a
planner and he's like, let's And so I was just
very fortunate. When you call the right people, they know
high quality planner had been around for a long time.
Made sure I got the right consultants, and the same
thing with another engineering firm, and so that between two
consultants at adg and place designer. I was able to.
(22:01):
I was fortunate. I lucked into some really good quality
consultants that didn't gudge and gave me some generalist advice.
But it was master planning and town planning. And then
I just went for a few years and came up
come off games were coming, which is just around the corner.
The village was just around the corners, a couple kilometers
from here, and there were some of the I guess
(22:24):
you nell COmON community assets of being lost due to
the village indoor sport rec center, and he was a
member here. I'm like, yeah, I might be able to
build that. Let me see what my planner thinks. And
we just started to boult it together from there, and
I remember the first DA we got through. I mean
it was like, I think for my planner it was
a pretty VILLI other day, but for me it was
like you, me and my lamb went from A to
B in value with a town like I haven't done anything.
(22:45):
My paper shuffle right, Like I went from being able
to put golf on it only to medical and sport
and wreck and mixed use, and the land tripled in value.
I'm like, how long has this been going on? Like?
So I immediately then went well, there's more in this
land and we started to look at retirement and all
these others. So it was a fast well it felt fast,
(23:06):
but it was over about six or seven years. But
I was just hungry for I'd go to every networking breakfast,
from small business stuff to whether it was with the
state government at the time, I wouldn't miss an opportunity
of how would I could to unlock some more land.
And at the operational site, I was here from open
to close every day. I bought a house in my
golf course, me and my family here until I worked
(23:27):
it out.
Speaker 1 (23:28):
And now what we've been doing today.
Speaker 2 (23:31):
We walked around a bit of a look at some
stuff and you show me the master plan for was
we're talking and of course Mick Fanning I think is
like an ambassador or something somehow involved in the business.
And we're talking with Mick about it. We're talking about
you now turning the building here a wave pool.
Speaker 3 (23:49):
Yeah, so what I mean, what is that about? It's
the evolution of really what we just talked about. I mean,
once we understood the sites value was in the land,
I'm a really I mean I'm a mad golfer still,
right when you start with a club in your hand.
Golf has always been at the central heartbeat of this.
For me, I was like, how do I build a
world class golf aset. What's a modern golfer cit He
(24:10):
look like you can't just build them and hope people
join and never play. You've got a couple of memberships
like that, so I'm about to get you on our
membership list. But what I realized is that it needed
to be different, and so that hasn't changed for probably
six raight years. And a few years ago we got
approached by a surf technology, particular surf technology, and it
tweaked me interest. I've never served in my life. But
(24:32):
Peter Bell, who was a planner but I hadn't engagement
at the time, had been asked to look for sites
and he's like, I know a guy that all like this,
pitched it to me. I'd already got some RESIE approval
at the time, and we looked at our master planment.
This is special. The deeper we got into tech, the
surf technology and what wavepools were, We're like, hang on,
this is just about to blow up globally. We are
right at the front of this. So I took a
(24:54):
couple of years to decide which tech. We've had a
few of them coming at us.
Speaker 1 (24:57):
We said it as in wavepool tech.
Speaker 3 (24:59):
He was in the wave technology and at that time
we were master planning. So I've been through the learning phase.
I really understood, like, let's master plan this is probably
look at it from an urban design. What are the
needs from the city met with the city. How do
I push and pull this a constraint site. So we've
got floodplane, all the normal geotechnical issues, all of the
normal environmental issues, all stuck in a flood plan, And well,
(25:25):
is it possible? It is probably the first question. And
so we as we unpacked that, we're like, okay, this
is real. I felt the same application I'd applied to
a golf course in its diversification of revenue. I wanted
to apply to these surf parks because these things were
popping up stand alone, and I'm like, that didn't feel
long term sustainable. It felt like this is going to
(25:46):
be an up and a down in regards to that.
And so I went, well, let's apply that lens to
I flew it. I went everywhere around the world. I
looked at every pool that was out of the ground.
I looked at every pool that was planned. I went
to this surf park summit probably six years ago, and
it was more like a bunch of cool surfers hanging
out was probably yeah maybe yeah, six years ago. But
now it's developers and property guys and so it's really
(26:09):
evolving and it's understanding of what the industry is. So yeah,
it the maturity of the surf and how it became
was a planner that asked me a question, would you
be interested? I did what I do is I get
under it, shake it, push it. We're went onto something here.
Approached Mick a little long. He'd been approached by a
lot of technologies, and I think what he really like
(26:31):
was our approach to masterplan and this wasn't a one
trick pony and so yeah, I mean mixed Mick. He's
an incredibly good human was as I got to know
him through the process, because we signed a sort of
term sheet like you do, but our DJA took nearly
three four years and it was running out and like
do we sign and it felt handshaky and we left
(26:54):
it like that, and I was able to build an
authentic relationship with Mick that it feels more like a
friendship than a business deal. And some mix inequity participant
in the Ambassador and it feels real. We got him
in the pool in Munich.
Speaker 1 (27:05):
So the technology we're using he mentioned that, he said
he be the minting one.
Speaker 3 (27:09):
And that was great for me. It was a big day. Right,
I've got my now partner Ambassador rolling in the pool.
I'm like, I hope he likes the product.
Speaker 1 (27:15):
And Mick Fanning of course, yeah, and well renowned and.
Speaker 3 (27:18):
If he doesn't like to surf, we've got a bit
of a problem in this master plan. Right, So that
was a big day and yeah, so really interesting. But
if I bring it back to me, it was just
good urban design, like what are these? These are inland
beaches that produce on demand every day, all day forever.
Speaker 1 (27:37):
From the respect of Mother nature. Just keep doing it.
Speaker 3 (27:40):
Yeah, and so for those surfers. And I didn't know
this at the time, but like nature's brutal, right, well, no,
nature's brutal, but I didn't know how often surf turns
off and how the conditions too much. Yeah, and even
for me now that I do love it a getting
out there as soon as it pumps properly. I can't
surf that either, So I've got this very small narrow
window and wave pools. I said this a couple of
(28:01):
times at where I've done some speaking for around the
surf piece. The way, the surf park industry is just
about to have its chairlift moment. So back in the
ski industry when it was really one gondola and there's
nothing else, and there's very little families going to these resorts,
when those chairlifts dropped in on scale and all the
(28:21):
tea barts and all that, it brought it to a
mass market. You can put a nonsurfer in one of
these lagoons and get them too genuinely surf very quick
in a short period. You can take a medium, a
good athlete, mediums to nonsurfer and turn them into a
reasonable because of the rints, it's a driving range for surfers.
Like if you and I go and take up golf,
we can't get a pro and we get a lesson
(28:42):
or two and me it balls every Tuesday and Thursday.
You can now do that with surfing, and.
Speaker 1 (28:46):
Then you're going to have a residential element as well.
Speaker 3 (28:49):
Yeah, and that was that master planning pieces like well,
people like living on golf courses and people like living
on beaches. And I flew to Brazil to check the
pool out. There was two pools, one in construction, well sorry,
two operational, one construction. And I got to this pool
in a Brazil and I'm walking in and I typically
video as i'm walking in, just so I can remember
what it was when you do these things. And I
had my head in the camera and I'm not really
(29:10):
paying much attention. I'm sort of walking through and the
broader spectrum and I dropped my my eyes lifted. It
felt like a beach. It was like, holy shit, this
thing's unbelievable. It felt like I was in a sort
of norsea of Hawaii. It was just crissand beautiful, like grass,
palm trees. And I'm like, this is different to the
pools I'd seen at this point. Most of them are
built like pool decks, nearly like a more built form,
(29:35):
constraints sites, no real element of that. And we'd had
a da in at that point, and I'm like, we're
blowing up our landscaping plan. We looked like a pool deck.
We need to look like this, and so I literally
held out for ninety days and re submitted our landscaping
to get the organic because I'm like, real estate sells
pretty good on beaches around the world. So if I
can have the two strong elements, and if I can
(29:57):
make the beach feel like a beach organically, that's more
pleasing than a hard stand. So yeah, that the real
estate for me has driven this project immensely because it's
it's the real balance sheet. It's the big ticket item,
and then the flip side of it is the operational
and how that works. But when we're master planning is like,
(30:19):
if it doesn't take the real estate box, if it
doesn't take the mixed use boss, and it doesn't take
the operational, then we keep going. We're just round in circles.
Speaker 1 (30:25):
So where are you guys at now?
Speaker 3 (30:28):
Yes, so we've now secured all the land security approvals.
We're in what I'm calling an off phrase, an off
market raise. At the moment, we're just going to some
family and friends and mine net worths to just talk
to them about We're calling it a little founders collective
and that's pretty cool. And a couple of the pools
in the us have raised all their equity in that
(30:49):
so we're in our equity raised debt, and equity evaluations
dropped next week. So I just had a little chat
with the value of last Thursday. It's feeling okay, it's
a nervous time, right. You sput a lot into a project.
You want to make sure those numbers stack so we
can unlock the debt. That's feeling.
Speaker 1 (31:02):
The way you would go about it, though, Luke, is
that you.
Speaker 2 (31:04):
I think what you're saying is that you'll raise some
equity and you'll borrow some money so that you can
get the people who put the wreck equity get some.
Speaker 1 (31:11):
Leverage into the property.
Speaker 2 (31:12):
And but a lot of it depends on the valuation
because you've got to know how much you're going to
give way. So like you walk out to an equity person,
you say, well, it's worth I know, half a billion
dollars for them, just picking a number. We want to
raise one hundred, so we're going to put out there.
We're want to raise twenty one hundred of equity, so
we're going to put out twenty percent. We're going to
(31:33):
eat twenty percent away. I'm just making numbers up for
the sake of the audience. But yeah, it's along those lines.
That's why the vowels are very important.
Speaker 3 (31:40):
Yeah. So what we're doing right now with the vow
is so we're going to raise forty nine percent equity
in a press share. One of the things I really
like about my partners and how we bought the golf
club was I really respect the capital right we come from.
I mean, you put money into my business, you need
to be like, I shouldn't be getting paid before or
you get paid, and so making sure that pref is
(32:01):
done right.
Speaker 2 (32:02):
So you need to explain, well, maybe we can both
to the listeners, but the issue of a pressure means
that they get preference. In other words, they get paid
a give it in first, where sometimes you don't even
get a divident and you get paid a return like
an interest rate.
Speaker 3 (32:16):
Yeah. So the way we're structuring at the moment, there's
some final tweaking to that, but the way we're structuring
at like when you say that some of the audience
won't know this. I mean two years ago, I didn't
know what this was. I knew what the mechanism was
because for me, I called it a ratchet. If you
put money and you get paid before I get paid. Yeah,
and then you get to the lawyer structure of structure.
Speaker 1 (32:32):
Legal structure is called a preference preference share.
Speaker 3 (32:35):
And so that preference share for me was designed to
do the mechanism of making sure that your money what
happens if things don't go well, Like we can all
talk blue Skuy on this project, and it's so easy
to talk blue s guy, and they're sexy, and so
you can sort of you can bullshit your way through
the sexy stuff. What you can't bullshit your way when
someone asked ale we're talking about earlier, when someone to
show me where the risks are, because sophisticated money, that's
(32:57):
where they go looking. And so what I wanted to
do make sure that if this turned down and it
didn't work, let's say it legitimately didn't know we're forecasting
in the high twenties ebitdar and let's say it's fifteen
ebitdar return in the operating business. What does that look
like for my investor? So how does the pref shard
What you don't want me is me making a bunch
(33:17):
of money while you're being two to part And so
we got really so that was a big part of
the PREF and then ninety million debt.
Speaker 1 (33:24):
Is the other side of our So debt always gets
paid first.
Speaker 3 (33:27):
Yep, Debt first, PREF second, US third.
Speaker 2 (33:30):
So in other words, the way you've structured it in
order to make it attractive in terms of risk mitigation
financial risk mitigations is that obviously debt's going to get
paid first because that's what the lender is going to
insist on lenders don't take do it anither way. But
then the first equity round that. Let's say in the
example you're saying to raise twenty twenty mili, they get
(33:52):
paid before you do. And if there's something leftover after
the else you get paid. Is it pref just to
dividends or is it pref tox as well on capital
as well. So if you sell, they get paid first.
If there is self for any reason, they always get
their money first.
Speaker 3 (34:08):
Yeah. So part of that is, and it's what we've done,
is we've put a PREF on the exit to an
i RR of eight percent. And that's really not really
about when we're forecasting well above eight percent, but it
was really about the ugly if things go toast, you
get your money back in eight percent before I get paid.
And I'm not a typically pessimistic person, but the lens
(34:29):
I've really been focused on right now is it's so
easy to sell the upside of these things, but it's
like the money doesn't really need to that's the easy part.
What does it look like? Ugly?
Speaker 1 (34:38):
And to mitigate the bad side?
Speaker 3 (34:40):
Yeah, and what is that?
Speaker 1 (34:41):
And that's you're right. I think that's too.
Speaker 2 (34:43):
Many people don't concentrate on mitigating through structure, through the
legal structure, what is the downside?
Speaker 1 (34:50):
And that's what prefs do.
Speaker 3 (34:52):
And I've been so focused on clearly, if we deliver,
I want some gravy out of this, because that's me
delivering for you and I in an investment. But what's
the opposite of that is me not delivering well sorely,
I shouldn't get my big clip right. And look, we're
putting in some serious equity into this. We've spent five
and a half million a date on the das. We've
put two and a half million into detailed design that
(35:12):
started last week, and so we've got large capital. We're
tipping the existing operating businesses in, so we've got profitable
operating businesses that are both going in and we've got
our primary residential lot in this deal, so there's one
hundred and sixty residential apartments going in the freehold. So
there's a there's a full whack there and a lot
of equity going on on our side. But I still
(35:32):
say to the guys as like my partners, and we're
all on the same we need to respect that frontline
capital because they're taking We've been here for a long time,
we know it, we smell it, We're in the detail.
These people are putting money in and so we are
not being I guess over it's clearly not giving more
than we need to. But we've got to find that
middle balance to unlock made you don't unlock the money.
I don't have a wave pool. And so I have
(35:54):
been really and it's been I mean, I'm loving it.
I'm enjoying the learning. I mean KPMGM, I can never
run slow down and just tell me what that acronym means,
irs and like and for me, I can't go to
the next level until I understand it. And sometimes it
slows it. I wouldn't say it slows the project down,
but the guys in the room, the guys that went
to UNI I find it until you can tell me
(36:18):
in a simple way where I understand it.
Speaker 2 (36:20):
Then it's too complex the structure you'd explain it, you're
going about explain so yeah, and if you're selling it
at the end of the day, and if it's too complex.
Speaker 3 (36:27):
What I'm starting to smell With a few meetings. And
I remember one of the meetings I had earlier with
the guy down Byron. He looked at my early structure
and just said, from a real estate point of view,
like I love where you're at. But unless I got
some of that real estate in the deal, it's it
doesn't fly. It doesn't smell right. You can give me
a twenty percent IRR and maybe your numbers are awesome,
(36:49):
a pref the hell out of it. But if I'm
paying to improve your land that much, I want some
of the uplift in the land. And I drove back
that's an hour and twenty to where I am are
in Quarter. And he's a pretty substantial businessman and it's
been around, very well known guy, and I'm like, he's right,
And so I've got three partners. I now need to
go and say we've got to tip some of the
gravy of this in and they're smart people.
Speaker 1 (37:11):
They get it, well, do you keep having iterations?
Speaker 2 (37:13):
And I think that's and I think what most people
don't understand is that they always look at these deals
when they're done and think, well, I loved it about
do that deal. But really they've got to be prepared
to go through all the shitty iterations. You have to
keep going through iteration after iteration after iteration and see
it works few but also it works for the investors.
Without the investors' money, there's no deal at the end
of the day.
Speaker 3 (37:33):
And that's that's come to light a lot more recently
for me, like a lot, and it's been a really
interesting learning curve because it's and you can call it
respective invester capital. I mean, if you don't respect, you're
not kidding that. It's as simple as that, right, and
the good investors you can get some passionate money and
that sort of fun money, and there is some of
that around, but it's rare. This is a really big
(37:54):
project and it deserves the right capital. Will go slow
if we have to, We will take our time to
get the right money.
Speaker 2 (38:00):
If you own, don't raise it, if you don't get
the debt, does a twenty million have to go in.
So in other words, it's got a condition precedent. It
says your money, you the investor, don't put any money
in unless we can get the loan approved.
Speaker 3 (38:11):
So yeah, so where it's say sixty million equity coming
in that will sit. So let's say you are my
investor at sixty that will sit in a lawyers trust account,
conditions precedent to unlock it. If we don't unlock it
within a period of time you get it back, you
won't zero risk including interest going back. And I think
there's been a couple of pools in Australia that have
tried that and chewed up a small amount, not big numbers,
(38:32):
but chewed up some investor capital. And we made a commitment.
A part of that detailed design. One of the conditions
precedent is build contracts in place. One of the biggest
risks at the moment to most jobs is construction. So
we've committed to making sure we get all the way
through to construction contracts, so we're not spending your new money,
investor cash on Maybe this is a job the day
(38:52):
your money drops in the excavator.
Speaker 1 (38:54):
Because that's what built Sorry, That's what investors are worried about.
Speaker 2 (38:57):
To say, what there's any building involved is the is
the cost blowouts? The construction cost because the constructions costs
these days are changing a lot of deals. So how
confident are you look that you're going to get this
deal away?
Speaker 3 (39:10):
Yeah? What I'd say to people now is, I mean,
I've been on this for five and a half years.
We are now buildable and fundable the structures right. I
brought in a development director who's come from a popular
listed development company, ripping guy but really talented, and he
basically redlined every building I had in my master plant
red line, the titling red line, the structure. We've got
offers from energecs around power, all the non sexy stuff.
(39:33):
There's so much sex in this job that it's easy
to get what but how do you build it? Where's
the power coming from? So we are buildable and we
feel our structure, albeit with tweaks, is now fundable and
the way we've structured it, so yeah, I'm not confident
we'll get this out of the ground.
Speaker 1 (39:50):
Like how many as you've been on it.
Speaker 3 (39:51):
I've been on the surf park of this approach. I've
been here for sixteen years and I've been on the
surf park for five and a half.
Speaker 2 (39:57):
Well that's a pretty long apprenticeship. Luke Schwager pretty hard
name to say, but good luck mate, Mark.
Speaker 3 (40:05):
Thanks for having I really appreciate it and it's good
to see
Luke Alshwager, welcome to the mentor thanks for having us well,
but we're welcome back.
Speaker 2 (00:04):
We have met before, yeah, yeah, maybe a year ago,
about twelve months ago. Yeah, and you came into a
weekend of small business owner of business owners generally come
to my farm and with our mate Jonathan Pas who
ran it, and you guys will guess you just say
my place.
Speaker 3 (00:25):
Now. We stayed in town, right, he stayed in town,
and then we sort of used your house as the
retreat and sort of the business sort of peace. And yeah,
it was amazing.
Speaker 1 (00:34):
And thank you very much.
Speaker 2 (00:35):
And I remember, I remember you well, and I remember
what you were doing at the time, and that's one
of the.
Speaker 1 (00:39):
Things I want to talk to you today. So you're
about today. You're the co founder and directed Palm Valley,
Gold Coast.
Speaker 2 (00:45):
But maybe just explain the precinct we are in now.
Speaker 3 (00:49):
So yeah, so I guess, well physically so we're located
on the Gold Coast. So Parkwood Village is formerly a
golf course called Parkwood International and I bought it with
some partners in twenty ten. Former golf professional you were, yeah,
had an opportunity like a lot of touring professionals. Create
(01:10):
didn't quite get there, and where I needed to move
to was into the golf industry. All I knew was
golf became the club professional here and had.
Speaker 1 (01:16):
Not, so you were the pro in this club.
Speaker 3 (01:18):
Yeah. I had an opportunity to buy the course and
this back in two thousand and nine, so I settled
it in twenty ten. And my sort of vision was
to create community golf courses traditionally had been very close shop,
very private, don't come in the front gate. And what
I saw when I was playing around the world was
it was the opposite. Let's bring him in, Let's bring
in whole of family. And so that's what Parkwood Village is.
(01:39):
And back in twenty sixteen, we I bought the Gold
Coast Titans in so it was an opportunity to really
diversify our customer base and create not only Alice Club,
but a high performance center for the footy club. And
they were going through some challenges.
Speaker 1 (01:53):
This is an NROL club, National rugby league.
Speaker 3 (01:56):
Club, yeah, and so the rugby league club obviously Land
Rugby League and the Gold Coast so it's a big
opportunity for us. It helped us reposition the site and yeah,
and that was really the unearthing of what the site
potential was. It's like, it's more than a golf course.
What does that look like?
Speaker 2 (02:13):
So if I could just go back one step, because
you were being quite modest in your explanation, then so
there was here a golf club, it's probably Approach International
Pipe Put International Golf Club. And then you have integrated
into that the Gold Coast Titans and aural rugby league side.
(02:37):
This is there, what their head offers or their training
center or yeah.
Speaker 3 (02:40):
So what we did was once we identified it. Obviously
golf golf as a business model is there's been some
challenges in it through the years, and so we've made
the golf course profitable. But really where the opportunity was
was in the land value, and that land value was
mixed use in commercial sport and rerec makes sense. So
we built a sport and rec center about four thousand
meters and we put the Gold Coast Titans High Performance
(03:01):
Center and their administration in there. So from a rugby
league point club, their head officers here, the hundredd staff
are based here, their training facilities are here.
Speaker 2 (03:11):
This is the football club football club, not as a
league's club.
Speaker 1 (03:14):
Not as a football club.
Speaker 3 (03:16):
And then as a part of that deal, we said
to them, well you don't really have a league's club,
so why don't we become at least your community.
Speaker 1 (03:22):
Club or that so premises.
Speaker 3 (03:24):
Yeah, so the fans had a place to come and
hang out, and so that dialed up our hospitality menu.
So part of those two things, and then the ancillary
off that moved into like medical and ancillarious cuscan radiology, physiotherapy,
all of those things. So it was a really nice fit.
And I wouldn't say it was by design. It was
a little bit of we'll suck at and see and
(03:45):
it really started, Okay, there's something in this mixed use
within these green heartbeats of the city, and that's that's
how we got here.
Speaker 2 (03:53):
So priborly, when it was before all those iterations.
Speaker 3 (04:00):
Park Valley, Park Valley, so it was Parkwood International.
Speaker 2 (04:03):
Parkwood International, park Wood International. It was just basically pro shopping.
Speaker 3 (04:09):
Had a decent clubhouse. Like most clubs if you go
to a traditional golf club or a member based golf club,
it was a big clubhouse with not much going on. Firstly,
so you had a licensed premises that really wasn't being
run like a licensed premises. Then you had naden whole
golf course.
Speaker 1 (04:22):
It means that's you're rating tole so to speak.
Speaker 3 (04:23):
Yeah, yeah, clubhouse. You can have a beer.
Speaker 2 (04:27):
It was just having a beer and biscuits or something.
Speaker 3 (04:29):
And like most clubs, they weren't really making money, so
your shrink service barely a menu. And so through This
is back in twenty ten, and so the golf course
had been here since nine to eighty seven. The Japanese
built it.
Speaker 1 (04:44):
So that was the Koma Goo Goomi days. This is
when the Japanese were investing.
Speaker 3 (04:47):
Heavily in the golf course in the mid.
Speaker 1 (04:49):
Eighties to ladies, yes, I remember it.
Speaker 3 (04:51):
And then they exited en Mass and so what we
had was back in the late eighties and we had
all the major golf courses being built by the Japanese
at that point. And so we had par Meadows, which
was an iconic course that Greg Norman, they had the
first million dollar even and so they built Parmettos, they
built Parkwood, and we were the really first two resort
style facilities on the Gold Coast. Where Parkwood was sat
(05:13):
at that point was really rural bushland outside of the coast.
When we're three point ninek longis from Southport, so we're
in the middle of town. But back then for the
local gold Coasters, there was a town.
Speaker 2 (05:23):
Yeah, and it was pretty It would have been pretty
pioneering stuff.
Speaker 1 (05:27):
Then to build a golf course.
Speaker 3 (05:28):
Totally, I mean, there was no commercial basis for it.
I mean, I think they'd owned it from eighty seven.
I think they sold it to a Korean group in
two thousand and five. They wouldn't have made profit through
that period. It was they built something, and it was
built well. I remember when we did some renovations, we
looked like a podium deck out the front of this
thing was a four hundred mili slab, like there was
(05:50):
no everything was built right, like the fridge Backer House
is still working today. Like when they did things, they
did it really well. So we're really fortunate there. The
base golf course, it was good, the route's good. It's
in the bottom of this little valley. And so as
a golf pro was I mean, for me, it was
a big opportunity. I'd sort of had a career that
(06:10):
didn't quite cut the mustard, and I need to get
a real job at the back end of my playing
and to have an opportunity to buy a course. At
the time, I was sort of reading a book about
what I now understand our options and how to buy
stuff with no money because I had no money.
Speaker 1 (06:24):
Yeah, golf course wouldn't have been cheap.
Speaker 3 (06:27):
And so at this point I probably wasn't thinking about
buying a golf course, but I was trying to trying
to sort of grind my way through and find my way.
But being a club pro here and then at an
international purchases international owners at the time they wanted to sell,
I'm like, I'll buy it.
Speaker 2 (06:43):
Can we just stop there? From a lucas A lot
of people would like to know how this sort of
thing works. So just to paint the picture a little bit,
here are twenty years ago yep, round about twenty years
ago form a golf pro, still golf pro, being on
the professional circuit, but probably it wasn't making a.
Speaker 1 (07:04):
Very well paid golf making the amount of money you
wanted to get.
Speaker 2 (07:07):
And it's a tough business and it's very competitive obviously,
both on a global scales, not just here in Australia
and particularly here in the Gold Coast. An organization like
some Japanese or organization decides to as part of you know,
the investments in Queensland, which there was lots of them.
Speaker 1 (07:23):
They built lots of golf courses here, but this is
one of the first ones they built.
Speaker 2 (07:27):
Which, by the way, you know, to give people context,
if I go east from here for kilometers, I'm on
the coast. Yeah you're I'm I'm at in South Stralia. Yeah, yeah, correct, correct,
right there, right there, I'm in I'm swimming in the water.
So but then when this was built, you would have
been thinking to yourself, well, this is a back and
(07:48):
were really I'm now I've been now pointed to be
the surfer, the to be the golf pro here.
Speaker 3 (07:53):
Yeah. Well, I mean there's a bit of a it's
for me, like for kids that grow up with the
aspirations of men. I mean I was the guy that
I want to be number one in the world. So
there's a bit of arrogance for I don't know what
you want to call it. If you can believe, yeah,
if you can believe, you can be the number one,
and I generally did, and I hung it all out there.
I left school young and that was all I wanted
(08:14):
to do, so to have the ambition or arrogance, whatever
you want to call it, to say that you're always
like it's hard to not look with a big lens.
And so coming back to being a golf pro is
a fall from grace a little bit, and it's not
I mean in my head at the time, it was
I look at the.
Speaker 1 (08:31):
Visional Golf proposed for a professional.
Speaker 3 (08:33):
Golfuring professional, so Greg Norman, you're out of Scots and
those guys through to a traditional club professional. And at
that point, if someone had asked me when I was
wanting to be a touring professional, you want to be
a club bro, I mean, that's the you nearly felt.
It was like the failed golf pro tour professional. So
so for me that transition, like a lot of athletes,
transitioning is sometimes not as easy. But I was very
(08:55):
hungry and I hadn't really tasted success as a player,
so I was like, what next, And so I think
as I took the club pro job on where I
was working for the club, I hadn't really turned that off, right,
It was like, what's next? And when I.
Speaker 1 (09:09):
Am looking all the time forwards next.
Speaker 3 (09:11):
I was at the time, Yeah, I couldn't. I was insatiable.
I wanted to find work. Yes, and I've been like
that even in my carrent I mean, how we got
to the wavepiol and when we get to that. But
I'm always looking for how to grow. And what I
had to do was temper that as well. Right, what
the club Pro job did put my feet on the ground.
It made me slow down. I had to serve the customer.
Speaker 1 (09:31):
I had to earn a wage.
Speaker 3 (09:33):
Yeah, I had to earn a wage, and it was
to be honest, it was the first time it had
to really earned a proper wage early days with your
little part time jobs and stuff like that, but it
was the first time I was paying rent. And because
you're bunking in houses your mum and dad anyway, you
can survive, and sponsors get you through year golf career.
And so the park would thing if I in the
revision mirror as the club Pro was like the making
(09:55):
of the early making of business knowledge for me because
it was simple as you walk in and selling you
a Mars bar a green fee and a bottle of
coke or a bottle of water. Lessons maybe, yeah, and
some lessons, but the primary income was I sell I
buy the bottle for two dollars. I sell it to
you for five dollars, and I do that a few
hundred times a day. I'm mostually making some good money
(10:16):
because that's how cloud pro contract works. You're not in
a salary scenario. You own the rights to the pro
shop revenue.
Speaker 1 (10:21):
Wow, wow, I did you know that.
Speaker 3 (10:23):
Yeah, So that's the traditional way of a club row.
So I had the I was servicing the golf course
and they outsourced that to a professional, and so I
was in a small business overnight with no overheads though, right,
I don't have to pay rent, don't.
Speaker 1 (10:36):
Have to verable cost. It's a veriable cost.
Speaker 3 (10:38):
Yeah.
Speaker 1 (10:38):
As you as you own, you pay.
Speaker 3 (10:40):
Yeah. And what was really interesting about that was it
taught me to first low down and you can't do
ninety things at once and getting and making a monthly
profit which then became my salary and ongoing. So there
was a real shift from that, which was partly what
I thought negative at the time, and in the revision
(11:01):
Merritor was the making of my base fundamental of how
to grab something that doesn't make profit and turn it
to profit.
Speaker 1 (11:06):
That's interesting. They're too late every month.
Speaker 2 (11:08):
It would have been accounting, so someone would have said, look,
you know you sold one hundred bttles of water.
Speaker 1 (11:12):
And each bottle cost you two bucks.
Speaker 2 (11:13):
It is two hundred, and you sold them for five
hundred and the surrounded profits like you would have got
into this mad.
Speaker 3 (11:18):
I didn't know what a balance sheet was when I started.
I couldn't have told you what a balance sheet was
if you'd ask me. P and L, like I said,
left school young. So it was a real birth of fire.
But I got it quickly. I had that intuitive nature,
like you walk in, like how much money can I
extract out of you from my pros?
Speaker 1 (11:33):
When the rents sort of hanging off it?
Speaker 2 (11:37):
You know, you got to pay rend or whatever you
got to do, or you buy food, you got to
buy clothes, or you want to go down the pub
with your mates, you got to pay you away quick.
Right now, you work that shit out pretty fast. Yeah
and L has become second nature.
Speaker 3 (11:46):
Yeah, and it really did. And I didn't even it
was non sophisticated, but it was commercially on point. And
as I've become more sophisticated, I look back and there
like I got that quick. I got the commercial side
of it quick. Scaling then was a whole different thing.
Speaker 2 (12:00):
Yeah, but hard to scale one one of yourself. So
and then during that period, Luke, you do you get
to know the people who owned own the place a
little bit?
Speaker 1 (12:13):
How did that all come?
Speaker 3 (12:14):
So, like a lot of the international owners in many
asset classes, there's an owner's rep typically is the one
you're interfacing with. And so they had a couple on
the ground that really didn't know anything about their property.
And do you mean so that two staff that were
probably sent from at this point that was career and
I'd played a little bit on the career. I played
some events up in Korea at the right at the
back end of my career, and I loved it, love
(12:36):
the food, love the culture, And that's how I really
owended up here. And so there was a couple of
stuff that had here but really didn't know what golf
operations was. It was a hard business, right, Golf had
been overdeveloped and the revenues were declining at the time.
And so I knew the owner's reps and they had
(12:57):
a couple of purchases come through property buyers, yeah, potential
purchases of the property, and I went, well, I'm I
could see it was very difficult for them to sell it.
So for what they paid, they paid five point five
million dollars I think it was from the Japanese and
they were losing at least half of me and maybe
(13:18):
seven hundred a year. I didn't have full visibility on
the number, but they were definitely losing money and the
service are going down. The quality, of course is going down,
and so I could just see that vision I've had
from when I was living and working way. I just
need to open this gates up. They need to make
it full community and family.
Speaker 1 (13:31):
Can I just stop?
Speaker 3 (13:32):
It?
Speaker 2 (13:32):
Is the reason why this place was losing money? Whatever
the amount doesn't really matter that much. But was losing money?
Is it because golf was on the decline or was
it because this place wasn't like at a standard where
you could get more people in.
Speaker 3 (13:50):
So it's probably both both. Golf was declining, which at
the moment it's going the opposite. It's growing like I've
never seen it. Is it. It's blowing up COVID. What
COVID did golf and the young people, it's phenomenal, right,
And I'm really enjoying it too, as a kid who
grew up in the game and now I'm forty eight.
I'm like, this is awesome watching my son who because
Bronnie James and lebron James are playing, he wants to
(14:12):
play golf. Fantastic. But I think it was both. I
think when you have a tired asset this, when you're
not reinvesting, eventually it dies. If you just think of
it like a restaurant, right, if you're not doing an
FF and sort of fit out properly every sort of
five to seven years, then you're not going to you're
not going to be there.
Speaker 1 (14:28):
And you're talking about there is stuff in the inside
the clubhouse.
Speaker 3 (14:31):
Yeah, all the amenities, yeah, the amenities, new bathrooms, Yeah,
just if you don't walk in and if it's not
on point. If you look at the great hospitality people,
they do it well and they always do it really well,
and they are constantly innovating around that. Well. This golf
course win this since nineteen eighty seven and it was
now two thousand and ten. Yeah, and it hadn't had
a dollar spent on it in real terms, and so
(14:52):
that was part of the problem. The second part was
it was running a business model that didn't exist really anymore.
Like a lot of golf clubs. So it was all
members in private and a little bit of public occasionally.
Speaker 1 (15:03):
So public weren't able to just turn up another game.
Speaker 3 (15:05):
They could, but it was not advertised and branded like that,
like they were open. But most clubs, or most most
of the market believe like you have to have to
be a member to play golf most courses. There's a
few public courses in every city, and so it played
like a members club. And so as we got here
and were part of the shift was to how to
(15:27):
bring more people in. So immediately looking at things like
the hospitality elements.
Speaker 1 (15:32):
This is before after you bought so well a little
while while before.
Speaker 3 (15:36):
So that was but I was teetering on the edges.
I was playing with very little money. I think I
borrowed twenty grand from my parents to fit out my
pro shop, painted the walls myself, normal small business story.
But once we had control of it, then we could
start moving the big pieces on the paper. But at
that point we'd had a bit of momentum around membership,
(15:56):
and I felt at the time my vision was sort
of weddings, community, miniature golf, bringing other things in, things
that were very operationally focused, and my partners were incredible.
The guys that we bought the golf club with a
friends of a family, very high level pitch, I want
(16:16):
to buy golf course pretty much looking at me like
what are you thinking about? Like yeah, and under and
as you know when you bringing these guys were sophistical.
They founded a company called health World Inner Health plus
these guys Michael and Leon Brosnen and the Grant family
Allen Grant. So they sent old Alan Grant down, a
gritty accountant that had worked years and years for our
(16:37):
with the boys and helped them form this company that
was exceptional. And the brief was nearly like do whatever
you can to tell Luke when not buying it. And
by the time I'd had an hour with Alan, He's like,
we're buying it. But really what that was it was
a land purchase. You're buying fifty six hectares for not
a lot of money, but they gave me enough rope
(16:59):
to not blow it up and a lot of money
over the years over the first five or six years.
And it took us about that to really get it right.
And that was I think Michael has said it a
few times over the years. It's like we probably spent
three million on your education to understand how to unlock
the value of the site. But that was really where
the nuts and bolts were. Was the pro shop year
(17:19):
or eighteen months was really really critical for me. And
then it was a how to scale and grow it.
It's like, okay, we'll put weddings on. I think at
one point I got to sixty weddings, but I was
still losing money. Yeah, it was like I didn't understand
the control elements of the hospital. I understood golf, but
I didn't know hospital. So I was like, okay, now
I'm going to every hot So I was in every
wedding and a touch like get really dirty, understand it,
(17:40):
better tweak it a bit more. Okay that now profits
ad the mini golf and so we just started and
it was all operationally focused and that titans sort of
opportunity or the master planning opportunity was where it really.
Speaker 1 (17:51):
So how did you think about I might just quickly
go back to the purchase.
Speaker 2 (17:58):
What do you do when you're in an environment where
you see there's an opportunity, but at this stage you're
like an non employee that like, yeah, sort of like
an employee, you know, the.
Speaker 1 (18:06):
Golf pro at a golf club.
Speaker 2 (18:10):
How do you broach to the owners that, look, I
might be interested buying this.
Speaker 3 (18:16):
I guess it's that same kid that wants to be
a golf professional, right, Like for me, it was I
probably didn't know what I was really asking what of
myself even like I'm going to buy this? There was
did you?
Speaker 2 (18:27):
Yeah?
Speaker 3 (18:27):
Yeah, I just went to the owner's rep and I said, look,
i've seen you taking that through. I'd love the opportunity
to buy it. And I had read I can't even
remember the name of the book, but it was it
was a book about options, and I was trying to
buy a house or real estate. How do I get
my foot on a piece of land? And so at
this point I'm reading the book and I'm pretty dyslexic,
and so a lot of my readings all being done
(18:48):
by ebooks and podcast audiobooks, and so I'm reading this
thing and when I grab something, and so I don't
often go through books like that. I don't think I
read a book at school. But when it when it
bites me, it bites me, and I'll read it. I
will hardly sleep that night. And that was me looking
for a thing I didn't think it was the golf course.
I probably thought it was a house or a flat
(19:09):
or something like that, and so, but it applied. I
was like, well, hang on, I'm the club pro. I've
got a contract over this. It's gonna be hard for
them to sell it without me embedded in it. So
I've sort of I've got some leverage here. I don't
really know what it is, but after the couple visits through,
it's dried up. No one wants it right, it's a
fifty six hectare loss making machine. And so we offered
(19:31):
him a price. We've got to agree on the option,
and I'm good to go. My partner's going to come
in and sort of spot me some cash. And then
just before the that we're done on that contract, they
pull out. They want a straight cash settlement. Well I'm
bugget I don't have four million dollars. So I called
Michael and the guys and I said, well, look that
one went out and they just said, we're a bit
(19:52):
high than that number, and they said, just offer them
a low bull. We'll pay cash. And within I remember
going from one minute be buying it under an option
to we're definitely not buying it to offer him a lobel. Yeah,
maybe we're in and and my partners are unbelievable with me.
I mean they were really good and they're still my partners.
They're great people. But they put Alan Grant put me around,
(20:18):
a really old school quality financial guy, and so they
grabbed that creativity and the kid that wants to do
everything at high energy and then go and put an
account next to him, who it makes me walk through
the panel line by line, adjust for every number as
it would. Right, Yeah, it was and it was exceptional.
And they knew what they were doing there, right, because
I think they knew my personality and a trustworthy sort
of person and so they got that. They just said, well,
(20:41):
we'll just leave Alan with him. And Alan was one
of if he passed away a few years back at
ninety three. And yeah, so that was the approach, the owners,
wrapping it up in a way that gave them some
security over it. At the end, he risted, yeah, and
they were these were these were handshake sort of deals too.
These boys were not we didn't have a shareholders we're talking.
I mean, I'm only forty eight only, but these were
(21:04):
like deals you hear about like that's the sort of
people they were. And it was like, but we'll back you, Luke.
And but once you get in for more than double digits,
once you pass ten, like, the deals get a little bit,
a little bit.
Speaker 1 (21:15):
More robust's a bit more scary.
Speaker 3 (21:16):
Yeah, And even then I'm saying, let's get some shareholders.
I wanted to protect them, right, and we've had this
wonderful partnership. But the Koreans were great to deal with.
They just didn't know the asset they had and the
planning piece. I remember going through the office and I
found this master plan and it had a name on
a dredge in Bell and it was a town planner.
And I didn't even know what a town planner was. Right,
(21:37):
I'll just hit a golf ball, right, and now I
serve a few beers and someone I'm gonna call this
guy and he moved on and Peter Bell as a
planner and he's like, let's And so I was just
very fortunate. When you call the right people, they know
high quality planner had been around for a long time.
Made sure I got the right consultants, and the same
thing with another engineering firm, and so that between two
consultants at adg and place designer. I was able to.
(22:01):
I was fortunate. I lucked into some really good quality
consultants that didn't gudge and gave me some generalist advice.
But it was master planning and town planning. And then
I just went for a few years and came up
come off games were coming, which is just around the corner.
The village was just around the corners, a couple kilometers
from here, and there were some of the I guess
(22:24):
you nell COmON community assets of being lost due to
the village indoor sport rec center, and he was a
member here. I'm like, yeah, I might be able to
build that. Let me see what my planner thinks. And
we just started to boult it together from there, and
I remember the first DA we got through. I mean
it was like, I think for my planner it was
a pretty VILLI other day, but for me it was
like you, me and my lamb went from A to
B in value with a town like I haven't done anything.
(22:45):
My paper shuffle right, Like I went from being able
to put golf on it only to medical and sport
and wreck and mixed use, and the land tripled in value.
I'm like, how long has this been going on? Like?
So I immediately then went well, there's more in this
land and we started to look at retirement and all
these others. So it was a fast well it felt fast,
(23:06):
but it was over about six or seven years. But
I was just hungry for I'd go to every networking breakfast,
from small business stuff to whether it was with the
state government at the time, I wouldn't miss an opportunity
of how would I could to unlock some more land.
And at the operational site, I was here from open
to close every day. I bought a house in my
golf course, me and my family here until I worked
(23:27):
it out.
Speaker 1 (23:28):
And now what we've been doing today.
Speaker 2 (23:31):
We walked around a bit of a look at some
stuff and you show me the master plan for was
we're talking and of course Mick Fanning I think is
like an ambassador or something somehow involved in the business.
And we're talking with Mick about it. We're talking about
you now turning the building here a wave pool.
Speaker 3 (23:49):
Yeah, so what I mean, what is that about? It's
the evolution of really what we just talked about. I mean,
once we understood the sites value was in the land,
I'm a really I mean I'm a mad golfer still,
right when you start with a club in your hand.
Golf has always been at the central heartbeat of this.
For me, I was like, how do I build a
world class golf aset. What's a modern golfer cit He
(24:10):
look like you can't just build them and hope people
join and never play. You've got a couple of memberships
like that, so I'm about to get you on our
membership list. But what I realized is that it needed
to be different, and so that hasn't changed for probably
six raight years. And a few years ago we got
approached by a surf technology, particular surf technology, and it
tweaked me interest. I've never served in my life. But
(24:32):
Peter Bell, who was a planner but I hadn't engagement
at the time, had been asked to look for sites
and he's like, I know a guy that all like this,
pitched it to me. I'd already got some RESIE approval
at the time, and we looked at our master planment.
This is special. The deeper we got into tech, the
surf technology and what wavepools were, We're like, hang on,
this is just about to blow up globally. We are
right at the front of this. So I took a
(24:54):
couple of years to decide which tech. We've had a
few of them coming at us.
Speaker 1 (24:57):
We said it as in wavepool tech.
Speaker 3 (24:59):
He was in the wave technology and at that time
we were master planning. So I've been through the learning phase.
I really understood, like, let's master plan this is probably
look at it from an urban design. What are the
needs from the city met with the city. How do
I push and pull this a constraint site. So we've
got floodplane, all the normal geotechnical issues, all of the
normal environmental issues, all stuck in a flood plan, And well,
(25:25):
is it possible? It is probably the first question. And
so we as we unpacked that, we're like, okay, this
is real. I felt the same application I'd applied to
a golf course in its diversification of revenue. I wanted
to apply to these surf parks because these things were
popping up stand alone, and I'm like, that didn't feel
long term sustainable. It felt like this is going to
(25:46):
be an up and a down in regards to that.
And so I went, well, let's apply that lens to
I flew it. I went everywhere around the world. I
looked at every pool that was out of the ground.
I looked at every pool that was planned. I went
to this surf park summit probably six years ago, and
it was more like a bunch of cool surfers hanging
out was probably yeah maybe yeah, six years ago. But
now it's developers and property guys and so it's really
(26:09):
evolving and it's understanding of what the industry is. So yeah,
it the maturity of the surf and how it became
was a planner that asked me a question, would you
be interested? I did what I do is I get
under it, shake it, push it. We're went onto something here.
Approached Mick a little long. He'd been approached by a
lot of technologies, and I think what he really like
(26:31):
was our approach to masterplan and this wasn't a one
trick pony and so yeah, I mean mixed Mick. He's
an incredibly good human was as I got to know
him through the process, because we signed a sort of
term sheet like you do, but our DJA took nearly
three four years and it was running out and like
do we sign and it felt handshaky and we left
(26:54):
it like that, and I was able to build an
authentic relationship with Mick that it feels more like a
friendship than a business deal. And some mix inequity participant
in the Ambassador and it feels real. We got him
in the pool in Munich.
Speaker 1 (27:05):
So the technology we're using he mentioned that, he said
he be the minting one.
Speaker 3 (27:09):
And that was great for me. It was a big day. Right,
I've got my now partner Ambassador rolling in the pool.
I'm like, I hope he likes the product.
Speaker 1 (27:15):
And Mick Fanning of course, yeah, and well renowned and.
Speaker 3 (27:18):
If he doesn't like to surf, we've got a bit
of a problem in this master plan. Right, So that
was a big day and yeah, so really interesting. But
if I bring it back to me, it was just
good urban design, like what are these? These are inland
beaches that produce on demand every day, all day forever.
Speaker 1 (27:37):
From the respect of Mother nature. Just keep doing it.
Speaker 3 (27:40):
Yeah, and so for those surfers. And I didn't know
this at the time, but like nature's brutal, right, well, no,
nature's brutal, but I didn't know how often surf turns
off and how the conditions too much. Yeah, and even
for me now that I do love it a getting
out there as soon as it pumps properly. I can't
surf that either, So I've got this very small narrow
window and wave pools. I said this a couple of
(28:01):
times at where I've done some speaking for around the
surf piece. The way, the surf park industry is just
about to have its chairlift moment. So back in the
ski industry when it was really one gondola and there's
nothing else, and there's very little families going to these resorts,
when those chairlifts dropped in on scale and all the
(28:21):
tea barts and all that, it brought it to a
mass market. You can put a nonsurfer in one of
these lagoons and get them too genuinely surf very quick
in a short period. You can take a medium, a
good athlete, mediums to nonsurfer and turn them into a
reasonable because of the rints, it's a driving range for surfers.
Like if you and I go and take up golf,
we can't get a pro and we get a lesson
(28:42):
or two and me it balls every Tuesday and Thursday.
You can now do that with surfing, and.
Speaker 1 (28:46):
Then you're going to have a residential element as well.
Speaker 3 (28:49):
Yeah, and that was that master planning pieces like well,
people like living on golf courses and people like living
on beaches. And I flew to Brazil to check the
pool out. There was two pools, one in construction, well sorry,
two operational, one construction. And I got to this pool
in a Brazil and I'm walking in and I typically
video as i'm walking in, just so I can remember
what it was when you do these things. And I
had my head in the camera and I'm not really
(29:10):
paying much attention. I'm sort of walking through and the
broader spectrum and I dropped my my eyes lifted. It
felt like a beach. It was like, holy shit, this
thing's unbelievable. It felt like I was in a sort
of norsea of Hawaii. It was just crissand beautiful, like grass,
palm trees. And I'm like, this is different to the
pools I'd seen at this point. Most of them are
built like pool decks, nearly like a more built form,
(29:35):
constraints sites, no real element of that. And we'd had
a da in at that point, and I'm like, we're
blowing up our landscaping plan. We looked like a pool deck.
We need to look like this, and so I literally
held out for ninety days and re submitted our landscaping
to get the organic because I'm like, real estate sells
pretty good on beaches around the world. So if I
can have the two strong elements, and if I can
(29:57):
make the beach feel like a beach organically, that's more
pleasing than a hard stand. So yeah, that the real
estate for me has driven this project immensely because it's
it's the real balance sheet. It's the big ticket item,
and then the flip side of it is the operational
and how that works. But when we're master planning is like,
(30:19):
if it doesn't take the real estate box, if it
doesn't take the mixed use boss, and it doesn't take
the operational, then we keep going. We're just round in circles.
Speaker 1 (30:25):
So where are you guys at now?
Speaker 3 (30:28):
Yes, so we've now secured all the land security approvals.
We're in what I'm calling an off phrase, an off
market raise. At the moment, we're just going to some
family and friends and mine net worths to just talk
to them about We're calling it a little founders collective
and that's pretty cool. And a couple of the pools
in the us have raised all their equity in that
(30:49):
so we're in our equity raised debt, and equity evaluations
dropped next week. So I just had a little chat
with the value of last Thursday. It's feeling okay, it's
a nervous time, right. You sput a lot into a project.
You want to make sure those numbers stack so we
can unlock the debt. That's feeling.
Speaker 1 (31:02):
The way you would go about it, though, Luke, is
that you.
Speaker 2 (31:04):
I think what you're saying is that you'll raise some
equity and you'll borrow some money so that you can
get the people who put the wreck equity get some.
Speaker 1 (31:11):
Leverage into the property.
Speaker 2 (31:12):
And but a lot of it depends on the valuation
because you've got to know how much you're going to
give way. So like you walk out to an equity person,
you say, well, it's worth I know, half a billion
dollars for them, just picking a number. We want to
raise one hundred, so we're going to put out there.
We're want to raise twenty one hundred of equity, so
we're going to put out twenty percent. We're going to
(31:33):
eat twenty percent away. I'm just making numbers up for
the sake of the audience. But yeah, it's along those lines.
That's why the vowels are very important.
Speaker 3 (31:40):
Yeah. So what we're doing right now with the vow
is so we're going to raise forty nine percent equity
in a press share. One of the things I really
like about my partners and how we bought the golf
club was I really respect the capital right we come from.
I mean, you put money into my business, you need
to be like, I shouldn't be getting paid before or
you get paid, and so making sure that pref is
(32:01):
done right.
Speaker 2 (32:02):
So you need to explain, well, maybe we can both
to the listeners, but the issue of a pressure means
that they get preference. In other words, they get paid
a give it in first, where sometimes you don't even
get a divident and you get paid a return like
an interest rate.
Speaker 3 (32:16):
Yeah. So the way we're structuring at the moment, there's
some final tweaking to that, but the way we're structuring
at like when you say that some of the audience
won't know this. I mean two years ago, I didn't
know what this was. I knew what the mechanism was
because for me, I called it a ratchet. If you
put money and you get paid before I get paid. Yeah,
and then you get to the lawyer structure of structure.
Speaker 1 (32:32):
Legal structure is called a preference preference share.
Speaker 3 (32:35):
And so that preference share for me was designed to
do the mechanism of making sure that your money what
happens if things don't go well, Like we can all
talk blue Skuy on this project, and it's so easy
to talk blue s guy, and they're sexy, and so
you can sort of you can bullshit your way through
the sexy stuff. What you can't bullshit your way when
someone asked ale we're talking about earlier, when someone to
show me where the risks are, because sophisticated money, that's
(32:57):
where they go looking. And so what I wanted to
do make sure that if this turned down and it
didn't work, let's say it legitimately didn't know we're forecasting
in the high twenties ebitdar and let's say it's fifteen
ebitdar return in the operating business. What does that look
like for my investor? So how does the pref shard
What you don't want me is me making a bunch
(33:17):
of money while you're being two to part And so
we got really so that was a big part of
the PREF and then ninety million debt.
Speaker 1 (33:24):
Is the other side of our So debt always gets
paid first.
Speaker 3 (33:27):
Yep, Debt first, PREF second, US third.
Speaker 2 (33:30):
So in other words, the way you've structured it in
order to make it attractive in terms of risk mitigation
financial risk mitigations is that obviously debt's going to get
paid first because that's what the lender is going to
insist on lenders don't take do it anither way. But
then the first equity round that. Let's say in the
example you're saying to raise twenty twenty mili, they get
(33:52):
paid before you do. And if there's something leftover after
the else you get paid. Is it pref just to
dividends or is it pref tox as well on capital
as well. So if you sell, they get paid first.
If there is self for any reason, they always get
their money first.
Speaker 3 (34:08):
Yeah. So part of that is, and it's what we've done,
is we've put a PREF on the exit to an
i RR of eight percent. And that's really not really
about when we're forecasting well above eight percent, but it
was really about the ugly if things go toast, you
get your money back in eight percent before I get paid.
And I'm not a typically pessimistic person, but the lens
(34:29):
I've really been focused on right now is it's so
easy to sell the upside of these things, but it's
like the money doesn't really need to that's the easy part.
What does it look like? Ugly?
Speaker 1 (34:38):
And to mitigate the bad side?
Speaker 3 (34:40):
Yeah, and what is that?
Speaker 1 (34:41):
And that's you're right. I think that's too.
Speaker 2 (34:43):
Many people don't concentrate on mitigating through structure, through the
legal structure, what is the downside?
Speaker 1 (34:50):
And that's what prefs do.
Speaker 3 (34:52):
And I've been so focused on clearly, if we deliver,
I want some gravy out of this, because that's me
delivering for you and I in an investment. But what's
the opposite of that is me not delivering well sorely,
I shouldn't get my big clip right. And look, we're
putting in some serious equity into this. We've spent five
and a half million a date on the das. We've
put two and a half million into detailed design that
(35:12):
started last week, and so we've got large capital. We're
tipping the existing operating businesses in, so we've got profitable
operating businesses that are both going in and we've got
our primary residential lot in this deal, so there's one
hundred and sixty residential apartments going in the freehold. So
there's a there's a full whack there and a lot
of equity going on on our side. But I still
(35:32):
say to the guys as like my partners, and we're
all on the same we need to respect that frontline
capital because they're taking We've been here for a long time,
we know it, we smell it, We're in the detail.
These people are putting money in and so we are
not being I guess over it's clearly not giving more
than we need to. But we've got to find that
middle balance to unlock made you don't unlock the money.
I don't have a wave pool. And so I have
(35:54):
been really and it's been I mean, I'm loving it.
I'm enjoying the learning. I mean KPMGM, I can never
run slow down and just tell me what that acronym means,
irs and like and for me, I can't go to
the next level until I understand it. And sometimes it
slows it. I wouldn't say it slows the project down,
but the guys in the room, the guys that went
to UNI I find it until you can tell me
(36:18):
in a simple way where I understand it.
Speaker 2 (36:20):
Then it's too complex the structure you'd explain it, you're
going about explain so yeah, and if you're selling it
at the end of the day, and if it's too complex.
Speaker 3 (36:27):
What I'm starting to smell With a few meetings. And
I remember one of the meetings I had earlier with
the guy down Byron. He looked at my early structure
and just said, from a real estate point of view,
like I love where you're at. But unless I got
some of that real estate in the deal, it's it
doesn't fly. It doesn't smell right. You can give me
a twenty percent IRR and maybe your numbers are awesome,
(36:49):
a pref the hell out of it. But if I'm
paying to improve your land that much, I want some
of the uplift in the land. And I drove back
that's an hour and twenty to where I am are
in Quarter. And he's a pretty substantial businessman and it's
been around, very well known guy, and I'm like, he's right,
And so I've got three partners. I now need to
go and say we've got to tip some of the
gravy of this in and they're smart people.
Speaker 1 (37:11):
They get it, well, do you keep having iterations?
Speaker 2 (37:13):
And I think that's and I think what most people
don't understand is that they always look at these deals
when they're done and think, well, I loved it about
do that deal. But really they've got to be prepared
to go through all the shitty iterations. You have to
keep going through iteration after iteration after iteration and see
it works few but also it works for the investors.
Without the investors' money, there's no deal at the end
of the day.
Speaker 3 (37:33):
And that's that's come to light a lot more recently
for me, like a lot, and it's been a really
interesting learning curve because it's and you can call it
respective invester capital. I mean, if you don't respect, you're
not kidding that. It's as simple as that, right, and
the good investors you can get some passionate money and
that sort of fun money, and there is some of
that around, but it's rare. This is a really big
(37:54):
project and it deserves the right capital. Will go slow
if we have to, We will take our time to
get the right money.
Speaker 2 (38:00):
If you own, don't raise it, if you don't get
the debt, does a twenty million have to go in.
So in other words, it's got a condition precedent. It
says your money, you the investor, don't put any money
in unless we can get the loan approved.
Speaker 3 (38:11):
So yeah, so where it's say sixty million equity coming
in that will sit. So let's say you are my
investor at sixty that will sit in a lawyers trust account,
conditions precedent to unlock it. If we don't unlock it
within a period of time you get it back, you
won't zero risk including interest going back. And I think
there's been a couple of pools in Australia that have
tried that and chewed up a small amount, not big numbers,
(38:32):
but chewed up some investor capital. And we made a commitment.
A part of that detailed design. One of the conditions
precedent is build contracts in place. One of the biggest
risks at the moment to most jobs is construction. So
we've committed to making sure we get all the way
through to construction contracts, so we're not spending your new money,
investor cash on Maybe this is a job the day
(38:52):
your money drops in the excavator.
Speaker 1 (38:54):
Because that's what built Sorry, That's what investors are worried about.
Speaker 2 (38:57):
To say, what there's any building involved is the is
the cost blowouts? The construction cost because the constructions costs
these days are changing a lot of deals. So how
confident are you look that you're going to get this
deal away?
Speaker 3 (39:10):
Yeah? What I'd say to people now is, I mean,
I've been on this for five and a half years.
We are now buildable and fundable the structures right. I
brought in a development director who's come from a popular
listed development company, ripping guy but really talented, and he
basically redlined every building I had in my master plant
red line, the titling red line, the structure. We've got
offers from energecs around power, all the non sexy stuff.
(39:33):
There's so much sex in this job that it's easy
to get what but how do you build it? Where's
the power coming from? So we are buildable and we
feel our structure, albeit with tweaks, is now fundable and
the way we've structured it, so yeah, I'm not confident
we'll get this out of the ground.
Speaker 1 (39:50):
Like how many as you've been on it.
Speaker 3 (39:51):
I've been on the surf park of this approach. I've
been here for sixteen years and I've been on the
surf park for five and a half.
Speaker 2 (39:57):
Well that's a pretty long apprenticeship. Luke Schwager pretty hard
name to say, but good luck mate, Mark.
Speaker 3 (40:05):
Thanks for having I really appreciate it and it's good
to see
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