Business Review Weekly
practice thrives on software and property syndication
Greg and Harry Perks run an Adelaide practice that has achieved astounding
success in two distinct businesses - software development and property
syndication. Since April last year, Perks & Associates has sold 650
copies of its software Focus for Results (FFR), mainly overseas. The
property syndications, in which the firm usually takes a 10-20% stake,
amount to $150 million and involve the big shopping centre in most of
South Australia's main provincial centres. Because the purchases began
with distress sales conducted by banks in the early 1990s, the investors
have enjoyed surging cashflows and big capital gain.
Harry Perks: The property portfolio is valued at $150 million Left: Greg
Perks consults with Ulrike Klein, a director of cosmetics company
Jurlique, at a retail outlet
Photos: Randy Larcombe
Greg, 43, and Harry, 50,
got together in 1981. Greg had worked for Peat Marwick and Touche Ross,
and Harry for Touche Ross and then a small firm. "It was a great
training ground but not our philosophy," Greg says. "We wanted
to get our hands dirtier."
The firm has seven partners
and 45 staff, making it one of Adelaide's largest independent firms. For a
couple of years in the early 1990s, Perks was recruiting more graduates
than some of the Big Six in Adelaide. Budgeted fees for 1998-99 are about
$4 million, excluding software sales revenue and including fees for
property work. The expected fee growth is 10%.
"We went to the second
boot camp of Results Accountants at Sanctuary Cove in 1992, when we had 15
people, to see if we could operate more imaginatively," Greg says.
"Harry said to me in the Hyatt pool, 'Now I know what an accounting
firm should really be doing, and it's not just accounting'. We set up
Perks Consulting - now with three specialists - and our firm became our
"Our director Neil
Anderson and I went back to university to do graduate diplomas in business
management. A lot of the diploma material was old hat, but I found a
quarter of it was new and refreshing, such as the latest American gurus'
theories, and I grabbed them for our operation. One idea was HOT FM teams,
an acronym for human resources, operational, technology, and finance and
marketing, to ensure our people understood our key drivers for
improvement. Without such a focus, people would stay in their comfort
zones and just do the compliance work that kept pouring through the
Greg became frustrated that
his partners could not drag themselves clear of technical work to start
consulting. He says: "In 1995, I came back from my Christmas break
determined to break the logjam. We had invited clients to fill in check
lists, but it was boring for everyone and they didn't want to know about
it. The diagnoses did not get done and consulting didn't materialise. My
brainwave was automated diagnostics through software, which clients could
enjoy while relieving the time pressure on our people. This idea came
because my diploma units had concentrated on marketing and
He set up Perks Business
Technology with directors as shareholders, and recruited talented young
computer graduates James Smith and Mark Davis. They created a program
where clients answer yes-no questions, and a report is generated with
priorities, timetables and budgets to reach agreed goals. This overcomes
CPAs' weakness in sales techniques, and their inability to find time to
write management reports.
Clients saw it as a
friendly audit of their affairs. Greg says: "We tested it with other
accountants and lawyers, and they all wanted a copy. Firms call it their
ticket to freedom."
By the end of 1996, Greg
had obtained international patents, and demonstrated the software to Paul
Dunn, chairman of Results Accountants. Dunn's comment was: "I can't
believe I didn't think of this myself. I want to market it." Dunn
named it Focus for Results and got the help of boot-camp firms in the
United States and Britain to internationalise it. Results does the
front-line client support and Perks solves the technical issues.
FFR has sold 200 units in
Australia, 100 in Britain, 50 each in New Zealand and Canada, and 250 in
the US. Greg is now testing FFR with other professions, including
financial planners and solicitors at two big Adelaide law firms. The check
list in the solicitors' version covers 200 issues ranging from
intellectual property protection to employment practices.
Greg thinks the software
output could create more referrals from lawyers because it makes the needs
of many clients explicit. Each profession has unique skills but there are
overlapping services, such as asset protection and estate planning.
"Who wants to know about $65 tax returns? Not us," he says.
"We want clients willing to give us their first call, listen to our
advice, guide them on business improvement, and in turn generate high
profitability for ourselves."
An attraction is that,
while clients are answering the software questions, relatively junior
accountants and solicitors, rather than partners, can answer the minor
Although the software can
produce a report almost instantly, firms usually delay for a week to add
to perception of value and avoid rushing to sell services. "Clients
need time to think about the issues they have just raised," Greg
says. "The report is also matched to an agreed monthly fee
To improve practical skills
in the profession, he intends setting up a South Australian user group of
about 25 firms to share success stories and weaknesses, and to develop
their strength in associated skills such as marketing. He says: "Most
clients are startled to discover that tax issues are not the only things
their accountant knows about business."
Harry Perks began the
property syndication in 1990. Self-investment ensures commitment, he says;
"our own 'hurt money' is in there." The portfolio of nine
shopping centres and one office tower, owned by 50 investors, is valued at
about $150 million. There is a common core of investors in four or five
properties and a trickle of new ones. Greg says that, in a small way, the
firm has created a portfolio similar to the well-performing listed
CountryWide Property Trust. He says: "It's good for our directors to
have a percentage of many investments than to have a lot of one
investment. We also get a much deeper involvement with our clients. Many
clients have high net worth but no time to spare on detailed work
searching out capital growth projects."
They have not sold any of
the properties. "We bought only centres we would be keen to hold.
Now, by selling we would have nowhere to re-invest so well," Greg
says. By contrast, some Melbourne accounting firms have bought Adelaide
property for syndicates and have charged fees rather than becoming
The firm has developed
software to analyse centres in terms of cashflow, long-term debt reduction
and value creation. Eight years later, the model they use is unchanged.
In 1990, few buyers were
prepared to put up the $5-15 million needed for shopping centres, although
many for sale through the State Bank of SA and other injured lenders had
secure tenants. Some of the properties were yielding 15%, with good growth
prospects. Harry's philosophy was to secure each of the centres that was
dominating the trade in its particular town. As strip shops declined,
centre traffic increased.
The first syndicate
included five clients and the property was Westland, Whyalla, bought for
$12 million. Harry says that, after upgrades to include Target,
Woolworths, a food court, and specialty stores, Westland is now the
biggest non-metropolitan centre in SA and is worth $30 million. An
expansion for Bi-Lo, and possibly cinemas, is being considered. Target's
store at Westland is the only one on the state's west and upper-west
coast. It opens the catchment pool up from 25,000 to 80,000, diverting
many households from driving five hours to Adelaide.
The syndicate had the good
luck about 1995 to buy the Roxby Downs centre just before the announcement
of WMC's expansion. It is spending $7 million to increase its floor space.
Syndicates own the Berri Mall with its big Coles store, and the Woolworths
centre at Naracoorte. The vineyard expansion is creating a boom in nearby
housing. In 1997, Perks acquired two centres at Victor Harbor (one based
on Woolworths) for $18 million, and last July the Mt Barker centre for $17
million, with plans for an $8 million expansion. Victor Harbor has a 4%
annual population growth, largely through tourism and leisure, and Mt
Barker has 3%.
Harry Perks says: "The
first five years are the hard ones. But at the high yields, returns can be
structured tax-effectively using depreciation, and the debt paid down. We
had the huge windfall of being able to finance centres yielding 15% at 10%
or 11%. Now we are refinancing some at only 7%, so returns are going up
and values are lifting dramatically. We ration things so only clients can
join syndicates. Little of the investment is through super funds. That is
all too hard."
The firm's success has
created a cycle where lenders and agents such as FBD Raine & Horne and
Knight Frank now bring good deals to it for assessment. Harry says:
"Everyone in SA knows us. We can raise several million in a few
weeks. We have remained loyal to our original financiers. We don't switch
just because some lender is fractionally better today and worse
tomorrow." The vacancy factor in the centres is only 1%. "We
intend keeping the shops full by being fair and not ripping tenants
off," he says. "There is a happy medium in these things."
The five-storey Adelaide
office building originally cost $11 million to build. A syndicate that was
smothered in cash from its previous purchase bought it fully leased for
$6.5 million in 1995, for a 14.5% yield. Because the investors also bought
the fixtures and fittings, the depreciation allowance is huge. The firm
also owns the $2 million mini-centre where it has its offices. Whenever
tenants move out, the firm takes more space.
Harry is prominent in the
racing industry and a proud member of the syndicate owning Gold Guru,
which he describes as Australia's champion three-year-old.
Accountancy week is
edited by Tony Thomas
Australia's Business Review Weekly
1998 BRW Media, September 7, 1998.