Inside Story: Paramor rides again

He’s done it again. For the third time on the trot, serial business builder Greg Paramor has found yet another willing institutional ‘friendly’ to take out his most recent property funds play, James Fielding Group (JFG).

When Money Management caught up with Paramor recently, he was a few days off announcing the sale of JFG to Mirvac in a deal that sees his ascendency to the top of the pile in property funds management and development pretty much complete.

Paramor will succeed Mirvac chief Bob Hamilton in the senior job steering one of the icon property brands in Australia.

Financial planners with long memories will recall Paramor’s first big ticket property foray with Growth Equities Mutual, followed by Paladin, which ultimately found a willing buyer in Deutsche Bank.

For its part, James Fielding Group is only a month shy of its third anniversary, and Mirvac’s $478 million price tag gives some indication of the market’s appetite for the Paramor Midas touch.

The first year of operation saw the listed JFG deliver a staggering 447 per cent increase in net profit, admittedly off a low base, but also boost its funds under management from $339 million to an impressive $1.5 billion.

This year JFG reported a net profit lift of 115 per cent to $28 million in the 12 months to June 30, up from the year one profit figure of $13.05 million.

Times are good, and the new Mirvac job places greater challenges and heavier responsibilities on Paramor’s shoulders. But business life has not always played out at the stratospheric levels of recent times, and Paramor — a down to earth bloke for all of his high-level deal-making — credits his associations with the financial planning industry and its retail clients as a critical component of his success.

Wind the clock back 14 years and it was a 40-year-old Greg Paramor who as co-founder and senior executive with unlisted property trust giant Growth Equities Mutual watched in dismay as one of Australia’s worst investor disasters — the Estate Mortgage collapse — finally unfolded.

Paramor was then chair of the former Unit Trust Association, the precursor industry body to today’s Investment and Financial Services Association. Few knew at the time how much of a strategic behind-the-scenes role Paramor had played, quietly tipping off the-then National Companies and Securities Commission (now the Australian Securities and Investments Commission) on the dangers looming behind the Estate Mortgage fiasco.

Paramor’s warnings to the regulator had little real effect. Estate Mortgage met its dramatic demise in 1990, taking with it the life savings and retirement dreams of thousands of small investors.

Some investors stayed the course (many had little choice) with their Estate Mortgage units, and in one of the industry’s more ironic twists, today find the remnants of their funds managed by none other than one Gregory Paramor and his James Fielding Group under the re-named JF Meridian Trust.

Is there a hint of fate in the fact that Paramor has ended up with the remnants of Estate Mortgage and some 28,000 small investors?

“A little bit, a little bit. I was in the thick of it [Estate Mortgage] when it blew up, and I had been involved with the NCSC before the advent of the Australian Securities and Investments Commission.

“In trying to protect against these things [fund collapse] I was certainly involved just before the collapse because I was aware of what was going on and I was in contact with the regulators about how we were trying to resolve it. And I also followed that through very carefully, I suppose at that time for a range of reasons — interest I suppose was one of them.

“You know, if some people had liquidated [their investment] they would have gotten a few cents in the dollar back then. And by not liquidating — okay, it’s over a decade later — but people have got from 30 to 70 cents in the dollar and they are getting a good stable income and good future prospects.”

As a rising steward of the securitised property industry, Paramor had also felt the impact of the Estate Mortgage collapse in a profound and enduring way. The most immediate effect was the feverish work of the unlisted property trust industry to salvage its tattered credibility, publicly list their funds to satisfy investor demand for liquidity, and to stave off the threat of a major redemption run by unit holders.

Fast forward a decade and a half and Paramor can’t deny that Estate Mortgage was a low point for the industry, for the financial planners who advised their clients to invest in it, and ultimately, of course, for the investing public.

It was also a low point for the one time Estate Mortgage father and son team of Reuben and Richard Lew, who as consultant to and managing director of Estate Mortgage Managers respectively, were convicted in 1993 of improperly using their positions at Estate Mortgage, facing jail terms for their role in the collapse.

As was reported in the media at the time, Reuben Lew, then aged 58, described his occupation in court as “unemployed” and was “probably wishing he could return to his previous occupation as dairy farmer”.

Yet lessons were learned. For Paramor this meant his attention to the needs of small retail investors and their financial advisers has remained steadfast. And leaving aside his not insignificant personal wealth, Paramor has rewarded his investors and shareholders alike, as the aftermath of Estate Mortgage helped to shape the Paramor philosophy long after those heady days of the early 1990s.

So, what of financial planning in 2004 — is it more or less sophisticated?

“I think more sophisticated, I am not as close to it today, but I still get around talking to many [planners] on a regular basis because many of them are very strong supporters of the group and some of those relationships go back 20 years now with me,” Paramour says.

“I feel pretty honoured, actually. And that is pretty important to me that people stay with me. You have to make sure you do the right thing by them.

“But, yes, I think [planning] has become more sophisticated, yet people heap a fair bit of criticism [on the industry]. I think there will always be criticism. You never stop criticising, particularly in industries that operate with future outcomes or lifestyles.

“When people invest money they obviously expect to get returns and the planners I know and like are very practical, very competent people and I think it is a constant — it is a bit like any industry, you are always trying to improve yourself but I think the training has improved, the general benefits to the consumer have improved also.

“It can get better — it would be silly to say it can’t as there must be areas you can constantly improve upon, the disclosure, soft dollar things keep coming back, and I mean they have been going around for a long time — will they ever go away? I don’t know. In my mind, I think that disclosure is the most important thing, I mean you tell people what you do and what you are doing out of it and there is no problem.

“We have got some pretty sophisticated planners out there, many of whom have got a queue at their door with people who want to use their services. And those planners aren’t household names; they just do what they do very, very well.

“They just know their stuff and they do it very well.”

A bit like Paramor, really.

Bruce Madden is a former editor of Money Management and a Director of BlueChip Communication Group. His exclusive interviews with key industry figures will appear each fortnight in Money Management.Write to Bruce at [email protected]