Success with a purpose

Hein Ehlers has been at the helm of Devmark Property Group for 28 years

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Hein Ehlers has been at the helm of Devmark Property Group for 28 years and his keen sense for property development and investment has propelled Devmark to a leadership position in their niche

The period was just before 1994, uncertainty had gripped a nation fresh from bloody battles, civil unrest and the fight to permanently end Apartheid. Business leaders were as nervous as the ordinary man on the street. There was uncertainty and nervousness, hope in parts and despair in other parts. As is the norm, where there is chaos, there is an opportunity for the keen mind.

The beginning

“This was prior to 1994, so we had a good look at the market. Everybody was nervous and I said to the guys, ‘Let’s go flat out’, because I knew only two things could happen in South Africa at that time—it was either going to be a great success or we would have had a civil war. With all the knowledge I had of the people running the ANC at that time, I considered it would be a success. As far as I was concerned, it was not going to go the way that all the pessimists thought it would,” explains Hein Ehlers, the CEO of Devmark Property Group.

Ehlers started Devmark Property Group 28 years ago, initially calling it Devprop Projects. Prior to this, he engaged in the development business with the sole aim of developing retail shopping centres. He subsequently spent the first four years of his property development career focusing on developing retail centres in an informal fashion.

“I soon came to the realisation that, in order for this to be executed properly, I needed to be invested in it full time. Initially, I had a partner in the business but in 1995, we went our separate ways. He carried on in the project management world and I stayed in the business of developing and marketing properties,” Ehlers explains.

A new niche

After buying land for the development of a retail shopping centre in the southern suburbs during 1990, Ehlers was convinced to develop a retirement village. “I don’t understand why and I still can’t give you a definitive reason why I did it but we went on to do the development. As we were inexperienced in the development of retirement villages and there was very little market research available, we decided to conduct our own research amongst our buyers. That information was used to gradually build a database of the type of people who were buying property in the retirement space. This was my first official big project in the residential market and our first retirement village development,” he further notes.

Due to the nervousness that existed prior to the 1994 election, the company was able to secure packages of land at relatively low prices and at lenient payment terms, and this got the residential development rolling. They subsequently got involved in commercial developments.

“Our first big commercial development was a business park that we developed in Bellville with approximately 46 buildings in it. The one thing that I learnt specifically about the residential market earlier on was that the challenges were greater within that sector than on the commercial side. The residential market is quite unstable and things can change overnight, what is good today is not so good tomorrow,” he says.

Ehlers explains that residential developers’ research is mostly based on trends and patterns. “It is very much a follow-me business, somebody hits the Atlantic seaboard and when they do well, everybody jumps on the bandwagon. Nobody ever checks how much stock is on the market, how much is being developed and whether there is a possible bubble developing, they just carry on like there is no tomorrow. In the residential market, there is always a tomorrow, it’s more about anticipating where tomorrow is. Thus, we always do a thorough assessment of the market and try to find a niche. We identify it then we hit it as hard as we can, we say as little as possible about it and we don’t brag about it. We maximise our opportunity within the niche that we would have uncovered. Typically, the retirement development is a niche. We have been active in this market for 25 years and it is only now that the rest of the developers are all jumping onto the bandwagon because, all of a sudden, they realise this is an opportunity,” he says.

Ehlers argues that the residential market is very volatile and, therefore, one should always do thorough market research before engaging.

“One evening, I was lying in a bath listening to soft music and reading a great business magazine, there was a five-page spread article and the writer was describing the way he saw what was going to happen in the residential market in America. That was before the economic crunch in the mid-2000s. I was immediately nervous because I realised that this was one thing that South Africa was not going to escape,” he explains.

The following morning, Ehlers walked into the office and advised his team to pull out of all the residential deals they were involved in and could possibly pull out of.

“That was probably one of the best business decisions I have ever made. That tsunami went on to hit South Africa, not much later than it did America. Although this was a very tough business decision to take, we were fortunate that we had a number of projects that were already out of risk and we could quietly proceed to complete them.

“Today, we have a holding company, which is the Devmark Property Group. Under that, we have Devmark Residential Holdings with its own Managing Director. It controls all the residential developments of the group and also our construction business, which is Devmark Construction. We are not in the tender market and only construct our own developments.

“On the commercial side, we focused on building and developing offices and retail shopping centres. Devmark Property Investments is our holding company for the group’s property portfolio. It is a reasonably sized portfolio with very low gearing. The people here keep asking me why we do not gear the portfolio and buy more property and I laugh and say, ‘When I’m not there, you can buy and gear it, but not in my lifetime’,” he explains.

This brief description of hard work, endurance and focus does not do justice to a man who has steered a company from the rocky slopes of the 90s to the present day. Due to exponential growth and a solid reputation, the company is now involved in numerous projects.

“We have a great project underway in Malmesbury, where we are going to construct a mixed-use development consisting of a shopping centre, hospital and some auto-related retail. With a total gross lettable area of 35 000m2. We are busy finishing off a shopping centre of approximately 30 000m2 in Philippi. Our retail and commercial pipeline is currently approximately 146 000m2. This includes our most exciting Galleria mixed-use development in Tyger Valley. We have also concluded an agreement with Samaritan Health to develop a number of hospitals for them in South Africa,” he explains.

Core markets

Devmark Residential Holdings has three core niches: affordable housing, retirement developments and as Ehlers explains, “pockets of excellence”. The latter being unique opportunities in unique locations, like the residential component of the mixed-use development on the wine estate, D’Aria.

“Our presence in the affordable housing sector is based on the strong research we have conducted. We estimate a shortage of approximately two million units in this sector. We have a strong presence in the retirement market. Our market research shows that there are currently 960 000 white baby boomers in South Africa and they are all going to retire in the next 10 to 15 years. That in itself creates an opportunity because those are very substantial numbers.

“The database we have built has in excess of 3 000 buyers and potential buyers’ details. With the completion of our current retirement developments, we would have completed in excess of 1 800 units. It is our strategy to build a further pipeline of 1 000 units, of which approximately 550 has already been secured. On the affordable housing side, we are building 960 units in Bellville. It’s a fully-integrated scheme and the first of its kind in Cape Town. Within the development, we have gap rentals and gap-open market stock. We also have 416 social housing units. We are in the process of applying for further 90 units,” Ehlers says.

In his words

Giving back

Leadership: why are you in that specific market?

There are two reasons. The first is, I felt it is my way of giving back something to South Africa. Social housing is a very difficult sector to get involved with and to fund and manage long term. Fortunately, we have a hardworking team who has pulled this together. This is something I believed I had to do, that is why I got involved in it. The second reason is, it creates a pipeline for our construction company. Ultimately, from a development perspective, we don’t really make any money out of it.

Childhood

Can you tell us more about yourself as an individual?

I grew up in a very middle-income home. My father worked for the government all his life, he was exceptional, so much so, that he was only absent from work for one day during his 40 years of employment. I was awarded a bursary to go to university but it was not enough to cover my costs, so I had to work during the June, April, September and December holidays. I worked as a Waiter on the Trans Karoo—I was fortunate to do this every year and that’s how I was actually able to fund my studies at the University of Stellenbosch. Interestingly, what I studied there is grossly diverse from where I am at the moment. I studied for a degree in social sciences, which has psychology and sociology as the main subjects. I probably decided to study something that was easy to afford me enough time to play rugby! I started my career as a Management Trainee at Colgate-Palmolive in Boksburg. From there, I moved to Irvin and Johnson where, at the age of 28, I became one of the Group General Managers. I subsequently moved to Pepkor, and it was while I was employed there that I had the opportunity to learn more about property development and retail. In 1987, I acquired a retail business from Pepkor and went on my own. The business was grossly undercapitalised and was not a success, but definitely a great learning experience.

Transition into entrepreneurship

What gave you the zeal to go on your own? You were doing well in corporate, with a senior post. Why move from a comfortable position to the hot seat?

It is quite an interesting one. I did my MBA at the University of Stellenbosch and my thesis was about fast foods and institutional feeding in South Africa, and both of these were still in the infancy stage at that time. I did that for Johnson because they were looking at vertical integration, so I had to develop a whole business plan for them to move into fast food and institutional feeding. When I moved to Pepkor, I had all this knowledge from my thesis, and the one thing that really struck me was the profitability of the Spur organisation. So, I met with the CEO of Spur at that time and asked to buy a franchise. I subsequently bought the Brackenfell franchise, but there were no premises, and it took about a year to get the premises. When we got to the premises, I had to pay R12 000—my contribution to get this business off the ground. This was in the mid-80s and was a reasonable amount of money. To my dismay, I could not borrow the money from the bank without the necessary security. It then struck me that I didn’t have R12 000 in spite of the fact that I was a Senior Executive in the corporate environment. I was driving a nice car with a good salary, but I didn’t have that kind of money. Obviously, today, the corporate world has changed massively and executives who perform can amass serious wealth. This motivated me more than anything else and I had to make a tough but brave decision, because I realised that if I didn’t do it, I would not be able to do it at a later age. The worst thing that could happen to me was losing my house and starting over again.

What happened after you received the money to open the franchise?

The Spur was eventually opened, I brought in a manager who later became a junior partner of mine. It was successful, financially and otherwise, and I sold it 15 years later. I was able to re-invest some of the profits that I made and eventually owned four Spurs. Then, in 1989, I developed my first convenient shopping centre and that is how I progressively got involved in the property industry.

What do you feel makes your company unique? You spoke about the social housing and affordable housing but what sets you apart today?

The most important factor is that we have a serious passion for solid market research. We are very careful and selective about what we do and invest in, specifically in the residential market. We have an ethos in the organisation, which was developed by the staff. We asked them what they would like to see as the ethos of the company, they had to identify four important points, and these were then developed into a company policy and company document. In addition, we have a relatively flat management structure and an exceptional open-door policy, so if anyone has a problem, they can escalate that problem to me at any time, despite their level in the organisation. Attention to detail is very important to me—this is a lesson I learnt in the retail business. I continuously tell the management that the main thing that distinguishes excellence and mediocrity is attention to detail.

You have mentioned your strong passion for business-related research. Do you have someone you task to conduct your research?

Sometimes, we use outside people, however, most of the research is done in-house by our marketing department. On the commercial and retail side, you have to use reputable research organisations.

Awards

Congratulations on the recent prestigious awards that you have won, the most recent one was you being recognised as the top CEO. Can you tell us more about the awards you have received?

The first award I got in the property industry was in 1998 from the Institute of Marketing Management. In 2015, I was given an award for excellence by Who’s Who International. The following year, I was inducted into the Who’s Who family. The International Association of Top Professionals gave me the award last year for top CEO. The International Association of Top Professionals is an international boutique networking organisation that hand-picks the world’s finest, most prestigious top professionals from different industries. These top professionals are given an opportunity to collaborate, share their ideas, be keynote speakers and help influence others in their fields. This organisation is not a membership that anyone can join, you have to be asked by the president or be nominated by a distinguished honorary member after an interview. Awards are annually given to top professionals who excel in their respective fields. It covers the entire spectrum of business, as well as medical, research, legal and other disciplines. They have a panel who decides the final selection. The category that I was selected for was top CEO.

Why do you think you received that award?

That’s a difficult one to answer, without sounding presumptuous. If I may use their words, it is for a professional who excels in his or her industry, in a nutshell.

Leadership style

What’s your leadership style?

I believe in empowering people. I don’t believe that age, gender or race are factors. I allow my executives to run their businesses and I intervene or interfere when I see that the ship is veering South when it’s supposed to be sailing North. My leadership style is not that of constant interfering and checking, however, I do have my finger on the pulse and our excellent reporting systems keep me well-informed at all times.

What do you think about failure in your business? When it’s an executive or a senior employee, how would you treat failure caused by poor decisions they may have made?

Failure is an inevitable part of business. If you don’t fail, you are not doing anything. It is a risk you take when going into business, that you will experience failure from time to time. However, if you learn from your mistakes, failures will become less and less. I always say that, at the end of the day, it is how you react to failure that counts. I always say to the executives that it is not the failure that counts but how you fix it, and if you fix it well, you can reflect on it and admit that, although you were faced with a serious problem, you successfully turned it around.

Milestones

What are some of the personal milestones that you are particularly proud of?

We have gone through a lot of the business milestones that we have wanted to achieve. On a personal level, growing up in an Afrikaans house, our previous generation was raised in a strict environment and they were not at liberty to voice their opinions entirely. One of the milestones I set for myself, which I am proud of to date, is that I have raised a happy family. I have four children who are happy and well-adjusted, this is the most rewarding achievement. On the business side, initially, when you start a business like this, you think it’s all about making money. Then, as you progress and start making money, your concepts and ideas start to change. I want to build a legacy and, gradually, we are achieving it. You grow from a small company, then you become corporate and when you become corporate, you need the right management in place. That is how you create the foundation for longevity. At the end of the day, what counts more than anything else is the respect—people respect me and they respect the organisation. One of the cornerstones of our ethos is honesty and integrity.

You are involved in a number of township projects—you mentioned Philippi. Which other projects are you involved in, if any? Additionally, what are your thoughts on the township sector?

The land in Philippi originally housed the Philippi Business Park. It was a very troublesome site—it was occupied by illegal business occupiers who refused to pay rent. Incidentally, I spent a lot of time there. What really fascinated me was that people in the townships live the same way we grew up—in the street. We grew up in the street, played cricket in the street, we got together in the street and that is what you have in the townships. I honestly believe that the government, on all levels, is doing too little to rectify the social fabric that is missing—something that keeps the community together. I believe that the government should start relaxing some of the policies it has in order to facilitate development opportunities in the townships.

If you do developments in the township without involving the community, it will most likely be unsuccessful, but if you involve the community and get their input on what they want and would like to see, it becomes a different story. The other thing I realised is there is an enormous amount of informal business taking place. I think it is an obligation to help those people create a more semi-formal business and that is what we did at the shopping centre in Philippi. The local government is relying more on developers for bulk service contributions and they must allocate some of those contributions not to bulk services but to creating a better life for people in the townships. This will make a huge difference.

What are the bulk services?

Bulk services are your water supply, electricity supply, stormwater and sewage generation away from the site.

Empowerment

What is your policy in terms of gender and black economic empowerment?

It is well-known that the current policy has only benefited a small percentage of the black population. The empowerment policy should create empowerment on a much broader scale. For instance, a business like ourselves could employ five trainees who can be developed and trained and their skills honed in property development and construction at a cost to our company. If this principle is applied across all industries and businesses, it can, on a massive scale, create skilled employees who can be gainfully employed or who are even able to start their own businesses. We have applied this principle successfully in our business and have assisted people in creating their own businesses to work as sub-contractors to our construction company. It is very gratifying to see how their businesses have grown over the last 10 years. With regards to the gender issue, 30% of our staff on site on the technical side and supervision is female. We will progressively try to improve that.

What are the greatest challenges you have experienced along your journey?

First of all, finance. It is not easy to get property finance. Due to lending mistakes in the past by the financial institutions and the non-performance of, especially, residential developers, it has become tough to raise property finance. Today, the banks will not finance the acquisition of land. If you operate as we do, running six to seven projects at a time, your investment in land becomes enormous and unsustainable—it just gets bigger and bigger because your projects become bigger as you grow. That is probably one of the biggest challenges. The other challenge is getting expertise and technically competent people as you grow. Self-motivation, when you are on top of the pile, is not always easy. You need to be able to motivate yourself, even during adverse circumstances.

You said something interesting about banks not financing land, why wouldn’t they finance the land?

Take Philippi for instance. We were fortunate that we bought the land for a very reasonable price, so that was not a big issue. If you take any of our other developments, you end up paying somewhere between R30 and R40 million for rather large chunks of land, and the banks’ policy in the past was you should provide enough pre-sales and put a reasonable deposit down on the land, then they will finance it. However, since the financial crunch in the mid-2000s, they do not finance land, they will not give you a cent, you have to pay cash. That is an enormous barrier; I don’t see how a young person can do that. If I had to start this business again, I wouldn’t be able to do it. If you are a young guy and you are 35, you have no chance unless you get a partner who can finance it.

What are your key day-to-day responsibilities as the founder? Since you mentioned you have executives and CEOs in place, what is your main role and function?

One of my key roles is to continuously re-evaluate our strategy to ensure it is current and implemented. I am very involved in the financial aspects of the company. I consider myself to be a very creative individual, every single plan that goes out, I sign off. I want my stamp of approval on designs and all plans. Also, I manage the key executives and ensure they achieve their budgets and targets, and execute their responsibilities.

What is your ethos, besides what you have already mentioned? Do you have particular principles that define who you are? Naturally, you evolve as an individual, but you do have integral principles that determine how you conduct business?

This is something that evolves and develops over a period of time. I was speaking about it to a great friend of mine recently. If you start off in business when you are young, your inclination is to do something that will immediately improve your financial position instead of looking at the long term and the result of what you are trying to achieve. Most likely, the most responsible ethos of all is integrity and honesty. This is absolutely part of me. The moment you focus more on the money and not the consequence of accumulating it then you affect someone else. We have to do business in a sustainable way that allows us to grow with other people, not destroy them in the process. It is not that easy to ensure these principles are applied throughout the organisation. It is imperative that the people at the lowest level in the organisation embrace and apply it.

Wisdom

They say wisdom is the most valuable asset. Is there something that you have learnt within your considerably long career that you would have done differently at a younger age?

I worked for a man called Jim Williams, he was the Group MD of Irvin and Johnson and he came from IT&T International. He turned a poor-performing business around into a success story. When you work with somebody who is an incredible disciplinarian such as he was, you learn a lot of lessons, including the discipline of effective time management and how to successfully turn a poor-performing business around. In addition, the lessons learnt about cash flow were invaluable. Without cash, your business is dead. You can have the greatest plans but if you don’t have money, you don’t have a business. I also learnt that you must be brave sometimes, and adopt a little bit of the Warren Buffet ‘you should be fearful when others are greedy and greedy when others are fearful’ approach. This really applies to the real estate business. Entrepreneurship is being punted left, right and centre but it’s not for everyone and it’s also not as glamorous as it is made out to be. Sometimes, I feel as though the message that is put out there is that entrepreneurship is easy, and there is a misconception that you are your own boss when, in fact, you probably work three times harder than you would if you were working for someone else.

What advice would you give to our readers who are considering venturing into entrepreneurship?

Firstly, whatever you decide to go and do, do your research properly. People tend to leap without thinking things through. It is imperative that you research properly before you decide to take the plunge. Secondly, you have to have a passion for what you do, you cannot be an entrepreneur if you are not passionate about what you do—you won’t succeed. Another thing is, you have to be extremely realistic about your expectations, it takes a lifetime to develop real wealth. I always say to my kids if it was easy, everybody would have been wealthy. There are very few really wealthy people in the world and in South Africa, far less, relative to the entire population. It takes an extraordinary amount of dedication and hard work over a very long period of time before you become seriously wealthy. There is no instant gratification. Equally important is that you should plough your money back into your business—your pocket and the business pocket are two different pockets. People tend to get into an entrepreneurial business, they start making money and then they buy boats, jet skis and a holiday home. Rather pay yourself a salary and never use the company’s money for your own personal benefit. Combining these two pockets is one of the biggest reasons why start-up entrepreneurs fail. They start making money, they see the money as their money and they spend it. Plough it back into your business and keep it in the reserve because there will be a rainy day when you are going to need it.

Family

You have four children, so, of course, you must have a very vibrant personal life and a very fulfilling professional life. How do you balance the two?

I have the capability of getting home at night and completely switching off thoughts of work, it is very important. I relax for about an hour before I retire to bed, then I start looking at my emails. I never ever put an out-of-office response on my mail. Even if I travel overseas, I don’t. Mornings are my alone time. I get up in the morning, I exercise for about an hour and I then quietly read the newspapers to get a grasp of all the political and business news. Then, I read my emails so that I can work on them with my personal assistant when I get to work. Maybe my balance is not where it should be. I read a lot and I’m the only one of my peers from university who has not taken a sabbatical, all of them have taken sabbaticals. I don’t take my problems home, I deal with them at work. 

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