Michael Fox is a man on a mission. With his new development group, CostaFox, up and running he is busy building a new development team as well as a pipeline of quality developments that will stand out in the marketplace. With a string of successful industrial and residential developments behind him Fox, a self confessed ‘shed-man’, is looking to back more winners in the property stakes, like another love of his – the Hawthorn Football Club.
CostaFox is developing a 1189 square metre site in Sydney’s Manly which has approval for a four-level luxury residential building with six apartments.
The Urban Developer recently caught up with Michael to learn more about his vision for CostaFox and understand his grounding in property.
Michael, can you please tell us about your background in the property industry?
I started about 30 years ago in property as a property manager and came through the residential property management and sales fields with a couple of local companies in Melbourne. But then I wanted to get into the commercial space — the deals all looked bigger and better. So I moved to McGees into the industrial and commercial sectors and then on to Hook Corporate Knight Frank. The development space was the thing that really caught my eye. I then went to work for the Smorgon family as a junior development manager back in the days when Smorgon Consolidated Industries existed before they started to divest their businesses and floated the steel business, so I ran the property portfolio for the Smorgon family. I used to run their Smorgon ARC outlets and ran the property portfolio for the steel business. That gave me a great insight into the corporate property sector, so I then went and worked for Toll Holdings, moving across there in 1997 when Toll was a company turning over $300 million. I was there for 12 years and was their director of property. Every time they bought a new business it would come with property associated with it; transport hubs, ports, wharves, railways, leaseholds — all sorts of things. By the end of it I’d built all their new warehouses and distribution facilities around the world.
What were some of your key learnings at Toll?
It was a fantastic time to be in the property sector. I joined a company that was in a massive growth phase. We bought many, many companies along the way, about 50-60. There was much integration and rationalisation of properties. It taught me about building businesses and gave me international exposure as well, so it started with little warehouses down in Cawley Road, Brooklyn, in Melbourne, and I think the last warehouse I built for Toll was in China — a 50,000 sqm warehouse.
So I had a pretty good experience there and worked on a lot of development stuff. I had worked closely alongside Paul Little there and then Paul and I started dabbling in little things on the side, which became Little Projects. I then left Toll to go and run that business. I suppose in the six years that I was there we’d grown a pretty good business and by the time I left we had done close to 2000 apartments. We always focused on prime locations and great lifestyle developments…things like Fitzroy Street, St Kilda, Toorak Road, South Yarra, and Bay Street, Port Melbourne — everything had to be in a premium location and the area had to be something pretty special and that’s still my philosophy.
I parted ways with Paul amicably at the end of last year. We’d worked together for 20 years and it was time for a change. Paul wanted to focus on smaller developments, I’m only in my 40s and have an appetite to grow something reasonably substantial with new capital partners.
I want to build a substantial business that creates special lifestyle properties, that’s our philosophy.
So how did the business relationship with Costa Asset Management come about?
Through mutual contacts I was introduced to Robert Costa of Costa Asset Management. The Costas are a well known Victorian business family with substantial agricultural businesses. Robert is a big player in property behind the scenes. He was wanting to create a development business and I was looking for a partner and the two of us got together and have started CostaFox. We have been operational since 1st February. I’ve gone back to scratch working from the ground up again, working from a laptop out of coffee shops, so it’s quite a humbling experience but were are up and running and doing our office fit out in South Yarra and will move in at the end of April. We have four full time staff and are looking to engage more high quality people.
What’s CostaFox’s main focus at the moment?
Well, we’ve purchased one of Sydney’s best development sites at Bower Street in Manly. It’s a high end site and a market I want to focus on. It’s six apartments that are super special that will be between 7-9 million dollars a piece. We’re trying to create something a bit more unique and special than what’s out there at the moment. Sydney’s a new venture for me but I saw this as a trophy property in a trophy location – it’s that little patch of Manly between Shelly Beach and Manly Beach. A lot of the Manly area is leasehold, so this is waterfront freehold with six exceptional apartments ranging in size from 250 to 350 sq m. They’re pretty unique. The market has been devoid in my opinion of really top quality apartments. In Melbourne particularly the numbers of apartments have grown considerably but the apartments seem to be getting smaller so how we’re trying to set ourselves apart, and with Manly especially, we’re trying to do something more special for people coming out of big houses in Sydney where there’s not much of an offering for them. What do you scale down to? They want something unique, a prestige location, money’s not really a barrier. It’s a different market and focus. The enquiry we’ve had on Manly has blown me away.
We were able to buy the site from a liquidator at a very good price. I’ve put together a pretty good team. The architect is award-winning Koichi Takada, Mim Design from Melbourne are doing the interiors and we’ve engaged PDS as the project managers. It’s a super experienced team and we hope to have it completed in about 18 months so we’re really getting into it with demolition starting shortly with a number of pre-sales in the wings.
And then what’s next?
We’re looking broadly at sites in premium locations in various capital cities. In Melbourne, the new APRA guidelines will start to bite some of the developers in funding and some sites have become overpriced and sales prices either need to rise dramatically or some of the site prices need to come down, so some fallout in the market may possibly occur. Some of the prices are not sustainable and this might open up some opportunities for us.
Who have been some of your mentors along the way?
I’ve been lucky in my career to have had some amazing bosses. However, the late David Burger who was managing director and founder of City Freeholds in Sydney was a guy that escaped from the war with nothing and built an empire in Sydney. David certainly was a mentor to me along the way. I looked up to him and what he achieved after starting from nothing.
Would you ever go back into sheds and warehouses?
Yes, I was just saying to someone that I’m an old shed man. In my time at Toll I probably built more warehouses than most. The industrial sector has been tough to break into over the last 5-10 years and has been dominated by the major trusts and those that have held land post the GFC. The GFC really killed the industrial land values, but I reckon it’s not too bad at the moment. I’ll never say never and it’s a space where we will still look for the right opportunities.