‘Capital history’

by Humphrey McQueen, Canberra

Building Owners’ & Managers’ Association

Blf 1980-85

The developer is not the end consumer – he is a manufacturer who like any other manufacturer has to pass on almost all cost rises if he is to survive business in the long run. It is the end consumer who bears the cost burdens and rises.[1]

From 1966, eight or more executives from the AMP, Dalgetys, Hammersons, Hookers, National Mutual and the Bank of NSW met over lunch to share ideas about the issues they faced as owner-managers of commercial properties. In August 1968, thirty-eight representatives of such businesses gathered in Sydney to form a Business Owners and Managers Association (BOMA). The NSW Public Works Department attended from the start because it had the same problems of maintenance and servicing as did the corporates. BOMA’s incorporation a year later advanced a process of self-discovery for one segment among Australia’s large property developers. BOMA had moved from being a club to a company, a sign that its founders meant business. At that stage, they saw themselves establishing a professional body to train people to look after the tall buildings and shopping complexes that had been appearing since 1957. Late in 1996, BOMA re-birthed as the Property Council of Australia.

Some of the founders kept up contacts in the USA where the National Association of Building Owners and Managers had been founded in 1907. They managed buildings. They did not construct them. Hence, the US body identified its members as building owners, managers, developers, leasing professionals, medical office building managers, corporate facility managers, asset managers, and the products and services need to operate commercial properties’. In 1968, the US group changed its name to BOMA International, and welcomed overseas affiliates.[2] The connections between Australia and US construction remained lopsided. British investments drove the boom in commercial building sector of the early Seventies.[3] Before then, US firms such as Bechtel, Fluor, Halliburton and Utah had contracts for the infrastructure on resources projects.[4]

In the US of A during 1969, contractors and their clients, confronted by a wave of strikes and wage rises, set up the Construction Users Anti-Inflation Roundtable, soon known as the Business Roundtable. In waging their war of attrition against the construction unions, the employers had an uneasy alliance with the Nixon administration, despite its courting the hard-hats against anti-war and anti-segregation protesters.[5]

In Australia, the building unions were about to take center stage. BOMA left that realm of disputation to the Master Builders and the Employers’ Federation. During the upsurge in construction and conflict between 1970 and 1974, BOMA confined itself to building its own house. Its staff engaged in educational tasks while its executive officers overcame suspicion from the smaller States. The new grouping had to wear down a reluctance to share ‘secrets’.[6] In 1975, the NSW division generated a revenue stream from luncheons and seminars. BOMA did not hold its first National Congresses until 1977; next year, it combined with the Council of Shopping Centres to conduct the first National Convention for that segment of owners and managers.[7]

Another index of BOMA’s consolidation has been the improvements in its publications. From September 1975, it produced a black-and-white newsletter, which it expanded during 1983 to a glossy magazine before being upgraded again in 1986. From 1989, the Executive decided to broaden the magazine’s coverage and its penetration. The new version of 10,000 copies achieved a circulation of 50,000, many times BOMA’s membership of under 2,000, with 700 active on sub-committees.[8]

The organisation entered a new phrase with the appointment of Ray Powys as its first full-time National Director in 1979. Until then, BOMA had operated as a side-line out of his office at the AMP where, in 1969, he had been appointed Property Investment Manager, after ten years as its NSW Investment manager. His $20,000 salary from BOMA had to be guaranteed independently since BOMA did not have that kind of money. Powys had the connections, the authority, the foresight and the enthusiasm to bring his creation to life as the preeminent circle of property executives.[9]

In 1994, retiring President, Brian Pollock, was pleased that BOMA was ‘no longer just an owners’ club’. BOMA always had included engineers and quantity surveyors but had brought in lawyers and accountants. For instance, a Client Contractor Group had investigated ‘client briefs, and security of payment’.[10]

One prong of Powys’ strategy was to service the members with information. The appointment in 1981 of the twenty-two-year-old Peter Verwer as head of research led to the publication of the BOMA Property Index so that investment decisions were no longer based on guesstimates:

Until 1985 there were no regular national surveys of vacancy (no one even knew what the stock of the cities was). There was no national perspective on shopping centres until 1987; and 1990 was the first year a property performance index measuring total returns for all commercial markets was published.[11]

Until a private firm produced the first review of property trusts in 1983, the sector of the market had borne no relationship to the Neo-Classical model of informed choice.

Verwer went on to become CEO in 1992. A double major in government and philosophy from the University of Sydney, he had been influenced by radical historians and political economists. Whenever he had to defend the despoliation of the environment, he quoted

the great English historian, E. P. Thompson, [who] referred to the ‘enormous condescension of posterity’ when discussing the habit of reviewing past action and ideas through the lens of modern mores, which are really little more than society’s latest prejudices.[12]

In May 1994, Verwer headed his editorial about Superannuation with two quotations from Marx, whom he regretted had ‘suffered bad press’.[13]

Looking back on the 1980s, Verwer recognized that BOMA had been a product of the transformation of property investment and management. During that decade, BOMA’s executives had refurbished their organisation as they did office blocks to match the demand for efficient and prestigious workspaces from the financial houses that were plunging into diverse and deregulated investment markets.[14]

Powys recalled that BOMA came under pressure to ‘represent the owners of big commercial properties in dealings with government and financiers and people generally’. As a result, BOMA slipped past its professional intentions to become a ‘trade organisation [to] represent our members for their benefit’.[15] As a lobby group, BOMA sought to contain the rises in the costs of construction that followed from poor design, sloppy management, industrial disputes, government regulations and environmentalist pressures.[16]

Verwer identified BOMA’s ‘premier role’ as promoting self-regulation. Its officers circumvented planning regulations and local governments in both the CBDs and the suburbs for shopping centres. He acknowledged: ‘While some decry so-called “rule bending”, there needs to be flexibility unless cities are to be built by numbers’.[17] They were being built by the numbers of dollars, whether as bribes or profits. Verwer rejoiced that his task as CEO was ‘to reduce the artificial risks created for members by government’. In particular, BOMA had won tax amortization allowances, beaten obstructive councils in the courts and influenced planning policies.[18]

One way to get governments off the backs of developers was to get closer to politicians and to the new breed of CEOs in the State bureaucracies. BOMA had a conduit to governments through their superannuation funds.[19] The sell-off of government properties and their leasing back intertwined more legs under the negotiating table.

BOMA had been established just as the Sixties protest movement added urban renewal to its targets. BOMA’s members were behind clear felling on the kind that had been proposed for The Rocks and Woolloomooloo. When City Councilors, notably Jack Mundey, failed to be flexible as the corrupt Lord Mayor Leo Port, the new State Liberal government sacked the popularly-elected Sydney City Council in 1987 with a business-oriented Commission, before redrawing the boundaries to install a property-owners-only Council for the CBD.

BOMA had become the bete noir of the commentator on urban environments for the Australian, Peter Ward:

Such conventional Sydney practices as scratching backs and bending urban planning rules in favour of the development lobby. The non-elected members have the numbers and use them, and that this generally means that the member from BOMA is well satisfied.[20]

BOMA acted as an executive sub-committee for that segment of the bourgeoisie expecting to live off the leasing of commercial properties.

In August 1996, BOMA took one more twist on its origins as an body to train professionals. BO&M devoted the issue to urban renewal. Its editor saw the Association’s role as ‘Clearing the Way to the New Property Transaction’. The capitalised headline read: ‘HOW TO BREED A BUNCH OF HOTSHOT NEGOTIATORS’.[21]

“the final cost is the only real cost”: the 1986 de-recognition of the ACWBLF in an era of financial deregulation.

Synopsis: Because financial deregulation increased the volatility of interest and exchange rates, investors sought instant liquidity. The lead times of construction projects tied up funds, and impeded that escape. Investors, therefore, looked beyond commercial properties for security. Finishing projects on time had become more vital than ever. Those objectives required an overhaul of on-site operations. To achieve that end, the body representing institutional investors, the Building Owners and Managers Association (BOMA), endorsed a two-step strategy. First, bust the BLF. Secondly, rein in the contractors. The latter, BOMA believed, depended on the former.

Outline

The totality of forces arraigned against the BLF is noted, as is the necessity of agents in the il-logic of the capital expansion. BOMA’s strategy for tightening on-site management is then detailed. The consequences for the construction industry from de-regulating the financial sector are examined, notably the demand for liquidity and the growth of property trusts. These issues are then refocused onto the need that capitals have to accelerate turnover and discipline labour time. Case studies of time management are provided in relation to the concrete for housing slabs and high-rise cores. Savings in the “cost of time” from steel are considered. The benefits from choosing one material over another are pitched against poor management. Those inefficiencies on site are linked to the specifying of contracts.

The annotated text will be available from my website, under “BLF” as ‘1986 de-reg’ @ www.alphalink.com.au/~loge27.

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[1] BOMA grew out of a luncheon club in 1966 before incorporating during 1969, to be renamed the Property Council of Australia in 1996; for a brief account see my website www.alphalink.com.au/~loge27 BLF

[2] James Wordhuysen and Ian Abley, Why is Construction so Backward?, Wiley, London, 2003.

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[1] BOMA national News, August 1977, p. 14.

[2] BO&M, February 1994, p. 27; BO&M, February7 1994, p. 27; http://www.boma.org

[3] M. T. Daly, Sydney Boom, Sydney Bust, The city and its property market 1850-1981, George Allen & Unwin: North Sydney, 1982, pp. 46-53.

[4] BO&M, October 1988, p. 10; for Bechtel projects in Australia, Forbes, 7 December 1981, p. 141; As ACTU President, Hawke became the golfing buddy of Betchel’s George Shultz, who became Reagan’s Secretary of State while Hawke was prime minister, Robert Hawke, The Hawke Memoirs, Heinemann, Melbourne, 1994, pp. 208-9.

[5] Marc Linder, Wars of Attrition, Vietnam, the Business Roundtable, and the Decline of Construction Unions, Fanpihua Press: Iowa City, 2000.

[6] Building Owner & Manager (BO&M), February 1994, pp. 12-13.

[7] BOMA national News, 3 (1), February 1978.

[8] BO&M, February 1994, p. 29.

[9] BO&M, February 1994, p. 12-13; in the mid-1970s, AMP held a third of its investments in property, a third in equities and a third in government bonds, Geoffrey Blainey, The history of the AMP Society, 1848-1998, Allen & Unwin: St Leonards, 1999, p. 283. Blainey reported that the monopolising of capital in the 1970s contributed to the AMP’s involvement with mining projects, such as $110m. in the Tomago (NSW) aluminum smelter in the early 1980s. ‘Likewise the pouring of money into city property was a reflection of the fact that the Society held about as much of the Australian share market as was sensible’, to become known as ‘The Investment Power House’, p. 287; A. C. Gray, Life Insurance in Australia, An Historical and Descriptive Account, McCarron Bird: Melbourne, 1977, chapter 15; Australian Insurance Industry Journal, August 1977, pp. 24-28, May 1981, pp. 68-72.

[10] BO&M, December 1994/January 1995, p. 8.

[11] BO&M, September 1993, p. 10.

[12] BO&M, March 1994, p. 4; for a profile of Verwer, BO&M, Dec 86 – Jan ’87, p. 13.

[13] Writing about property rights, Verwer editorialsed about Marx as a superannuation trustee, May 1994, p. 9-10; Marx noted about devils quoting scripture: ‘The more a ruling class is able to assimilate the foremost minds of a ruled class, the more stable and dangerous becomes its rule’. Capital, volume III, Progress Publishers: Moscow, 196?, p. 601.

[14] These forces are analysed in my ‘The 1986 de-recognition of the ABCE & BLF in an ear of financial deregulation’, also on this site.

[15] BO&M, February 1994, pp. 12- 13.

[16] BO&M, ‘Editorial’, February 1994, pp. 4-6.

[17] BO&M, ‘Editorial’, March 1994, p. 4.

[18] BO&M, ‘Editorial’, February 1994, p. 6.

[19] Building Economist, March 1988, pp. 15-16.

[20] Weekend Australian, 29-30 January 1994, ‘Property’, p. 6; Verwer’s reply, BO&M, March 1994, p. 4.

[21] BO&M, August 1996, Cover.