28 Feb 2019
John Zeckendorf: Asset Manager. Adventurer.
Motel investors hail from all walks of life. But how many can say they’ve controlled a $5 billion global asset portfolio by age 30, and conquered the highest mountain on every continent?
By any measure, John Zeckendorf has led a life more challenging and purposeful than most. Now, while still acting as a high-level corporate advisor, he oversees two investment funds – soon to be three – focused on regional Australian accommodation assets.
And he does it all while enjoying family life with his wife and four children, aged 12 to 21, in Kingston, a quiet upmarket beachside suburb of Hobart. Also a committed Christian, John savours “the magnificent creation we have all around us in Tasmania.”
But Tasmania wasn’t always home. He was raised in Sydney, studied accounting and went on to become a Director at Price Waterhouse (now PwC) working in corporate recovery, property and finance for 12 years in the late 1980s and 1990s.
It was then John first encountered the hospitality sector. This was a time of global economic turmoil and Paul Keating’s “recession that Australia had to have”. So, as a receiver and liquidator, John took stewardship of many embattled hospitality businesses.
But the excesses of 80s were nothing to those he would confront next. A deceptively unassuming line on his resume reads “worked in Brunei for the Royal Family to help resolve the major litigation and asset recovery that resulted from the Prince Jefri dispute.”
What it means is John became asset manager for the notorious playboy brother of the Sultan of Brunei, entering what Vanity Fair described as “a world of orgiastic wealth.”
Jefri was the poster boy for conspicuous consumption, said to have “gone through more cash than any other human being on earth” in his pursuit of luxury hotels, planeloads of women, polo ponies, colossal diamonds and more than 2,000 luxury cars.
John says landing the role was “a classic case of right place, right time.” He’d been working all over the world for Price Waterhouse, living in Hong Kong then London, when he was offered a position in Brunei.
“But the guy I was supposed to work for had burned out, and he asked me if I wanted to replace him. There I was, just turned 30, and basically thrown the keys to $5 billion worth of assets and told ‘here, sort this out.’
“It was fascinating and extremely full-on. I could be on three different continents in a week. We were some airlines’ best customers. I flew more than their pilots.”
The 70 mainly property-related assets he oversaw included some of the world’s finest hotels (New York Palace Hotel, Hotel Bel Air in LA and Hotel Plaza Athenee in Paris), jewellers, power stations, a theme park, marina, and many developments.
Then there was the amazing garage of cars. “It was fun to work through,” he admits. But John knew from the outset this was a very corrupted environment. “I stipulated from the start I didn’t want to go anywhere near ‘the Court’ – a valuable tip from my predecessor.”
In the end, he helped resolve nearly $35 billion worth of debt racked up by the profligate prince.
So John Zeckendorf has worked at the highest levels, with giant banks, governments and corporations. But he says there comes a time when you tire of that.
The lesson he values most from those years is not about empire building, but about the power of relationships. “You can do entrepreneurial things with a small team. It’s not about size. Relationships and attitude count for a lot more.”
This understanding sowed the seed for John’s next step, to return to Australia and, with long-time friend and colleague, Ryan Shaw, establish Mandala Asset Solutions in 2003.
Mandala focuses on lifting the value of assets. With a strong emphasis on property, hospitality and turnarounds, it takes a hands-on, solution-focussed approach backed by an incredible depth of experience.
“The definition of a Mandala,” he explains, “is something built around a focusing point, where the whole is substantially greater than the sum of the component parts.”
Among their many capabilities, a key focus is hospitality.
“We came out of London and Brunei with some savings and we were looking for good advice to make it work for us, but it just wasn’t. We wanted a solid investment that would earn a regular income, with a good outlook, and we had time to get involved.
“So we looked at what we knew about from our insolvency days, regional motels. The first one we bought was in Berry (2007), two hours south of Sydney, a freehold going concern. In the first year, I think the return was about 12 per cent. In the second, it was around 30 per cent.
“We thought this was amazing, so we decided we’d buy another. I remember we looked at one in Dubbo, to which I said a firm ‘no’. We were driving back to Sydney and Ryan said there was another in Orange that might be worth a look. We drove in and I said ‘buy it’ straight away.
“We told our friends and, before we knew it, we had our first fund.”
So began Trinity Accommodation Master Trust (TAMT), which was launched with the Orange property in May 2010, and ultimately included four leaseholds – Quality inn Ambassador Orange, Parklands Resort and Conference Centre in Mudgee, the Artesian Spa Motel in Moree and Lithgow’s Zigzag Motel.
Three have since been sold, and the top-performing Orange property retained. The fund achieved a Year 3 weighted average yield of 22.1% and convinced Mandala to expand its asset management activities.
“If we were to no longer rely solely on friends and family investors, we had to professionalise,” John says. “It’s quite a process to gain the necessary Australian Financial Services Licence (AFSL) and set up the compliance structure.”
The Trinity Accommodation Regional Hospitality Fund (TARHF) launched in late 2015.
“The value of funds under management (FUM) was around $6 million at the first close, and we have virtually doubled that at every close – to $14 million by the next close, $27 million by the third, and we’re about to do the fourth and final close (14 Dec, 2018),” John says.
Now with nearly $30m of FUM, the fund owns six properties comprising 224 rooms: Q Express Townsville, Quality Inn Carriage House Wagga Wagga (passive freeholds), Lincoln Downs Resort Batemans Bay, Thunderbird Motel Yass, Launceston’s Elphin Villas, and Mercure Albury (freehold going concerns).
A further 253 rooms are under acquisition, taking the portfolio to nine properties, with capacity for more. Since inception, TARHF has returned an average of nearly 11% p.a. The remaining fund life is four years and the annual capital gains target 5%.
“Our relationship with ResortBrokers has been critical,” says John. “They have provided us with an excellent pipeline of opportunities to consider and they know that we are fast, agile, fair, discrete and always follow through.”
Time then to launch fund #3. But now, the aim is to attract larger investors and achieve a scale that will ultimately appeal to big league buyers, such as superannuation funds, prepared to pay a better yield. To do so requires a forensic eye for compliance.
“It’s called ‘a roll up’ – buy from smaller operators, fix the properties with capex and professionalised systems, make sure they are properly capitalised and compliant, maintain strict compliance records for five years, then you can sell to the big end of town.
“The process has been applied to all sorts of industries, but no one has really done it in hospitality yet.”
The proven strategy remains: invest in income-producing regional accommodation-driven assets with operational and property upside – motels of course, but potentially caravan parks, backpackers, even student accommodation. Just no pubs, and definitely no gambling.
So that’s the next business challenge. John is never one to aim low.
This is a man who only started mountaineering in 2010, and has since completed the Seven Summits, conquering the highest mountain on each of the seven continents. Everest was his seventh peak, achieved in May 2017.
He’s the first Tasmanian to climb Everest, and only the 25th Australian to achieve the ultimate 7-summit mountaineering challenge. Now he’s about to tackle a series of volcanos in Ecuador – easy by comparison, he says, “except one of them is smoking at the moment!”
As well as his business activities across multiple states, family life in Tasmania and training for his incredible climbing exploits, John is also a director of several not-for-profit entities associated with his faith, including in the aged care and drug-addicted youth areas.
Clearly not one to pass up any opportunity –business, personal or spiritual – John is excited about the investment outlook in the regional accommodation sector. “I see some really good opportunities coming up, interesting buying,” he says.
“This will be a result of tightening credit. There’s no doubt, deals are getting a bit harder and taking longer, and this is where good relationships really come to the fore to access money.”
And, having inspected probably 500-plus properties in the last 10 years, it’s clear John knows a good opportunity when he sees one. “You develop good instincts. I know what I’m looking for and I often know well before I get there whether we are going to buy.”
‘High achiever’ is an apt description of John Zeckendorf – metaphorically and literally. Quick-witted too. “I have never been accused of being boring, despite being an accountant!”