From buying an abandoned reserve to nabbing a neglected castle in Lithuania, Ian Gowrie-Smith’s property investments are nothing short of eclectic. While he made much of his fortune investing in the pharmaceutical industry and mining, it is his property investments that enabled him to live the lifestyle he now enjoys. Nila Sweeney tells his story
When the young and cash-strapped Ian Gowrie-Smith was offered the opportunity to buy what he described as an “untouched and original” Victorian house in Melbourne’s North Carlton
, little did he know that this purchase would set the tone for his future property investments.
Gowrie-Smith, who made his multibillion-dollar fortune developing pharmaceutical and mining companies, owns a number of commercial and residential properties in Australia and overseas. He is also the proud owner of what’s considered to be one of the last few remaining freehold atolls in the world - the Conflict Islands in Papua New Guinea.
A self-confessed property romantic who admits to making some investment decisions based on how he felt at the time, Gowrie-Smith’s property holdings include some unique investments, such as a palace in the city centre of Lithuania and a game reserve with trout fishing in South Africa.
“I have spent a life of being a property romantic,” Gowrie-Smith says. “When you’ve bought the type of properties like I did, buying the Conflict Islands was a natural move for me. I would say that I’ve always wanted to own an island.”
Gowrie-Smith’s billionaire lifestyle is a far cry from his earlier years. Growing up in a farming family in Griffith
, a regional town 568km from Sydney, he defied the family farming tradition by moving out to the big city of Melbourne to go to university. He hasn’t looked back since.
“My father had done a deal with me and said, “Son, you could either go to university and at the end of university you shall forever be gone, or you can come back to the land and become a farmer and I’ll set you up with a farm. Needless to say, I followed the first option."
An inherently bright student, Gowrie-Smith got a scholarship from Trinity College, which meant all his school fees were paid. “By being a scholar, my father actually got a good deal out of it, because I ended up getting a vast majority of my fees paid for me,” he reminisces.
It was during his stint at university that he came across his first property. Despite not having any regular income at the time, Gowrie-Smith fell in love with the house’s old charm and decided to pull strings to get it.
“I looked at this place and I thought it was amazing. It still has original wallpaper and gas-light fittings still intact. My mother, who was a passionate collector of antiques, had probably influenced me and my love for for old things.”
The asking price was $8,500, and a naturally astute Gowrie-Smith was able to convince the vendor to give him the loan he needed.
“The seller ended up lending me $7,000 on a fixed interest of around 8% over seven years. Yes, it was an original vendor financing arrangement. But even with that help, it was a struggle for me to find $1,500, because in real terms it was still a lot of money then,” he says.
Gowrie-Smith’s mother came to the rescue to make up for the shortfall, allowing him to snag his first home.
He happily spent his last year of college in this property, but had to move out during his last term in order to finish his degree. He admits to having had too much fun living in his own home.
After graduating from Trinity College, Gowrie-Smith promptly moved to Sydney. From there, he went on to build multibillion-dollar pharmaceutical companies and create a number of successful mining businesses.
Real estate wins and lessons learned
Gowrie-Smith admits that although he made much of his wealth in the pharmaceutical industry and mining, it is his real estate holdings that enabled him to have the lifestyle he now enjoys.
“Real estate has played an important role all the way through,” he says. “I bought my first property during golden era of property, at a time when anybody who was anybody who could afford to buy and hold was buying real estate. The only problem for me at that time was that I was too young and I wasn’t employed that long, and even when I was employed I really didn’t have the money and cash flow to hold property over a long period of time, especially with the interest rate at 18%.”
He decided to sell his Melbourne home for $45,000 within three years of buying it, and over the next few decades buying and selling properties alongside his other activities became a continuous process.
“Buying properties along the way and selling them at maturity point has really supported my lifestyle,” he says. “I highly regarded property as a safe deposit, and all throughout the process I kept putting the spare money I had into property.”
Despite his successful foray into real estate, Gowrie-Smith is not shy about admitting some mistakes he made along the way.
For example, he thinks he made the wrong call by assuming Lithuania would follow the growth trajectory of Ireland once it became a member of the European Union. Believing that the country would become the next emerging economy, Gowrie-Smith bought a castle in the middle of the city, hoping to cash in on the expected economic boom.
“I made the fundamental mistake there, believing that Lithuania would parallel the growth of Ireland upon Ireland’s entry into the EU, not realising that the model I was following was unsupported and unsustainable and about to collapse, so the model I was modelling it from was incorrect. Lithuania has gone through rough times, but it’s also one of the biggest and fastest-growing economies in Europe at the moment. I bought a big piece of land with a massive building in it, right at the heart of the city, so someday it will be worth a lot, I hope. But at the moment if I sell it I will be losing money. It happens,” he says wryly.
He also learned the hard way, during the GFC, that having an unencumbered property portfolio doesn’t automatically entitle you to a loan during a credit squeeze.
“I was celebrating my 60th birthday with a group of friends in a game reserve in Africa, and we had no Wi-Fi or phone connection for the whole time. Nobody could reach us to tell us the financial world was in a meltdown and that the global financial crisis was underway. We were blissfully unaware the markets were crashing down,” he recalls.
It was only when he returned to civilisation that he found out what had happened and was confronted by the harsh reality: he needed to access cash urgently.
“I remembered wandering into Westpac with a war chest of unencumbered property portfolio worth four times more than the amount I was seeking to borrow. I thought because I was a long-term client of Westpac and had all these properties as security that I would not have any issues getting cash. But I was declined, along with everybody else. It was a tough lesson to learn.
“I think the biggest shock for me was the fact that I had never been exposed to the need to borrow money under pressure. I thought I’d be able to access cash easily. Turned out this isn’t the case during a credit squeeze. At the height of the GFC, the banks were practically turning everybody down.
“It wasn’t that they were worried that they couldn’t recoup what they lent me. It’s just that they needed to rebuild their balance sheet and there were a lot of people who owed them money in the billions that couldn’t repay their debts. So the banks are more worried about losing money from the bad debtors than making money from good customers with good credit.”
Needless to say, he found a way to raise the much-needed cash, and despite his experience with his bank, he continued to develop his array of 'unique' properties, like the Conflict Islands.
The sweet rewards of owning a string of exotic islands
Owning an island in an exotic location has become quite an obsession among the mega rich and famous. However, Gowrie-Smith says he wasn’t even looking to acquire one when the opportunity to buy the Conf lict Islands presented itself.
“I was doing gold, oil and gas exploration work [in PNG], and my accountant mentioned he was the PNG representative of an octogenarian couple from Hawaii who, due to ill health, were looking to sell the islands,” he says. “He assured me they should be very pretty, although he had never seen them. I pursued the vendors and we agreed that I should get someone to visit the islands to give us a current status report.”
After getting a report back from his trusted local researcher, he went ahead and, in typical Gowrie-Smith fashion, bought the islands sight unseen.
Although he was coy about disclosing the purchase price, some media reports at the time cited $25m.
Gowrie-Smith recalls that his first sighting of the islands was less than than impressive. With no airstrip and arriving in the dead of the night by boat during high tide, he says it was a "pretty grim first sight".
Luckily, everything improved in the morning and, as the day progressed, he got to see the islands in all their magnificent beauty and realised he was now the owner of an extraordinary property.
“I had no idea before, or for some time later, what an extraordinary, rare jewel of an investment I had lucked upon,” he says. “I hadn’t appreciated that these islands were at the epicentre of the best diving in the world, or that there are a mere handful of complete freehold atolls for sale.”
Gowrie-Smith's goal for the Conflict Islands is to ultimately turn them into something that benefits the locals, while protecting their unique biodiversity.
In order to achieve his grand vision, he needs to enlist like-minded investors who will agree to develop two of the biggest islands and turn them into a sustainable tourist destination.
“My vision is to establish an exclusive community of like-minded individuals who wish to preserve and enjoy the islands for future generations, as part of their legacy,” he says. “Potential investors or purchasers are invited to participate in the conservation and protection and enjoyment of these magnificent islands. Environmental consciousness in regard to the design and operation is a must, as will be the conservation of the islands’ natural beauty and protection of species.”
Investment opportunities include the shared ownership and development of the atoll as a whole, or purchasing individual islands or plots for private luxury residences.
“The nearest example of what we might ultimately become is like Hamilton Island in Queensland where they put an airstrip where you can fly out of any capital city in Australia and land on the island. If we put a runway in the two biggest islands, Panasesa and Irai, it becomes really accessible. Even if we just rely on the existing airport in Alotau in Milne Bay, and take a plane or boat from there, it would still just take around 45 and 90 minutes respectively,” he explains.
Giving back to the community
When you’ve made your fortune digging up forests to mine oil and gas, naturally it would be a challenge to convince people of your commitment to sustainability.
But Gowrie-Smith was steadfast in his conviction that he should make a difference to other’s lives. “I guess you get to a point in your life where helping others becomes more urgent,” he says.
“Having spoken to some of the local dancers who travelled around nine hours by sailboats – and some of them are young, well-educated, well-spoken men and women but are living a subsistence life because they don’t have the opportunity – has made my cause even more urgent.”
Gowrie-Smith’s vision for the Conflict Islands, which he acquired from its former owner some nine years ago, was to turn them into a hub of sustainable tourism, which he hopes will provide a livelihood for the residents of the nearby islands.
“We don’t have an option to do nothing," Gowrie-Smith says. "If we don’t do anything, these islands will deteriorate to the point where the world-class corals and biodiversity will perish.”
Secret to success
Like many successful entrepreneurs, Gowrie-Smith’s path to success was a combination of hard work and ambition, although he's the first to admit that a big part of his success was being in the right place at the right time.
"I'd often say that I have more to thank for good luck than for good judgement, but I consciously place myself to receive that luck. Sometimes I'm lucky; other times I'm not. But a lot of good fortune and wealth are made by people that aren’t hard-working or intelligent. I know quite a lot of wealthy people in the world, and I have to say that some of them were at the right place at the right time. Some of these people place themselves intentionally, and in other cases there has been a big element of luck in it.
“Yes, being passionate is important. It doesn't mean with passion you’re always right, but you have to attack things with ferocity and usually with a degree of naivety. Because if you know how high the barriers are ahead of you, you wouldn’t go ahead and do it. It's only when you’ve got over barriers and got used to getting over barriers and have the passion to get over the last one that you will then have the determination to do it.
"I guess you could say I'm disciplined. I was also prepared to work hard and had the ambition."
This feature is an excerpt from Your Investment Property's August Issue. To read the complete feature, you may purchase the issue or sign up for a subscription.
Do you have more than $120k in your super fund? You could use your super to buy property - Find out how