If I
was Frank Cicutto I’d be asking myself this morning if
I had done something very bad in a former life, after all being shed by the
National Australia Bank over the forex options trading
losses scandal, and the bank’s explosion in costs is one
thing. But
what about the retirement play, chairing Run Corp, a company with the bright
idea to takeover the rent rolls of real estate agents and run them as a low cost
national business?

Well, according to the SMH this morning there’s everything wrong with Run: a bodgy business plan, high costs,
higher staff costs and exploding losses.

And
there’s chairman Frank and his board being surprised by yesterday’s warning of
higher losses (and it wasn’t a profit warning, as the AFR and other papers
reported, this company had budgeted for losses in year one), just like Frank and
his fellow directors at the NAB were surprised by the $360 million forex option losses.

Run
Corp’s business plan fatally flawed. I know of one Sydney real estate agent taken over
for the rent roll: Run is using poor quality software which was imposed on the
firm, staffing costs have risen because running a rent roll is time
consuming.

Run
claimed a lot of the administration of the rent roll could be done via the
internet and email from Melbourne for both tenant and owner. The
experience is that this is an illusion: owners are often small and want personal
service and need a person to contact and are taking properties to other agents
when this doesn’t happen.

Tenants
have been frustrated by technical problems and delays in getting repairs and
other things done to the properties they rent. The dumb bunnies from Melbourne
who dreamed up the idea have been flooded with inquiries from both tenants and
owners. The
people from Run wouldn’t listen to some of the people they hired in the
takeovers: if they had some of the losses may have been avoided, and the loss of
more than a thousand properties from the rent rolls acquired.

Peter Fray

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