George Herscu

George Herscu
Born	1 February 1928 Bucharest
Died	12 December 2013 (aged 85) Los Angeles
Burial place	Hillside Memorial Park
Occupation	Property developer
Board member of	Retail Developments Co. (1963–1977) Hanover Holdings (1969–77) Hersfield Developments (1977–1992) Property Trust of Australia (1983–1992)
Criminal charges	Corruption: 19 counts (1995)
Spouse	Sheila Bloom (m. 1958)
Children	Jeffrey (b. 1959) Michelle (b. 1962) Robert (b. 1963)
Parents	Jacob Herscu (father) Liza Herscu (mother)

Israel ben Jacob Liza (Hebrew: ישראל בן יעקב, February 1928 – 12 December 2013), known professionally as George Herscu, was a Jewish billionaire property developer, businessman and philanthropist. An immigrant from Romania, he had humble beginnings in the 1950s but by the 1980s had large-scale commercial developments in Australia and America.

Personal life

George Herscu was born in 1928 at Bucharest, the capital city of Romania. He survived the Holocaust by "hiding under the floor of a peasant's hut". His parents, Jacob and Liza, also survived and emigrated to Israel, where Herscu would regularly visit them. One of the few times Herscu recalled his life as a 13-year-old Jewish boy in the concentration camps was in a 1986 interview with Ruth Ostrow for her book The New Boy Network:

"When you go through what I went through in life, when you know they are going to kill you and do things to you - you have to save yourself. To be successful you can't be the nicest guy to everybody. If you look at all the problems and risks in life you are dead and buried. That's what I have learned. You must never drop your bundle."

He was liberated from the Romanian concentration camps in 1944 and eventually found himself in Belgium. Highly traumatised, Herscu was dispatched to the Bonegilla Migrant Camp in 1950 at the of age 21, cooking and cleaning shoes on the ship to Australia. "I was a young man man when I arrived here from the concentration camps of Europe. I wanted to start a new life in a wonderful country, and Australia gave me everything that anyone could desire".

Herscu owned Hyperno with Russ Hinze; which won the 1979 Melbourne Cup. He also enjoyed golf in his spare time and was a member of the Cranbourne Golf Club. By the 1980s, Herscu had come a long way from his humble beginnings. He redefined extravagant living. He purchased a Rolls-Royce, a Cadillac, and a Jaguar for his Gold Coast condo, along with a luxury apartment with million-dollar views above Circular Quay in Sydney, where he and his wife, Sheila, and their three children would stay when visiting the city. In New York, he secured an apartment on Central Park South. Herscu also bought an executive jet but was embarrassed when he realised it was just a Hawker 900—smaller than the corporate jet owned by John Elliott. Not one to settle, he then purchased a $15-million Gulfstream G1. Herscu frequently flew with his associates on his private jet, taking trips from New York to Pasadena for the Super Bowl or up to Minnesota for a World Series game.

However, it was his mansion at Whernside Avenue in Toorak, nestled among the homes of the wealthy, that truly stood out. He designed it after Tara, the grand estate from his favourite movie Gone With the Wind. Even in the downturn of Melbourne’s property market, the house fetched nearly $2 million when the receivers auctioned it off. Herscu recalled: "I asked the builder to build double of everything... inside jacuzzi, outside jacuzzi... The outside one is so big that when I first got in it, the water lifted me right up into the air. This is Hollywood..."

Herscu managed to avoid scrutiny from the Australian Securities Commission, which was the corporate regulator at the time, but his luck ran out when it was revealed that he made two $50,000 payments to Queensland planning minister Russ Hinze. The payments were intended to influence a dispute with the Brisbane City Council concerning his Sunnybank shopping center. During his corruption trial, Herscu claimed that the money was meant for Hinze to purchase two racehorses but was instead used as a loan, which Hinze later repaid with interest. However, the jury found his explanation unconvincing. Herscu was subsequently taken to Boggo Road Gaol in a paddy wagon, where he joined fellow former ministers Don Lane and Brian Austin, who had served during the Bjelke-Petersen era.

The next year, Herscu was moved to the St Vincent de Paul homeless shelter for men in South Brisbane and assigned to work at the Jewish Board of Deputies community centre. Despite suffering a heart attack, he remained there until his parole in June 1993. After his release, he returned to the United States, where in July 2008, he became involved in a legal dispute with his son, Robert, over an alleged fraudulent scheme.

Herscu died at the age of 85 on 12 December 2013 in Los Angeles and is buried at the Hillside Memorial Park Cemetery.

Career

After arriving in Australia, he travelled to Hobart, where he got a job as a store man for realestate firm A. V. Jennings in 1950. In 1952, he opened a milk bar in the Melbourne suburb Yarraville, which he bought with a Czechoslovakian migrant who he'd met in a gymnasium. But he "quickly realised he would not become rich making milkshakes," so they did the place up and sold it for a profit. He then purchased a delicatessen and expanded it into a chain of seven suburban stores. "I know a good business - I can smell it," Herscu boasted. His first blueprint for greater success was the construction of American-style car-orientated strip shopping complexes in Melbourne's suburbs complemented by some home building.

By about 1964, he had partnered with Maurice Alter, a Polish refugee who had also survived the Holocaust. In 1967, they were assessing some shops at Paul Fayman's recently extended Forest Hill Shopping Centre. Fayman explained the deal, Herscu suddenly interrupted with: "Why just buy the shops? I want to buy the whole centre." It was an impulsive decision that paid off. Herscu, Alter, and Fayman ventured into the regional shopping centre development business, and their company, Hanover Holdings, quickly became a dominant force in the industry. However, like many of Herscu's past partnerships, this one was short-lived. A merchant banker familiar with Hanover noted:

"With egos like that they could never work as a team. Fayman thought he was the most cultural. Alter thought he was smarter and wiser. Herscu thought he had more balls than everyone else, and in a way he was right, if having balls means rushing into things without thinking them through."

For Herscu, the breakup was quite profitable. In a move that upset the minority shareholders, he, Fayman, and Alter privatised Hanover by making an offer for the shares at a price far below the actual value of its assets. After a revaluation, Herscu ended up with $106 million worth of property, which laid the groundwork for his fortune. This would not be the last time Herscu faced accusations of questionable business practices. Retailers at his Footscray Market were outraged when they learned that what they thought was a promise of a year of free rent turned out to be merely a delay. On another occasion, he ended up in court after attempting to force out four difficult tenants by dismantling their shops around them.

One of his most notorious legal encounters came in 1982 when Herscu’s company, Hersfield Corporation, along with developers Maurice Alter and the Grollo brothers, faced charges of buying industrial peace on their projects by bribing Norman Gallagher, the head of the Builders' Laborers Federation. Herscu claimed the Cain Government was targeting him due to his Jewish background and mounted a defence centred around this claim. "I never knew what went on", he claimed. Herscu ultimately admitted guilt, and the four individuals were issued $5,000 good behaviour bonds. The magistrate emphasised that a conviction would have been "catastrophic" for them, as it would have prevented them from holding positions as directors or managers of companies. George Herscu narrowly avoided a ruling that could have ended his career just before his final significant opportunity had even started.

"Should I buy another shopping centre?" asked Herscu. "No, I want to have some fun. I'll go for a company." Like most of what Herscu says about himself, this should be taken with more than a grain of salt. In fact "bullshit" is what a financier involved in the deal spluttered when he was asked about the quote. In 1985, Herscu's shopping centre business was thriving, stretching from Brisbane to the Gold Coast, Sydney, Melbourne, and even across to Perth. His portfolio consisted of massive brick-and-concrete structures surrounded by expansive asphalt parking lots on the outskirts of suburban sprawl, reflecting his belief in middle Australia's deep affection for shopping malls. The air was thick with takeover excitement, and Herscu was eager to get involved. That’s the official narrative. Behind the scenes, however, Herscu had enlisted a merchant banker, Mr. Paul Carter, to scout potential takeover targets. Carter was the one who first pinpointed Woolworths and then the Hooker Corporation as ripe for acquisition. In the end, Herscu chose Hooker, and with the help of a $200 million loan from ANZ Bank, he secured a controlling stake. His target was a large, conservative company that had failed to provide substantial dividends to its loyal shareholders for years. However, Hooker had acquired vast amounts of outer-urban land in the 1960s, and that land was now ready for development.

On January 20, 1986, Herscu, flanked by his sharp, MBA-armed lieutenants, walked into Hooker House on Pitt Street in Sydney. They were left waiting outside the boardroom as the directors deliberated on how to handle the intruders. "When they came out, it was like two football teams lined up before the game". Mr. Fred Millar (the chairman) shook George's hand and said, "There are now two directors. The rest of us have resigned," recalled one of Herscu’s advisors. The directors walked out without a word. Herscu wasted no time, immediately setting plans in motion to revitalise the company, which he referred to as the “sleeping giant.” He revealed intentions to expand the Prouds/Edments chain with 130 new stores and boasted to his team that he had already secured the Darling Harbor casino license. Australia, he proclaimed, was suddenly too small for him. Barry Glover, who was the managing director of Hooker at the time, reflected on the change in leadership: "The old regime was cautious and financially responsible. In came George and his team, and the managers who felt they had been held back saw him as a blessing. I had a shopping development planned for Tampa, Florida, which was already substantial—500,000 square feet." George took one look at it and said, "Let’s double it. No, let’s triple it."

When he got to Los Angeles on his first trip to inspect his domain, Herscu was picked up by a chartered jet and flown to Atlanta, Georgia, which was then the company's modest base of operations. "George had never had treatment like this," said one of his lieutenants. "They met him on the tarmac all cheering and wearing these orange day-glow badges saying 'GH/HB The Future Is Now' I was cringing, but George thought it was wonderful. He lapped it up". Herscu's personal style began to wear thin, even among those closest to him. Mr. Glover lasted just 10 days before he walked away. By the time Herscu's brief tenure at Hooker ended with the company's collapse three and a half years later, only one or two of the original team of 20 top managers remained. Mr. Glover reflected on the situation, saying: "He wanted to be emperor, and I wanted to be king. There wasn't room for both of us. But that left him with a weak board and weak executives. There was no one left who could control him, and in the end, that’s what led to the downfall."

By July of 1988, Herscu was quickly running out of credit. His U.S. operation had grown to over a billion dollars, constructing some of the most extravagant shopping malls ever built—massive complexes in overlooked locations like Tampa, Denver and Cincinnati. Despite the chairman's enthusiasm, most of his key team members knew the end was near. Hooker had borrowed from over 50 American banks and was now turning to obscure institutions like the Bank of Nova Scotia, desperately seeking more funds to keep the company afloat. One finance executive remembers flying to five cities in a single day in a last-ditch effort to convince the banks to extend more credit. The issue was this: Herscu had these massive shopping malls, but he couldn't secure major retailers to take the head leases, even with generous incentives. Department chains like Macy's were offered fully-fitted stores, ready for operation, along with $5 million in cash, yet they still turned Herscu down. That was when he made his final, fatal mistake—acquiring chains like Bonwit Teller and B. Altman in an attempt to fill the vast, empty spaces in his hundreds of thousands of square meters of vacant shopping centres.

As summer turned to autumn in 1988, with the banks closing in, Herscu's executives tried to convince him to sell some of his properties to reduce his debt. "He just wouldn't listen," said a finance executive. The final attempt to save the company came when Herscu was eventually persuaded that more capital needed to be injected into Hooker to keep it afloat. A $1 rights issue for shareholders, particularly Herscu who owned nearly half the company, was proposed, and a meeting was arranged with the company’s merchant bankers in New York. According to someone who was present, the conversation went as follows: Once the proposal had been outlined, the banker challenged Herscu: "You want to put your own money in? Don’t be an idiot—raise some junk bonds." Herscu responded, "Beauty, go ahead." However, by that point, the junk bond market was on the brink of collapse, and three months of high-priced negotiations ended in failure. "We all knew it was over by late 1988... the only surprise was that it took so long," said the former Hooker executive. The company lurched along until July 1989, with Herscu almost daily announcing new plans, restructuring and refinancing. When Hersfield and Hooker were eventually placed into receivership, the debts were put at about $2 billion.

Philanthropy

Herscu supported many communal organisations and causes including the Melbourne Hebrew Congregation, Yeshivah College, Mount Scopus College, Tel Aviv University, Sholem Aleichem College, the Hebrew University. He also regularly offered his home to United Isreal Appeal meetings and hosted several emissaries including Arieh Dulzin. "Mr. Herscu maintains that Israel cannot live without the support of diaspora Jewry and says we must educate our children and future generations to keep on supporting the Jewish State.", one journalist stated.