02 Jul 2020
Words Sean Slatter The Hotel Conversation

ResortBrokers reports more than $20 million in SEQ management rights transactions throughout the past two months

A combination of experienced accommodation operators and industry newcomers have been driving up demand for permanent management rights in south east Queensland, according to ResortBrokers.

The specialist agency reports that 16 management rights deals have been either settled or agreed in Brisbane, the Sunshine Coast and Gold Coast across both short-term and long-term complexes since May 1.

ResortBrokers Brisbane Management Rights Specialist Nathan Eades said the surge was partly due to pent up demand stemming from lockdown restrictions in March.

“When the coronavirus restrictions were imposed in early March, things were pretty chaotic and a lot of deals were put on hold,” he said.

“After a month or so, the experienced operators became active and over the past few weeks, we’ve had really strong enquiry levels from new operators who want to gain a foothold in the management rights industry.

"The mass redundancies and reduced hours and pay in the general workforce has also meant people are looking to be their own boss and in management rights, the salary is guaranteed and underpinned by state legislation."

Management rights typically include the ability for an onsite manager to earn a salary for managing day-to-day duties such as cleaning as well as earning fees from letting out apartments in a strata-titled building.

The value of a management rights business is generally calculated by applying a multiplier to its annual profit.

ResortBrokers has sold the management rights to both established complexes and off the plan developments with a range of between $112,000 and $4.9 million.

Recent off the plan sales overseen by ResortBrokers have included the 17-level Allure tower at Chevron Island on the Gold Coast and Rochedale Outlook with its 84 townhouses south of the Brisbane CBD.

The established complexes included Adelphi Springs and South Hamptons at Southport, The Foundry at Woolloongabba and Stuart Patterson Lodge at Brassall in Ipswich.

The sales featured two separate multiple complex portfolios of six and four apartment complexes which were both caretaking only businesses.

Mr Eades noted “bundled” deals of smaller assets were gaining popularity.

“The travel bans and restrictions has naturally led to an increased interest in permanent complexes, as these often have tenants on long term leases,” he said.

“Demand for permanent management rights will always remain a constant as they provide a more regular cash flow, even during a crisis like this one, but the short term accommodation market is also starting to bounce back.

“There are some great opportunities in the short term market.

"For buyers who are in a good position with cash available, then the next few months could present some great value.”

Mr Eades said the biggest challenge now facing the accommodation industry was how valuers would respond to the coronavirus crisis in their assessment of the loss of income incurred by operators during the shutdown period.

“The criteria of valuers will go a long way to determining how quickly we can return to pre-CV volumes of transactions," he said.

"Liquidity is key and until this is over, every deal will need to be looked at individually and on its own merits.

"The flow of credit from lending institutions will also play a major factor in the industry in the short and medium term."