25 May 2020
Words
Gareth Closter
Why the buyer profile for management rights in Brisbane is changing
I've been with ResortBrokers for five years now, selling management rights in Brisbane City and northern suburbs. Over that time have seen a number of changes and trends in the industry. And I thought I'd give you some information on the one that I see as the biggest game changer for the industry - the changing face of managers.
Traditionally, and when I started in the industry, it was founded on “mom and dad” couples buying these businesses as a gateway to retirement and just spending their last couple of years, working part time, getting a salary, and then selling the business and retiring.
Typically, they lived onsite. They were generally in unit one and had an office attached. Most people don't realise this, but the reason they had that office attached, was because people would come and knock on the door to come and pay their rent and they'd pay in cash. What we've seen in recent times is also the advent of electronic signing. So previously they'd also come to the office to sign a lease or to renew their lease. However, now everything's done electronically via electronic payments of rent and electronic exchanges of emails for their leases and other documents.
What this has meant is that in the last development cycle, and over the past 10 years, we've seen many businesses introduced to the market that are what we refer to as “business only”.
These businesses don't have any real estate and a lot of them don't even have an office. Many people question this and wonder why they don't have an office. Quite simply, it's not required for the day-to-day operations of a management rights operator until you have more than 150 units.
Also, what we've seen is a real change in the profile of people buying management rights. So we've gone from having the “mom and dad” couples who wanted to buy somewhere in a specific area so that they could have their child in a certain catchment for this school, or for other reasons such as needing a three bedroom unit. So they would buy businesses based on their accommodation needs. Whereas these days, we see people owning somewhere between two and up to 15 management rights, where they amalgamate them.
There's also many Chinese buyers who've entered the market. And there's also syndicates. All of those parties are really driven by the financial return and don't care where it is as long as the real estate requirements are not overly strong. What has this done? It's meant our buyer pool for management rights has never been stronger.
Every time we put good properties to the market, we get multiple offers and as far as the multiplier range is concerned, we've even been surprising ourselves this year.
Recently, I sold a business with a net profit of just $81,000 per annum. We put it to the market at a five times multiplier and we achieved five and a quarter, which was a result that we typically never would have seen, particularly if it had the real estate attached.
So you might be surprised particularly in that business only space at what your business is worth. We're happy to let you know and give you our thoughts on that. Or if you need any other help, we're always here.
Gareth Closter
0423 182 766
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