September 12 Resort Brokers Informer by iformat

INFORMER

No. 68 | September 2012

Australiaâ&#x20AC;&#x2122;s No.1 tourism & business

CHINA set for significant investment

This month we look at the fast emerging Chinese market and the potential impact on the tourism and accommodation sector

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the Queensland – NT border for $6.5, and a 53-room Muswellbrook motel project for $10.4m. Big things are also happening in the management rights market. Recently settled was the sale of Sailfish Cove on the Gold Coast, by Glenn Millar and Alex Cook. And we have a few more under contract... You’ll read more inside about the positive outlook for management rights as we continue our series on the growth of this vital industry. Resort Brokers is scaling up our specialist management rights division in preparation for big things. A new agent has joined us on the Gold Coast, in response to rising enquiry, and we welcome David Janett, from a management rights background, to look after the Southside of Brisbane. A fantastic new Informer feature is our series on the many faces of the accommodation industry. In this issue, we profile one of the biggest names in Top End tourism, Foxy Robinson – a great bloke whose working class origins didn’t stop him from doing big things and making big money.

Time to think

BIG!

’ve just been reminded of something Donald Trump said: “If you’re going to be thinking, you may as well think big.” It occurs to me that ‘thinking big’ and ‘big thinkers’ are the common themes running through this edition of The Informer.

Ian Crooks

MANAGING DIRECTOR

COVER STORY: China’s middle class grows more affluent and more adventurous by the day. As their horizons expand, Australia is in the box seat to provide the Chinese – already our most valuable inbound tourism market – with bigger and better tourism experiences and investment opportunities. Get ‘China ready’. The red flag is set to green light Australian tourism growth.

Our cover story, arising from my inclusion in a government-led trade mission to China, looks at the biggest tourism and business market to ever present itself to Australia. You can’t get any bigger than China! We need to expand our thinking, scale up our tourism infrastructure and make a ‘big’ effort to maximise the potential of this enormous market. I’m convinced it will reignite key tourism centres, particularly Far North Queensland and the Gold Coast. An imminent change to our visa system is also set to spark a surge of foreign investment in the $5-10 million range, particularly from China. And it will come at a time when this market is already firing up. Resort Brokers is increasingly active in this bracket. We’ve just sold some bigger properties including Brisbane’s prime airport motel, Pegasus Motor Inn, for $9.5m, the Mercure Maitland in the Hunter Valley for $9.2m, and CBD Executive Apartments in Rockhampton for $6.8m. Large properties just listed with us include the ‘Raffles of the North’, The Hotel Cairns, for $10.5m, Bowen’s Port Dennison Motor Inn for $6.4m, the Barkly Homestead on

Finally, having negotiated nearly 40 years in this industry, through three major booms and busts, I’m always asked the big question: ‘where are we in the current cycle’. I reckon buyers are now itching to make their move, as the climb upward begins. You’ll find a great article by Alex Cook on page 20 looking at what is motivating buyers. As the upswing comes, Resort Brokers has launched a unique incentive package for vendors who list with us exclusively. Offering valuable marketing bonuses, it underlines our commitment to work with you in a partnership. Resort Brokers backs sellers with skin in the game. Remember, we’re not ‘listing agents’. We are selling agents! Please send your feedback to: carlacook@resortbrokers.com.au or PO Box 5004, West End Q4101.

INSIDE MANAGEMENT RIGHTS SERIES (cont.) 16 WHAT DRIVES YOU TO BUY

AGENT & AREA PROFILE

FEATURE: CHINA INVESTMENT

FACES OF THE ACCOM. INDUSTRY

INDUSTRY SPECIALISTS

EXCLUSIVE LISTINGS

TRADE PAGE

RELIEF MANAGERS

RESORT BROKERS DIRECTORY

RESORTBROKERS.COM.AU 3

he leasehold offering of a family orientated beautifully maintained motel, comprising 18 motel rooms, and one three bedroom apartment, with a great combination of queen and king sized bedrooms, family suites, executive spas and a disabled Unit. Reverse cycle air-conditioners in all rooms, including Austar television, DVD player and complimentary DVD hire, together with microwave and mini bar. Delicious country style cooked breakfasts are available daily and evening room service 7 nights per week. The vista bar and lounge is a fresh modern and comfortable place to enjoy a drink and meal. We offer snacks and main meals 7 nights per week, served either in the restaurant or directly to your room. A large variety of local and imported beers, quality wines and top shelf spirits ensure there is something for every taste and budget. • Prestige Warragul Views with revenue growth of 31% in 2011/12

Prestige Warragul Views with revenue growth of 31% LEASEHOLD OFFERING • Strong growth region, one hour from Melbourne by car or train • Beautiful motel comprising 18 motel rooms and 1 x 3 Bedroom Apartment • Reverse cycle air-conditioners in all rooms together with microwave and mini bar • Population Growth of 4% Per Annum as new Industries continue to arrive. • Warragul is expanding rapidly, with only 3 Motels and 44 Rooms, occupancy is in the High 70s • The Vista Bar and Lounge is a fresh modern, comfortable place to enjoy a drink and meal • Snacks and main meals are served 7 nights per week either in the restaurant or room

Tony Payne EXCLUSIVE AGENT Mobile: 0418 329 421 Melbourne office: (03) 9347 3100 Email: tonypayne@resortbrokers.com.au

Nett profit: $210,958 Turnover: $518,932 PRICE: $695,000 REF: LH001988

4 RESORTBROKERS.COM.AU

Hotel Furniture Specialists

1300 500 815

admin@resortinteriors.com.au

www.resortinteriors.com.au

ing Reef Resort is located directly adjacent to Kurrimine beachside with direct access to the beach. It is a truly remarkable location and a magnificent place to be! The King Reef Resort is located an hour and half South of Cairns on 1.57ha of land covering over 160m of beach frontage. The Resort hosts a tavern with general license, 10 gaming machines, bar & restaurant (130 seat), bottle shop, commercial kitchen, TAB & KENO overlooking the coral sea. The accommodation consists of four motel units, five double bedroom apartments, six single bedroom apartments (located over two levels) and five self contained beach side cabins, 64 site caravan park and a 3 bedroom beach front manager’s residence. The entire park has been fully refurbished and is exceptionally presented. The current vendors have traded for 10 years and have decided it is time for someone else to come and enjoy a spot like no other. The Resort has a solid trading history and is definitely worth a look!

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All angles covered MAGNIFICENT RESORT SOUTH OF CAIRNS

Kurrimine Beach is hidden away from travellers and tourists - so that is a perfect reason to visit. The town is located north of Mission Beach and south of Innisfail. It is a very popular place for fishers from all around the tropical north and the beach stretches for many kilometres and a large reef, King Reef, is located just off shore. Kurrimine Beach is untouched by major development and sustains the old-world flavor of the tropical north. • 15 motel units – 4 motel studios, 5 double bedroom apartments and 6 single bedroom apartments • 5 self contained ocean front cabins 4 brand new, other cabin refurbished • 3 bedroom beach front residence • The entire park has been completely refurbished and renovated

Shane Mullins Mobile: 0447 185 001 Brisbane office: (07) 3878 399 Email: shanemullins@resortbrokers.com.au

Nett profit: $699,000 Sales Price: $6,000,000 + SAV

REF: FH002024

Forced sale - 4 star freehold MASSIVE UPSIDE FOR NEW OWNER /OPERATOR

Ian Dore EXCLUSIVE AGENT Mobile: 0412 752 238 Brisbane office: (07) 3878 399 Email: iandore@resortbrokers.com.au

Net Profit: $179,673 (adjusted) PRICE: $1,375,000 REF: FH001968

his stunning 4 star Going Concern offers huge upside development potential including, but not limited to, the approval with working drawings for an additional 9 rooms! Being located high on the beautiful Alstonville Plateau in northern New South Wales affords the Motel a beautiful year around climate, magnificent rainforest scenery and an ever changing hinterland outlook. The rooms have luxurious private facilities, are spacious and quite, and all have a magnificent outlook onto the manicured gardens. This is a fantastic near new Motel and while small and easy to operate, it is as good as you could hope to find anywhere!

Evening meals are offered as an option in the sub-tropical dining room while there is shopping, restaurants and a hotel adjacent. The Motel enjoys a strong corporate clientele with repeat business as it is highly visible and easily accessible, just off the Bruxner Highway at Wollongbar. On the beautiful Alstonville Plateau at Wollongbar, northern New South Wales. Only 10 minutes away is thriving Ballina, a City undergoing major transformation with the Pacific Highway diversion away from the town centre. Ballina located at the mouth of the Richmond River and boasts many new boutiques, trendy cafes / restaurants, popular surfing beaches, licensed clubs with entertainment and fantastic fishing / boating in the Richmond River. It is also only 15 minutes away from Lismore. • Presently 11 luxury private ground level suites all with polished timber flooring • 4 Star Rating • Very modern large three bed manager’s unit, two bath, lounge, dining and spacious eat-in kitchen and private outdoor patio • The approved plans to develop an additional 9 suites are included in the sale RESORTBROKERS.COM.AU

EXPRESSIONS OF INTEREST

orizons Resort a prestige 4 star tourist apartment resort and conference complex on the shores of Lake Jindabyne is a resort for all seasons. Jindabyne has a population of 3,800 people and is the principal accommodation and retail centre for visitors to the nearby Kosciuszko National Park Ski Resort areas. Whilst the tourist industry is highly seasonal with the greatest demand for accommodation during the four month ski season from June to September, Horizons Resort is also a popular summer destination for conferences, weddings and events. Unlike traditional management right sales where there is a letting agreement via the body / owners corporation, this is not the case here as the letting arrangements are in perpetuity and direct with the individual Owner / Investors with each side having a ninety (90) day break clause. Similarly, presently there is NO traditional caretaking maintenance agreement or responsibility attaching to this sale as this

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4 star apartment resort & conference complex ON LAKE JINDABYNE, ADJACENT TO SNOW FIELDS work is performed by another company, and as a consequence no income is presently received from the body / owners corporation, however the potential exists to pick-up this contract. • 1 20 self-contained residential apartments, 80 of which are in the letting pool • 4 star facilities incl. indoor heated swimming pool, outdoor tennis court and gym • Offers three separate conference rooms catering for up to 250 people and features a tented function room perfect for any special occasion • Huge occupancy upside in summer • Confidentiality agreements available on request before full financial details will be provided

Ian Dore EXCLUSIVE AGENT Mobile: 0412 752 238 Brisbane office: (07) 3878 399 Email: iandore@resortbrokers.com.au

Residence & freehold titles: $2,700,000 Business title: $295,000 PRICE: $2,950,000 REF: MR002010

Editorial

The ‘Raffles’ of the north 82 OCCUPANCY - GREAT RETURNS!

Ian Crooks EXCLUSIVE AGENT Mobile: 0411 171 648 Brisbane office: (07) 3878 399 Email: iancrooks@resortbrokers.com.au

Nett profit: $1,491,000 Turnover: $3,593,676 PRICE: $10,500,000 REF: FH002027

The award winning Plantation Bar & Grill boasts excellent in-house and local patronage, while a mix of conference and function rooms comfortably cater from small meetings to large conferences. After eight successful years the current owner has decided to retire!

elegantly appointed and refurbished, this hotel boasts 92 spacious guest rooms including 40 suites together with an award winning restaurant, conferencing facilities and a range of features synonymous with a 4 star resort hotel.

This hotel in our opinion is one of Australia’s best buys. With the recent announcement of triweekly flights from both China Southern and China Eastern we believe Cairns will return to its preeminent position of the 1980’s making it one of Australia’s key tourism destinations.

It is located on a large prominent site in the heart of the Cairns accommodation precinct and enjoys three street frontages. It is just one block from the Esplanade and 500 metres from the main restaurant and retail district, ensuring it is well patronised by a wide range of hotel guests and travellers.

• 4 star rated • Attractive appearance with lush tropical gardens • 92 spacious guest suites consisting of 51 Plantation Rooms, 1 Plantation Spa Rooms, 36 Tower Suites and 4 Penthouse Suites • Centrally located

The Hotel incorporates traditional Queensland architecture with sweeping verandah’s and tropical surrounds.

Don’t miss this opportunity! RESORTBROKERS.COM.AU

Have the freedom to live where you like with no requirement to live on site. Live in either the beautiful three bedroom townhouse or reside off site and rent it out. Simply caretaking only with no letting worries. this lovely little complex consists of 33 units with a mix of duplex’s and freestanding townhouses. The agreement is on the accommodation module with a 3% or CPI whichever is higher. Conveniently located near Carindale Shopping centre & public transport with a childcare centre in the street. Amazing potential for a letting business with thirteen units being managed by outside agents.

Live off site - caretaking only FREEDOM WITH AN 11.7% RETURN ON INVESTMENT Ideal as an add on to an existing complex, newcomer to the industry or for someone working already looking to make some extra income. An accommodation module with twelve years on the term. Very manageable caretaking workload for income, first to see will buy.

Nett profit: $62,544 (projected) PRICE: $529,000

• Body corporate salary $41,544 • Agreement increasing by 3% or cpi which ever greater • Healthy sinking fund

Email: timcrooks@resortbrokers.com.au

Southside gem MANAGEMENT RIGHTS COMPLEX Nett profit: $133,000 PRICE: $935,000

Steve Campbell Mobile: 0407 220 668 Email: stevecampbell@resortbrokers.com.au

David Janett Mobile: 0404 204 672 Email: davidjanett@resortbrokers.com.au

Brisbane office: (07) 3878 3999 Ref: MR002032 10 RESORTBROKERS.COM.AU

This great little complex of 38 town houses is located in Calamvale, on the south side of the city, adjacent to Sunnybank Hills. This complex is easily run by one person with a manageable caretaking workload. There is an annual 5% pay increase and 23 years left to run on the agreements. The managers unit has been recently renovated with air con throughout. Would suit a young family or possibly someone looking for a great second income or would make a great starter for the first timer.

Tim Crooks EXCLUSIVE AGENT Mobile: 0422 208 450 Brisbane office: (07) 3878 3999

Ref: MR002033

This is probably the best small management rights business in the very popular south Brisbane and there is potential to increase your income. Be quick you won’t be disappointed !! • 38 in complex with 29 in the rental pool • Close by to all amenities including shops, buses and train station • Manageable caretaking work load • 5% increase or CPI – what ever is the greatest • 23 years on term • Co-operative committee • Recently renovated managers residence

Take a step back in time LEASE A HISTORIC PROPERTY IN THE BLUE MOUNTAINS Nett profit: On request Turnover: $300,000 PRICE: $150,000

Shane Wynhoven EXCLUSIVE AGENT Mobile: 0424174592 Sydney office: (02) 9904 8224 Email: shanewynhoven@resortbrokers.com.au REF: LH002006

A superb Blue Mountains Heritage property, comprising of 12 double rooms plus 2 sunlit cottages with district views of the surrounding area. The property has been beautifully decorated in keeping with the era with historic artwork and period pieces setting the mood for a peaceful escape from the city hustle and bustle. Set on parklike grounds of over 4,000sqm, Leura House is a showpiece of the area and can cater to weekend visitors, international tourists, weddings and conferences.

This stunning property is a true bargain and a wonderful opportunity to operate one of the Blue Mountains historic gems for only $150,000. It truly is as good as it looks – priced to sell. • Historic heritage listed property • 12 rooms and 2 cottages • 3.5 Star AAA • Parklike grounds • District views • Conference facilities • Licensed restaurant available (currently inactive)

REF: RESORTBROKERS.COM.AU 11

Editorial

Contract dates and stress reduction tips MIKE PHIPPS - MIKE PHIPPS FINANCE

on, to use the legal jargon, time is of the essence. Other than the contract date there are four other dates which are critical. The verification date, the finance date, the due diligence date and the settlement date. The relationship between all of these dates tends to determine the stress levels and probability of heart attacks among all of the parties involved in the purchase. The first comment I would make is that occasionally contracts get signed and dated by the purchaser prior to signing by the vendor. If the vendor takes a couple of days to sign then those days are immediately lost in the process. Once the contracts are signed the purchaser will instruct his solicitor, accountant and banker to get cracking. Discussions with industry professionals combined with my own stats indicate that the verification report and the legal diligence will take 14 days on average. These time frames are achievable provided everything goes to plan and there are no hitches along the way. A recent emerging trend around lack of preparation by vendors in terms of financial records concerns me somewhat but I digress. And so, to the poor old bank manager. He needs all these reports in order to assess the deal and make a decision. If a valuation is required to support the finance application then the valuer will want a copy of the accountant’s verification report. Let’s assume that the purchaser instructs all parties as soon as the contract is signed and dated by the vendor. This rarely happens in reality but for the sake of the exercise let’s pretend it’s a perfect world !

Generally I try and write these articles from an industry commentator point of view. Otherwise it’s too easy to start thinking like a banker and generally that makes for pretty boring reading. Having said that, recent events have caused me to reflect on the lender’s plight when dealing with management rights purchase contracts. While I acknowledge that the chances of anyone feeling sorry for the banks is 12 RESORTBROKERS.COM.AU

remote we really need to have a think about current practice in respect of critical contract dates. I’m sure most readers are familiar with the general contractual arrangements and time lines for management rights purchases. Essentially there’s two contracts, one for the business and one for the manager’s unit. The contracts are signed and dated and the clock starts ticking. From then

The lender will then request a copy of the verification report from the accountant. On average this will turn up in 14 days. At the same time the lender will also request that the purchaser’s solicitor provide confirmation that all is well with the legal due diligence. Again, this process will take about 14 days. So, in a perfect world the bank will have copies of verification and due diligence reports in 14 days from the date of contract. Provided no valuation of the management rights business is required the lender can then complete assessment of the deal, document the proposal, make a final approval decision and provide the purchaser with a letter of offer. This shouldn’t take more than 5 days dependant on business volumes at the time. Having said that it’s important to understand that time frames between finance approval and production of Letters of Offer can vary greatly between lenders. No one will go to unconditional status without a physical Letter of Offer to hand so we commonly see lenders confirming approval but then needing 3 to 5 business days to produce the Letter of Offer.

Editorial

So, in a perfect world the entire process has taken 19 days. If the contracts have 21 day finance clauses this leaves 2 days leeway. During this time the purchaser and their solicitor need to consider the bank’s offer, formally accept the terms and conditions and notify the vendor’s solicitors accordingly. Based on these timeframes it would seem that a 21 day finance clause in a management rights contract leaves no room for delays, public holidays, transaction complexity or work volume impacts at any point in the process. Now, let’s consider the same scenario with the added impact of a management rights valuation. The valuer simply can’t complete the report without the accountant’s verification report. It’s true that a substantial amount of work and research can be completed by the valuer pending receipt of the verification report. In the real world that’s exactly what happens. However, the valuer will still require time the study the report and incorporate the outcomes into the valuation assumptions. The final formal valuation report is then completed and provided to the lender. In that theoretical perfect world this will add at least 5 to 7 on to the process. Suddenly that 21 day finance clause is looking a bit shaky.

Who owns your domain name? BY FRANK HIGGINSON - HYNES LAWYERS The content of this article might actually surprise a few people. We all know that the internet is causing rapid change in many business sectors. A scan of any daily news source will reveal the consequences of the changing habits of consumers, and the businesses (particularly retail) that are suffering as a result.

As these scenarios demonstrate, the actual finance approval process takes about 5 days maximum. However, the bank relies on a number of other parties completing their jobs before a final approval can be achieved.

All of this is making the value and goodwill in your domain name incredibly important to the future of your business. At law you do not actually own your own domain name. This is somewhat terrifying but true.

And here’s the rub. When an over enthusiastic vendor pressures the agent or his lawyer to put a short finance clause in a contract guess who takes the rap. No matter where in the process the time frames blow out inevitably the net result is a finance date extension request. In fact I’ve even seen other service providers in the process request finance extensions to give them more time to complete their part of the overall job. This reflects poorly on the lender when in fact the ball has been dropped further up the line.

The government has set up a body, known as auDA that legally ‘owns’ all domain names. When you register a domain name through a registrar (ie a domain name provider), you receive a right to use the domain name, and the registrar acts as a ‘broker’ between you and auDA.

So, what to do ? It’s pretty simple. Management rights sale contracts should have a minimum 28 day finance clause. Anything less is simply inviting stress, conflict and ill will. An acknowledgment of the commercial realities and timeframes by all parties would solve most of the problems. Oh, and don’t think you’ve dodged a bullet if you are selling a motel. Similar time frames apply given current lender guidelines for the same sort of financial due diligence reports we have traditionally see in management rights. Motel valuations in regional areas also seem to taking longer than usual these days.

Providing you pay your yearly fees, you receive the exclusive right to use that domain name. As the saying goes, possession is nine tenths of the law and this is especially the case with domain names, that is, as long as you have it you can use it. Often people will know you by your domain name. If you’ve spent many years building up a brand linked to a domain name and then lose control of the domain name, the loss can be catastrophic, particularly if the domain name ends up in the hands of a competitor or someone that would otherwise cause your business damage. The same applies to transferring a domain name to another person (due to business sale, insolvency, restructuring, etc) and if that transfer goes wrong, you may lose

control of that domain name and all the goodwill and reputation attached to it. Because you do not legally own the domain name, you will not have any right to automatically recover it if something does go wrong causing you to lose control. The goodwill in domain names in a management rights context is growing. This is particularly the case with short term and corporate buildings, although they still benefit permanent complexes (particularly large ones). It still surprises us when acting for a client purchasing a management rights business how many times the vendor (or their lawyer) has not procured the transfer of the domain name when the business was purchased by them. In many cases, recovery of a lost domain name may simply be impossible. Having a registered trade mark that matches the domain name may assist in recovering the domain name or preventing anyone from using it in a way detrimental to you, but it is not guaranteed. Where the domain name can be recovered, doing so may be difficult, time consuming and costly. The simple solution is to ensure that you treat your domain name like a child. Care for it, understand the magic dates (renewal / birthday dates) and invest in it because it is very valuable to you. The relative good news is it shouldn’t get you out of bed crying at 5 in the morning because of a bad dream! Just make sure your bad dream isn’t the loss of control of a valuable business asset of yours. We have a number of very experienced intellectual property and information technology lawyers if you need help on any of these issues. RESORTBROKERS.COM.AU 13

n offer is the leasehold interest of a very well presented 24 unit AAA 3.5 Star motel in Toowoomba. The motel has been painted inside and out and with each room fitted with huge flat screens TV’s and new bedspreads.

The property is complimented with a large owners residence consisting of three bedrooms, a bathroom, combined lounge and dining / kitchenette located on the second level. For ease of operation there is a comfortable lounge off the reception, that doubles as a dining area for the vendors, as it is has access to the commercial kitchen. To service the clients of the motel, a 45 seat restaurant is currently run by the vendors however it is not promoted to the off premise / general public diners. The use of the popular Tancredi Gourmet food system negates the need of having to employ a chef. The restaurant is not promoted by the current vendors and at this stage it equates to less than 10% of the turnover. The majority of the turnover comes from the high 14 RESORTBROKERS.COM.AU

Leasehold opportunity in Qld largest provincial city GOOD RENT RATIO profit accommodation side of the business, however this is not to say that the restaurant could not be fired up and achieve greater profits from the food side of the business. Good forward bookings and situated in a strong motel city augers well for a lessee.

Lindsay Cooper EXCLUSIVE AGENT Mobile: 0418 711 047 Brisbane office: (07) 3878 3999 Email: lindsaycooper@resortbrokers.com.au

Fantastic presentation is assured and well worthy of inspection , just 1hr 20 from Brisbane city you wont be disappointed. • Long lease 21 years • Large lessees accommodation • Situated in Qld largest Provincial City • 1 hour 20 minutes Brisbane • Closest City to the Surrat Basin • Good forward bookings • Good rent ratio

Nett profit: $252,965 Turnover: $585,000 PRICE: $875,000 REF: LH002026

4.5 star luxury beach resort HIGH PROFIT - LOW MULTIPLIER - NORTHERN NSW

Ian Dore Mobile: 0412 752 238 Brisbane office: (07) 3878 399 Email: iandore@resortbrokers.com.au

amba is the ideal holiday and lifestyle destination sitting at the mouth of the mighty Clarence River on the beautiful north coast of New South Wales. It is just 1.5 hours north of Coffs Harbour and 1.5 hours south of Byron Bay The year-around climate is perfect and is famous for family holidays including swimming, golfing, surfing, fishing, boating and just relaxing!

Nett profit: $322,020 Turnover: $733,194 PRICE: $2,077,000

The Resort is a prestigious beachfront 4.5 star-rated property which includes a selection of 37 luxuriously appointed 2 bedroom, 3 bedroom, penthouses, villas and townhouses set in manicured landscaped surroundings. Themed in a contemporary Mediterranean style, The Sands Resort is situated right alongside the beautiful pristine Pippi

Beach in central Yamba. The resort is a short stroll away from Yamba’s town centre, restaurants, coffee-cafes, pub, clubs and serene fishing spots. The apartments, villas and townhouses are appointed with elegant and modern furnishings and fully equipped kitchens, while all wrap around luxury walk-in pools, hot spa and bbq entertaining areas. The detached Managers Residence includes two spacious bedrooms, main ensuited plus separate main bathroom, spacious entertainers kitchen and separate lounge and dining rooms. Also on title are two tennis courts, a large heated swimming pool, a very generous store room, three station back office, reception with open plan arrival area and coffee lounge. Facilities include: • 21 metre lap pool, outdoor entertaining areas and barbeques • Heated pool and outdoor heated spa • Tennis courts • Gymnasium pass • Coffee shop at reception • Opposite Pippi Beach & short stroll to shopping and other beaches RESORTBROKERS.COM.AU 15

lobbyists from the Unit Owners Association of Queensland (UOAQ) and instigated by Mr Bleijje’s ousted predecessor Paul Lucas, has been the subject of extensive comment and debate.

Editorial

In what must be regarded as particularly fortunate coincidence for the management rights industry, Jarrod Bleijje started his career as a solicitor at a Sunshine Coast legal firm, specialising in commercial law and management rights. Previously, the impending review of the management rights industry had seemed to be little more than a misguided and politically-motivated endeavour, brought about by a fading politician hoping to win votes. The outcome was anyone’s guess. Thankfully, stakeholders can now be confident that the review will be assessed by someone with a true understanding of the industry and a genuine desire make rational decisions.

Management rights in safe hands ALEX COOK - RESORT BROKERS AUSTRALIA Queensland’s new Attorney-General heralds a fresh government stance on management rights. Nearly 6 months has now passed since Anna Bligh’s Labour Party was resoundingly defeated by the LNP at the Queensland state election. Although many would argue that it is still too early to pass judgement on the policies of the new state government, it is apparent that the LNP is already having some positive impact in some areas. Not least in the sector of management rights, and largely due to a

bright young political talent by the name of Jarrod Bleijje. Jarrod Bleijje was first elected to the Parliament of Queensland in 2009, representing the Sunshine Coast electorate of Kawana. In 2010, he was promoted to the Shadow Ministry as Shadow AttorneyGeneral and Shadow Ministry for Justice, a role he held through to March’s state election. As Queensland’s new attorneygeneral, he has inherited a review of the state’s management rights system. This review, prompted by a minority of

Positives emerge

The first opportunity for many to hear Mr Bleijje’s thoughts on this contentious subject came at a recent public seminar organised by Archer’s Body Corporate Management in Mooloolaba. The sizeable audience was made up of variety of interested parties, including members of the UOAQ, resident unit managers, industry solicitors, developers, brokers and financiers. Except for a handful of vociferous management rights opponents from the UOAQ (including their chairman Wayne Riley), the majority seemed eager to receive reassurances about the future of the management rights industry and to support the man they hoped would champion its defence. For those that fell into this camp, Jarrod Bleijje did not disappoint. Although maintaining a calm composure, Jarrod Bleijje was very clear in his opinions of the review. While he said that he would carefully consider all 217 submissions made to the discussion paper put forward by the previous government, he also

CATIE LANGDON - PART 4 IN OUR SERIES COVERING THE GROWTH OF MANAGEMENT RIGHTS The management rights industry was pumped during the 2000s. Aggressive corporate buying sprees pushed multipliers skywards, and banks were only too keen to keep the river of finance flowing. But we all know what came next.

But the period of pain and readjustment seems now to be largely over, and a consolidated, somewhat strengthened industry has emerged. Reality has returned to the market, says management rights legal expert, John Punch.

for strong, long-term operators to pick-up prime management rights – for example the Picone family at Chevron Renaissance in Surfers Paradise – and use their knowledge to reinvigorate the businesses,” he said.

Last month marked five years since the global financial crisis struck. The accommodation sector, like most, has spent these years dealing with the fall-out. In the wake of the demise of the corporate players, 2010-11 saw more management rights sold under receivership conditions than ever before.

“In many ways, the post-GFC rationalisation affected the industry positively. The lenders who’ve been supportive of management rights over the long term, are still true to the industry, and will provide finance readily, which is not the case in other sectors.

“There has been a build-up of knowledge among the people who have stayed with the industry for the long haul, and now they can see the opportunities.” Arbon Property Management’s Richard Arbon, profiled in the July Informer, and Dave Ruxton of Dreamtime Resorts spring to mind.

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“The shake-out has provided opportunities

stated that a fundamental reform of the management rights industry was not, and never likely to be, a priority of the LNP. “While there may be some flaws and faults in it, the Queensland system of on-site caretakers is a good system. Other states are looking to copy our model,” Mr Bleijje said. “Caretakers are businesses and for them to have successful financing of businesses, caretakers need to have secure, long term contracts,” Mr Bleijie said. These words will come as a significant blow to the UOAQ, who have set themselves the agenda of achieving nothing less than a complete overall of the management rights industry. Their suggested policies are drastic, rambling and extensive, with the most noteworthy being the limitation of caretaking / letting agreements to 3 years and the prohibition of extending or ‘topping up’ agreements. As any stakeholder in the industry knows, security of tenure is an With public companies no longer dominating the market, the door has also opened too for partnership and syndicate ownership models. “People like Steve Burton of the PCS Finance Group and Mark Ryall of MRM Finance have been doing it – marrying up investor-managers on the ground with passive private investors – which provides the wherewithal to buy high value buildings.” Mr Punch also observed that the post-GFC slowdown in the development of new apartment projects had allowed existing operators to re-group and build their businesses without pressure from new competition. The durability and resilience of the industry, he says, is manifest in the participation of management rights owners in their peak industry body, ARAMA. “Another positive has been the growth in the strength of ARAMA. It now presents a very strong voice and solid industry base to the public and to government. “ARAMA has developed to a point where, on the Gold Coast, in Brisbane and on the Sunshine Coast, it is not unusual for monthly get-togethers to attract 150 people, demonstrating a very organised and supportive industry,” he said. “We are seeing many more long-term management rights people – those who tell me they’ve had their building for eight or 10 years. Turnover has reduced and this adds to the strength, stability and expertise of the industry.” Despite the growth and consolidation, probably 80 per cent of the management rights industry is still based in Queensland. This owes largely to the lack of supporting and enabling legislation in the other states. “We are still in a position where Queensland

essential tenant of management rights. As explained by Nigel Corne, a commentator on Accomnews.com, a 3 year term will ‘create a situation where the manager has no asset in the business and (no incentive) to improve the ongoing yield, to the detriment of all stakeholders. This promulgates a short term business strategy by Caretakers and will only appeal to less professional people’. Moreover, it must be remembered that the vast majority of management rights owners are ‘mum and dad’ operators who have invested their entire life savings in their business. By prohibiting the extension of caretaking / letting agreements, these owners would be faced with a situation whereby their investment would devalue day-by-day, year-by-year. By reducing the maximum length of agreements to 3 years, the value of their investments would effectively be wiped away overnight. It is the only state providing a strong legal framework for the industry,” Mr Punch said. “Other states have made some effort to follow the legislative lead of Queensland, but they have a long way to go.” He said issues such as agent licensing and letting agreement terms had not been resolved satisfactorily outside Queensland. “I’m very pleased to see the change of government in Queensland appears to have also allayed the recent potential threat to our laws which reared its head in a discussion paper issued by former Attorney General Paul Lucas,” Mr Punch said. “New Attorney General Jarrod Bleije has been reassuring, saying current laws are well balanced and there will always be responsible legislation in Queensland.” Less supportive and understanding, however, are Federal bureaucrats seeking to standardise various regulatory systems across the nation. Ever the crusader for management rights, John Punch is now advocating strongly on two Federal fronts. The first relates to the National Occupational Licensing System (NOLS), which is about to nationalise real estate licensing. “Because other states have no knowledge of or provision for Residential Letting Agent licenses, we must fight to ensure Queensland’s system is catered for in the nationally-based legislation,” he said. The second issue concerns a Federal push to change building classifications under the Building Codes of Australia. At contention is whether Class 2 buildings (multi-unit) are suitable and safe for use as tourist accommodation. “It is ludicrous to suggest any change to Class 2 permissible uses,” Mr Punch said. “In Queensland, there has never been an incident of any Class 2 building being unsafe. So why change anything? We must

doesn’t take a genius to work out that this would simply be unjust, not to mention what the financial institutions that have funded the growth of the management rights industry would have to say on the matter. For these reasons, it came as a great relief to the numerous stakeholders present at the seminar (with the obvious exception of some members of the UOAQ) to hear Jarrod Bleijje calmly and succinctly expressing his confidence in the industry and his belief that reform is unnecessary. ‘It is refreshing to see a minister supporting a successful industry of small business’, comments Nigel Corne. Personally, I believe many will feel that the management rights industry is now in safe hands (at least until the next election) and that they can once again start planning for the future. This can only be a good thing.

Editorial stand our ground and fight to retain the status quo. “Thank goodness we have strong industry organisations such as tourism authorities and ARAMA who are making sure politicians get a real perspective. There are promising signs the politicians are receptive and amenable.” So, from this solid base, where to now for management rights? According to Resort Brokers and John Punch, the future looks very strong for the industry as serviced apartments take an increasingly large share of the accommodation market. In the decade from 2001 to 2011, the number of room nights sold in serviced apartments grew by 72%. Australian Bureau of Statistics figures show, based on earnings, serviced apartments now command 26% of the accommodation market, level with motels (26%) and fast closing in on hotels (46%). According to IBISWorld, the estimated value of the serviced apartment sector in Australia is $8 billion. “There is a growing acknowledgement by hotel groups that management rights is a good market for them to be in,” Mr Punch said. Next edition, we will look in detail at the serviced apartments sector, which one industry analyst has forecast will outperform the hotel sector over the next three years. To catch up on previous articles in this series, go to http://resortbrokers.com. au/informer-archive.htm

RESORTBROKERS.COM.AU 17

he leasehold interest of Quest Studios East Melbourne featuring 38 serviced studio fully self contained apartments. The property facilities include rooftop garden leisure area, intimate courtyard, guest laundry, secure on-site car parking (limited), Wi-Fi internet and i-pod docking stations. The property is a member of the nationally recognised Quest Serviced Apartment Group under the Quest Studio Brand. It is ideally positioned to achieve substantial growth in occupancy, income and room rates. Situated in the vibrant suburb of East Melbourne within 2 kms of the Melbourne CBD. East Melbourne is a prestigious and historic suburb within easy commuting and walking distance to the city and Bridge Road with its gourmet supermarkets, exclusive fashion stores and fine dining and casual restaurants appreciated by corporate, leisure and family clients. Melbourne is regarded as the sporting capital of Australia. Quest East Melbourne is located across the road from the iconic MCG & within 1km of Rod Laver Arena, Hisense Arena & AAMI park.

18 RESORTBROKERS.COM.AU

Corporate apartment leasehold business WITHIN 2 KM OF MELBOURNE CBD • 38 serviced studio apartments. All apartments have fully equipped kitchenettes, bathroom and living/ dining area • The property underwent a full redevelopment and refurbishment in 2007 including new carpets, curtains, lighting, bedding and fresh painting including common areas and stairways • In August 2012 Quest launched a new brand category Quest Studios. Quest East Melbourne is set to benefit from this launch • Opportunity for hands on franchisee to expand on current occupancy and incomes • Long Leases - 20 & 25 years from August 2012 • Occupancy 2011/12 - 58%

Jim Chapman EXCLUSIVE AGENT Mobile: 0413 444 782 Melbourne office: (03) 9347 3100 Email: jimchapman@resortbrokers.com.au

Tony Payne EXCLUSIVE AGENT Mobile: 0418 329 421 Melbourne office: (03) 9347 3100 Email: tonypayne@resortbrokers.com.au

Nett profit: TBA Turnover: $1,345,990 PRICE: $475,000 REF: LH001993

4 star Burleigh beachfront 80% OCCUPANCY WITH RESORT FACILITIES

Ian Dore EXCLUSIVE AGENT Mobile: 0412 752 238 Brisbane office: (07) 3878 399 Email: iandore@resortbrokers.com.au

pposite prestigious Burleigh Beach, 4 year old Ambience Holiday Resort is a magnificently presented 4 Star medium rise Beach Resort complex offering absolute Ocean views within walking distance to everything Burleigh Heads has to offer. Apartment range through One, Two and Three bedroom styles, all extremely large, beautifully furnished and offer incredible Ocean, Coastal or Hinterland views.

Net Profit: $394,108 (includes body corporate remuneration)

PRICE: $ 3,100,000 (including unit) REF: MR001984

Burleigh Heads and Ambience Apartments in particular are a true destination location offering a superb Lifestyle with every amenity, dining / café options, boutique shops, entertainment and patrolled surf beach at your fingertips.

The Managers apartment is a spacious 2 or 3 bedrooms, two bathrooms with spa, separate laundry all designed around an open plan living – dining – kitchen layout which leads outside to an enclosed private patio courtyard. Burleigh Heads is all about its famous pristine white sand beach and safe surfing and a renowned family holiday destination! Burleigh Heads is directly in-between Coolangatta and Surfers Paradise offering a wonderful National Park where with some fabulous scenery and a range of wildlife, as well as views of more great Gold Coast beaches. • 93 units (53 in the letting pool) • 80% occupancy • 21 years remaining on term • Facilities include: 25 metre heated pool, spa, heated year around, BBQ and garden court, gymnasium – air conditioned, steam room and sauna

RESORTBROKERS.COM.AU 19

INTRODUCING RESORT BROKERS AUSTRALIA

EXCLUSIVE LISTING PACKAGE At Resort Brokers, we pride ourselves on being selling agents, not just listing agents. When we take a new property to market, we want to make sure it has every chance of not only selling but selling well. In doing this, we recognise the need to enter into a partnership relationship with our vendors. After all, it’s not just us who will be exerting considerable time and effort during the sale process. We’re both in it together, from the moment we list, until the moment we settle. With this is mind, we have developed our new ‘exclusive listing package’, as outlined below. In short, this package means we are willing to put our money where our mouth is. When you as a vendor put your faith in us by giving us an exclusive agency, we will also put our faith in your property by making a significant contribution to your advertising costs. We think it is very important for both parties to have ‘skin in the game’. We can’t say fairer than that!

The package includes • 2 x newspapers adverts • Listed in the ‘exclusive listing’ page in the Resort Brokers’ Informer • 30 day enhanced listing on realcommercial. com.au or realbusinesses.com.au • Special ‘exclusive listing’ highlighting banner on the Resort Brokers Australia website • Included in a monthly exclusive listing e-shot sent to circa 15,000 people in the industry

The Original and still No. 1

Conditions apply. Minimum of 90 days exclusive

2012–2013 changes for small business operators

Editorial

TONY ROSSITER - HOLMANS ACCOUNTANTS EMPLOYEE ENTITLEMENTS Increase to Award Wages and Allowances Fair Work Australia’s minimum wage panel recently handed down its annual wage decision increasing: • The Federal Minimum Wage and Minimum Award Wages by 2.9% – bringing the Federal Minimum Wage to $15.96 per hour; and • Casual loading for non-award covered employees to 23%. These increases, together with the increases to expense base allowances – which increase annually based on the relevant CPI group – take effect from the first pay period from 1 July 2012. With the new financial year just around the corner, employers should review existing wage rates and salary arrangements to ensure that from 1 July 2012 wages being paid to staff are equal to or higher than the relevant rate under the applicable award – or the Federal Minimum Wage. For employers that pay “all up” hourly rates or remunerate staff on a salaried basis, now is also a good time to review pay rates to ensure that when such rates are broken down employees are not being disadvantaged under the relevant award.

Now would be an opportune time for Management Rights operators who employ staff to check your compliance. Work Health and Safety Act 2011 The Work Health and Safety Act 2011 provides a framework to protect the health, safety and welfare of all workers at work and all other people in the workplace. This Act has: • Introduced additional obligations of all people involved in a workplace – not limited to employers and workers; • Introduced additional obligations on existing parties; and • Created personal consequences for noncompliance. Every person in a Body Corporate – including those who simply live there – now have some responsibility under the Work Health and Safety Act 2011. These new laws mean that Management Rights operators need to understand the risks and ensure you have the appropriate measures in place to manage those risks. END OF YEAR TIPS FOR BUSINESSES AND INDIVIDUALS

Where wage rates and allowances need to change to take into account such increases, employers should consider whether any written variations need to be made to their employment contracts. Employers who fail to pass on the necessary increases or are found to be underpaying staff risk prosecution and penalties of up to $33,000 per employee – not to mention the possibility for personal liability for directors involved in the company’s contravention.

Obsolete Stock All stock should be reviewed during an end of year stock-take and decisions made in relation to the current realisable value of any stock held for resale. Consider the age of the items, likelihood of future sales and their scrap value. Any stock that has no realisable value can be considered to be obsolete and an outright deduction claimed in the current year. Remember to retain and file all relevant documentation. Be Prepared to Substantiate Your Claim Make sure you keep all receipts to substantiate your deductions and be able to demonstrate why the expense was incurred

UNCHANGED

TIER 1

TIER 2

TIER 3

Singles

$84,000 or less

$84,001-$97,000

$97,001-$130,000

$130,001 or more

Families

$168,000 or less

$168,001-$194,000

$194,001-$260,000

$260,001 or more

Rebate Under age 65

30%

20%

10%

Aged 65-69

35%

25%

15%

Aged 70 and over

40%

30%

20%

to derive assessable income. Fixed Assets Review the useful life of fixed assets and determine if there are any benefits in scrapping or trading in such assets in light of the new capital allowance measures due to come into force from 1 July 2012. Work from Home Taxpayers that work from home may be able to claim a percentage of home-related expenses. These expenses must be directly related to the earning of taxable income. Many management rights operators are in a position to claim home office expenses which are often overlooked. Renovations by Previous Owner You may be eligible for a deduction for depreciation on the cost of improvements by a previous owner, provided items are identifiable and itemised on a depreciation schedule. Generally this will require the use of a Quantity Surveyor to make an assessment of the value of the improvements for depreciation purposes. Review Division 7A Private Loans A private loan older than 6 years faces a risk of becoming statute barred (unenforceable). This means the Australian Taxation Office may use its discretion and treat the loan as an unfranked dividend unless remedial action is taken. Should you own a private company that is currently trading or has traded in the past you should review your exposure to division 7a on an annual basis. Prepayment of Private Health Insurance Premiums Did you know if you prepaid your health insurance before 1 July 2012 you could have avoided the reduction in the 30% Private Health Insurance Rebate? From 1 July 2012 the 30% Health Insurance Rebate is means tested. For families earning up to $168,000 and singles earning up to $84,000 the 30% rebate will still apply; however if you fall above these limits, the rebate will start to phase out. Most Private Health Insurance companies allowed customers to prepay up to one year of private health insurance before 1 July 2012, meaning they could still receive the 30% rebate as part of their fees. This meant a significant saving on the premium for the 2013 year. RESORTBROKERS.COM.AU 21

ouncil approval is current for a tourist park containing 175 cabin, camp and caravan park sites (short term) located at Wallabi Point - a famous surfing beach located between picturesque National Parks, the Manning Valley and the Pacific Ocean on the central NSW coast. The location offers the following attributes:• Patrolled Surf Beach, including the well know surf breaks • Beach fishing plus off-shore fishing from adjoining Saltwater Point boat ramp • Nearby Saltwater Reserve has a lagoon for safe swimming and picnicking • Easy 15 minute drive to Taree CBD or 5 minutes to Old Bar township • All weather access from all major centres and the Highway • Nearby Kiwarrak State Forest walking tracks • Boating on the Manning river, 7 minutes away The site fronts Wallabi Point Saltwater Surf Beach and is 400 metres from the Wallabi Point Village and 800 metres from Saltwater National Park and Boat Ramp.

22 RESORTBROKERS.COM.AU

Beach front cabin, caravan & camp development site Amenities include; conference centre, general store, pool, tennis court, camp kitchen, BBQs’s and car wash. The Council Approval (available upon request) provides for the following: • Total 175 sites, all short term, as follows: • 55 Annual & Park Cabin Sites • Powered Caravan sites • 10 Caravan Sites with ensuites • Powered Camp Sites • Un-powered Camp Sites • Bunkhouse Sites • New managers residence • Reception / Office / General Store • Conference Centre • New swimming pool and Tennis Court • New Maintenance Sheds • Camp kitchen

Ian Dore EXCLUSIVE AGENT Mobile: 0412 752 238 Brisbane office: (07) 3878 399 Email: iandore@resortbrokers.com.au

PRICE: $2,500,000

REF: FH002014

Any closer and you would fall in

SUNSHINE COAST MANAGEMENT RIGHTS Glenn Millar EXCLUSIVE AGENT Mobile: 0412 277 804 Brisbane office: (07) 3878 3999 Email: glennmillar@resortbrokers.com.au

Nett profit: $245,135 (incl. BC remuneration) PRICE: $1,908,000 (incl. unit)

REF: MR001858

his stunning complex is right on the stunning Maroochy River central to the Sunshine Coast, with all apartments having uninterrupted 180 degree views across the river to the Ocean. The complex was built in 2003 by the renowned Juniper Development Group who are noted for their architecturally stunning designs. This property is no exception. It is stylish and elegant in its design and internal fit out, and is literally right on the waterfront, where guests can fish off the resorts private jetty. The complex is located on the Maroochy River and in the heart of the action,so you can walk out your front door to wonderful choice of alfresco dining overlooking the river or the cafes in the CBD.

The Maroochydore Surf Club and patrolled beach are also an easy walk. The main Sunshine Coast shopping centre, Sunshine Plaza and The Big Top, are across the road. Sunshine Plaza is one of Queensland’s largest shopping centres and is only 5 minutes away. There are dozens of restaurants within walking distance. The building has just undergone a complete repaint which has brought it back to its original condition. There is a provision in the profit and loss statement for a receptionist as the current managers chose to take advantage of outside activities. Should an incoming couple chose to handle the office themselves there is an additional $24,000 that could go onto the net income bringing it up to approx $270,000. The current managers are retiring after 7 years in the complex. • Spacious, modern three bedroom managers apartment with adjacent office on title • Long accommodation module agreement RESORTBROKERS.COM.AU 23

Editorial

something that fits. For some this is easy, for others it might take a bit of time.

What drives you to buy? ALEX COOK - RESORT BROKERS AUSTRALIA

This article aims to take a quick look at some of the main motivations that attract people to buying into our sector, and the types of businesses that best fit with those motivations. Even for experienced buyers, it might open your eyes to another suitable area of investment. As agents, perhaps the most common type of buyer we come across are those driven by return on investment. Buyers in this category will usually have a limited amount of equity available. They want to make sure that the income they receive from their investment is as high as possible. If they are purchasing management rights, this will often mean making sacrifices on the manager’s unit or even searching for a ‘business only’ opportunity. These buyers will also look to pay as low a ‘multiplier’ as possible. This might mean purchasing a less desirable complex, perhaps slightly dated or in a lower-demographic area. If you are purchasing a motel lease, this will mean looking for a business showing a higher than average yield. Generally, this will mean concentrating on more regional or remote motels. Given the turbulent state of the world’s stock markets, an increasingly popular source of motivation is those looking for a solid passive investment. The most common channel for passive investment in the accommodation sector is through the purchase of freehold motels. The investment is arranged so an active manager (lessee) will lease the motel from the freehold owner on a long-term basis. The freehold owner does little except for collect rent at the end of each month. Another popular area for passive investment is through a ‘syndicate’ purchase of large management rights businesses. This describes the situation whereby a number of parties pool their resources to facilitate a large purchase. One of the parties will be the ‘active’ partner and will receive a salary as well as their share of the profits. The remaining parties will become silent investors and will receive their share of the profits after the active partner’s salary has been deducted.

One of the great things about Australian accommodation businesses is the sheer diversity of people that they attract. As anyone with even a small amount of interest in the sector will testify, owners can come from all walks of life and from all corners of the globe. They all have something to offer and something to gain. 24 RESORTBROKERS.COM.AU

Equally as diverse as the people who own businesses are the motivations that attract them to purchase in the first place. The beauty of buying an accommodation business in Australia is there is genuinely something for everyone. Regardless of what your work and life ambitions are, if you look hard enough you will be able to find

One incentive for purchasing an accommodation business that has perhaps become less prevalent since the GFC is that of lifestyle. Nonetheless, it is still a major driver, particularly within management rights. Those seeking lifestyle opportunities will generally concentrate on location, facilities and owners accommodation. They will often also look for a business

where they are not required to do a huge amount of work. This might mean buying a small business with a light workload, or alternatively a large business with an income big enough to support staff. Lifestyle purchasers will typically look for fantastic accommodation, perhaps on the waterfront or with stunning city views. They will also look to be in a first-class location, maybe in a major city CBD or right on the beach. As lifestyle requirements will often work against the financial strength of a business, purchasers in this sector will often be more financially established than your average purchaser and less driven to make large monetary gains. One of the most exciting reasons for investing is to achieve large capital growth. Some buyers are interested primarily in the increase they are likely to achieve between the price they purchase a business for and the price they sell a business for. As most would appreciate, this is perhaps the least secure reason for investing and the most difficult to get right. Nonetheless, for an astute purchaser there are often some incredible opportunities to make windfalls from the purchase and sale of accommodation businesses. In order to be successful in this, the key is to be extremely open-minded in what you are looking for. You never know what the next opportunity will be, not where it will be located. You might find a motel lease in the middle of the outback with poor trading figures; however, a new mine is opening in the area and is likely to fill rooms and drive tariffs for years to come. You might find a management rights under poor management, with numerous externally managed units and a short term remaining on the agreements; can you buy it at a cheap price and regain the favour of the owners and the committee, driving the income back up in the process? In reality, most purchasers are open to a variety of motivating factors when they are searching the market for their next (or first) investment. In an ideal world, most buyers would like to satisfy all the criteria discussed above, and often more. I would not argue for a second that many businesses on the market will be fall into a more than one of these categories. Indeed, that is the beauty of investing the accommodation industry. However, as anyone who has bought a motel, management rights, caravan park or resort will testify…you are unlikely to tick all the boxes. For that reason, it is important to have a grasp on what it most important for you. What are you really aiming to achieve out of your investment?

... and now let’s relate these categories to some opportunities listed in this edition of the Informer CAPITAL GROWTH Magic Mountain (page 42) – as mentioned in the ad, there is considerable scope to increase the bottom line of this business. Indeed, past P&L’s show the property used to regularly net in excess of $600K. There are 27 agents managed by an external local agent; current management has not made any effort to retrieve them. Current marketing strategy is dated; a new manager should be able to drive occupancy from sub-50% to Gold Coast average of 60%+. There are also 33 units in the permanent pool that can be converted to holiday lets as occupancy grows. Also, there is relatively little maintenance income. The property is offered on a low multiplier as holiday MR’s on the Gold Coast are currently not in great demand. Over 3 – 4 years we believe a good manager can add $150K - $200K to the bottom and then sell at a higher multiplier, making substantial capital gains (you can do the maths yourself!!) The Garden Inn (page 7)– the potential for capital growth in the new and charming Northern New South Wales motel is clear to see. Currently the property consists of 11 luxury private ground level suites and is trading well. However, already with planning approval and with architectural working drawing in place are a further 9 rooms. As occupancy grows and these units are built, the scope to increase the bottom line is enormous. LIFESTYLE Ambience (page 19) – this stunning beachfront property on Burleigh Beach at the southern end of the Gold Coast is perfect for those looking for a first-class lifestyle. The spacious, modern manager’s unit is set around a large open-plan living/ dining/kitchen area, leading onto a private outside courtyard. The properties facilities are first class, and there are numerous restaurants, cafes and shops in the immediate vicinity. That’s not to mention perhaps one of Australia’s finest stretches of beach, within second walk. Waves (page 23) – another awe-inspiring property, on the Maroochy River on the Sunshine Coast. All units have 180 degree views of the ocean across the river; you can walk straight outside the front door

onto the waterfront, where you can fish off the resort’s private jetty. The property is right in the heart of the action with plenty of al fresco dining options on you door step. There is provision in the income for a receptionist, to give you more time to enjoy your leisure pursuits. PASSIVE INVESTMENT The Centrepoint (page 36)– if you’re looking for a secure passive investment, you cannot do much better than to purchase the freehold investment to the Centrepoint Motel, the premier motel in the heart of Lismore, the capital of Northern New South Wales. The rent you receive from the new 30 year lease will pay you a healthy 10% return for years to come. Your return will be CPI linked and subject to a market review every 5 years. Sit back and count your pennies. Hotel Cairns (page 9)– opportunities like this don’t come along often. Although this iconic hotel is currently owneroperated, there is plenty in the income for a savvy investor to run it under complete management. With the growing number of Chinese tourists arriving in Cairns dayby-day, this hotel is incredibly well placed to benefit from Cairns resurgence. Watch from a distance as the income rolls in and your investment grows! RETURN ON INVESTMENT The Bluff Palms Motel (page 39) – if you’re looking for an incredible return on investment, I suggest you get yourself up to Bluff and buy this tomorrow before someone else. No, it’s not a misprint, this lease shows a jaw-dropping 48% return on investment. Nestled between the booming mining towns of Rockhampton and Townsville, the income can only be expected to rise. To make matters even better, you’ll have the security of a new 30 year lease. Barkly Homestead (page 35) – sitting on the Barkly Highway, the gateway between the Northern Territory and Queensland, this property enjoys income from a variety of streams and boasts occupancy of 80% for 8 – 9 months of the year. The business makes a massive net income of $750,000 and is offered at the bargain price of $2,100,000…..showing an incredible return of nearly 36%!! RESORTBROKERS.COM.AU 25

Agent & area profile Stuart Charles - Melbourne and West Victoria Our agents pride themselves on their local knowledge. They each look after a geographical patch, and grow to learn it intimately. We feel this adds greatly to the confidence with which a property can be sold. In this new feature we will get some thoughts on their local area and will also learn a bit about their personalities. Tell us about your area

What did you do before Resort Brokers?

Opportunities

My area includes parts of Melbourne, the Great Ocean Road and Western Victoria. The towns within this area rely on many different industries, which is what makes my patch so interesting. The Great Ocean Road has tourism, the South West has farming and industries such as wind farms, and then the larger towns along the Western Highway rely on the corporate trade.

Before Resort Brokers I was involved in a food export company that focused on Middle East markets. The role required that I live in Dubai and travel extensively through Middle East countries. Although a fantastic experience, a return to Australia was always inevitable.

There has never been a better time to secure a property or business along the Great Ocean Road. With investment from state government and local councils, tourism is expected to increase significantly.

Your thoughts on your area Although tourism has been down recently, overall most motels in Victoria’s west continue to thrive. The larger towns near Melbourne such as Geelong and Ballarat continue to enjoy good population growth. Also, there is a very positive outlook for regional towns such as Horsham, Ararat, Colac, Warrnambool and Stawell. Essentially, my area has always enjoyed consistent trade and reliable profits. 26 RESORTBROKERS.COM.AU

How did you end up at Resort Brokers? My return to Australia provided an opportunity for a career change. I’d been involved in a number of small businesses over the years and was keen to investigate opportunities within business brokering. Given the motel industry provides operators with such good returns it seemed a fantastic industry to be associated with, especially considering Resort Brokers was keen to commence an aggressive push into Victoria.

Challenges Motels need to keep pace with local competition and broader competition. The major challenge is to implement a cost effective refurbishment of a property that meet guest’s expectations.

Spare time? Anything sport – taking my son to basketball or enjoying local football

What makes you laugh? AAA’s STAR Rating Scheme

What annoys you? Collingwood supporters

$100,000+ PRICE REDUCTION

Gold mine golf course freehold motel $100,000 + PRICE REDUCTION Ian Dore EXCLUSIVE AGENT Mobile: 0412 752 238 Brisbane office: (07) 3878 399 Email: iandore@resortbrokers.com.au

Net Profit: $144,195 (projected) Turnover $187,174 Adjoining residence: $ 495,000 MOTEL PRICE: $895,000 REF: FH001986

old mine motel opportunity + adjacent 5 bedroom residence with redevelopment approval! Insufficient exposure to accommodation booking sites over many years has now created this fantastic opportunity for an energetic owner / operator to immediately upgrade this motel website and reap the rewards. This refurbished 3.5 star 12 suite family orientated motel is set in attractive tropical, leafy gardens, offering affordable, spacious air conditioned rooms for couples, groups, families (two bedrooms) or the corporate traveller. Relax by the pool and BBQ, play golf, go to the beach or venture off to explore this beautiful part of the Northern Rivers Region.

The motel adjoins the famous Ocean Shores Golf Course and especially designed golf / accommodation Packages are a big generator of repeat business. Gold packages include: • Play and stay special dinner package • Play and stay lunch package • Ocean shores country club Also for sale separately is a family home which adjoins the motel with direct frontage to the golf course. It consists of 5 bedrooms over two levels with huge living / entertaining areas. The home sits on a double block of land of 1463m2 which could either support additional motel units or another residence. Presently the home is rented for six months at $550 P.W. • 12 units • 3.5 star self rated • In-ground pool • Fabulous location!

RESORTBROKERS.COM.AU 27

The many faces of the accommodation industry CATIE LANGDON - PART 2 IN OUR SERIES

Continuing our series profiling the many faces of Australia’s accommodation industry, we introduce you to the leaders and innovators, characters and canny operators of tourism. These are their stories. swimming pool. The manager, who often spent his weekends in Darwin, would throw Foxy the keys, with instructions to look after the place until he came back. One day, he didn’t come back. “So I was appointed the new manager and continued in that position for three years without a day off,” Foxy said. It was in this leisure-based environment, that Foxy had the idea to enter the tourism industry. “I got my start by acquiring struggling hotels, motels and caravan parks in Katherine. I’d tidy them up, turn around the balance sheet, and sell them off. These included the Redgum Caravan Park, Knotts Crossing Resort and the Adelaide River Pub.”

Foxy Robinson:

Asked how many tourism properties he’s owned over the years, Foxy can’t really recall. He brushes the question aside. “Maybe a dozen – too many to mention – but I never hung on to them for long.”

John ‘Foxy’ Robinson’s climb to prominence in the Top End is the stuff of legends. From an abattoir worker to number 39 on the Northern Territory’s ‘most powerful’ list, his is one of Australia’s greatest accommodation industry success stories.

He also speaks with some pride of his humble origins, the fact he left school and home at the tender age of 13, and never progressed beyond primary school. For many years, there was no inkling he was destined to be a wealthy entrepreneur and hotel developer.

But two properties stand out … the big money spinners. First was the 30-acre Palms Resort caravan park and service station, just outside Darwin on the Stuart Highway.

Knowing John Robinson’s ‘rags to riches’ tale, it is natural to assume his nickname owes to his cunning ingenuity, his ability to go after and get what he wants. But no. ‘Foxy’ is simply an innocent tag bestowed in childhood because of his red hair. Yet, when it came to business dealings, it would prove to be an apt sobriquet. Mr Robinson is nothing if not a shrewd operator.

First Foxy joined the navy, a bush kid in search of adventure. But that career was short-lived. “It didn’t work out. After three months they gave me the boot.” Why? “I guess I was a bit cheeky,” he laughs.

a legend of Top End tourism

Foxy was born in Bourke, New South Wales, one of seven children and the only one with red hair. Perhaps it’s the legacy of another legendry character on the family tree, Ned Kelly. “I’m descended straight down the Kelly line,” he declares proudly. 28 RESORTBROKERS.COM.AU

After working for his uncle in Sydney for a while, Foxy moved to the Territory in 1965, aged 16. Abattoirs were opening across the Top End and, for 15 years, he worked as a slaughterman in meatworks from Borroloola to Broome. The demise of that industry in the early eighties set Foxy on a new path, one that would ultimately make his fortune. He took a landscaping job at the Katherine

Foxy moved his family there in the midnineties and set about transforming one of the city’s most run-down tourist parks into the most expensive ever sold in Australia. It was reported he bought it for $5.5 million, spent $5 million on it, and sold it to Mirvac some years later for $17 million. The next significant milestone came when he built Darwin Airport Resort and Darwin Airport Inn, the first he developed from scratch. Having formed a syndicate to secure the lease of the airport site, Foxy toured the world checking out airport hotels – what services they offer, how they trade, what makes them successful.

Editorial

His airport hotels, with a combined 320 rooms, opened in April 2005. And, despite warnings to the contrary, his formula for good food, top facilities and services tailored for airline passengers’ was a huge success. True to form, Foxy would sell for a sizeable profit, and move on. But this time, the deal had an unusual twist, one that made it taste all the sweeter. In 2008, he sold the four-star Darwin Airport Resort to a Melbourne investment company for $26 million, and leased back its operation. Then the GFC struck, and the buyer had to sell out. Foxy bought back his hotel for $5 million less than he’d been paid for it just 12 months earlier. Ultimately, in March 2011, he sold both airport hotels to a Sydney-based group for $70 million. During his years in the abattoirs, Foxy met and married Trish. The couple has been together for 35 years now, and raised four children. The grandchildren tally so far is eight, and rising. Thanks to Foxy, they’ll have a very different start in life to his own. So, what’s his secret? “The best looking businesses attract the best business.” he says simply. “Good beds, good linen, good food are crucial. I worked properties hard over two to three years, then sold. But I always left enough in them for the next bloke.” “If you have a property making $200,000 a year, and know it should be making $700,000, you get it up to $500,000 or $600,000 in the first couple of years, then you sell. There’s more in it after that, but the next rise will be steady. I’m after the big jump.” From time to time, Foxy strayed from the tourism industry, ‘though accommodation was still his forte. At Palmerston, he built the Bechtel work camp for the Darwin LNG Plant project, catering for over a thousand workers. Now he’s involved in another aspect of accommodation provision, on a very large scale, but confidentiality agreements prevent him from discussing it. But Foxy reckons his days of buying or developing tourist properties are behind him. “I’m trying to retire,” he says. And he’s found the perfect place to put his feet up. Buying it was particularly sweet for the former meat worker. In the late eighties, when working as a labourer on the construction of Darwin’s lavish Bellevue House, he was

Don’t these people listen? BY JOHN MAHONEY - MAHONEY LAWYERS It has been some than 3 years now since the Queensland Government created confusion and uncertainty in the management rights and tourism industries in issuing a policy statement regarding the classification of buildings, in particular that part of the statement that suggested that Class 2 buildings could not be used for holiday and short term accommodation.

buildings should be made comply with Class 3 standards. Perhaps not so strange given there is no evidence of death or injury due to serviced apartment buildings not being built to Class 3 standards.

Although not proceeding with the proposed legislative changes, the Government has consistently refused to retract its published view that apartment buildings throughout Queensland which are Class 2 buildings under the Building Code of Australia can not lawfully be used for short term or holiday accommodation. We are talking here about almost every apartment building on the Gold Coast, Brisbane, the Sunshine Coast and North and Far North Queensland!

The overwhelming popularity of serviced apartments as an alternative to the traditionally small and expensive hotel room demonstrates that a large proportion of tourists and travellers prefer serviced apartment accommodation. It is not surprising that at the recent Australia New Zealand Pacific Hotel Industry Conference two of the top three awards went to management rights operators of serviced apartments.

As I have reported previously, that view is in conflict with the position that it and Councils throughout Queensland have adopted for 30 or more years; it is in conflict with a decision of South Australian Planning Court; and is in conflict with various decisions of the Office of the Commissioner for Body Corporate and Community Management in Queensland. Some time ago, after much lobbying from other interest groups, the Australian Building Codes Board (ABCB) sought submissions from the management rights industry and others about the issue. The request for submissions included a background paper which contained many comments from interest groups wanting serviced apartment buildings to have to comply with the much stricter Class 3 classification. Almost all of the comments in that paper referred to the financial advantage serviced apartment operators have over traditional hotel operators whose buildings have to be Class 3 and as such, with stricter fire safety systems and other requirements, are more expensive to build and maintain. None of the comments claimed that there are safety reasons why serviced apartment buildings should have to meet Class 3 standards. Strange, given that the differences between Class 2 and Class 3 requirements are safety related and it would only be for safety reasons that serviced apartment

The reality seems to be that Class 2 safety requirements are, and have proven to be, more than adequate in catering for short term and holiday guests in serviced apartment buildings.

Typically hotels provide many ancillary services such as concierge services, room service, 24 hour reception, valet parking and so on. All of those services come at a huge cost which quite apart from any extra costs associated with Class 3 compliance, necessitate that hotels charge a much higher room rate than that for a serviced apartment. There will always be a proportion of consumers who want and are prepared to pay for those services but it is wrong to change the long held and judicially supported views about Class 2 buildings in order to force all consumers into hotel accommodation and the higher expense that goes with that. Despite the extensive submissions ARAMA and others made, the review which is all but completed is proposing a national approach to the Building Code of Australia by including a Guide to the Code the effect of which is that serviced apartments used for short term or holiday purposes must be Class 3. It seems that that the ABCB has not seen through the flawed arguments raised against the existing regime in Queensland. If the ABCB’s current proposed Guide is implemented it will be up to the Queensland Government, in order to protect the management rights and tourism industries which have already been hit hard by economic conditions, to ignore any national approach and if necessary legislate to maintain the status quo. RESORTBROKERS.COM.AU 29

eing offered for sale is the chance to own one of the most outstanding motel leases in outback Queensland . The property is only 13 years old and boasts 40 beautifully appointed units over 3 wings set in landscaping which is both attractive and appropriate. The Gidgee Grill restaurant offers guests and locals alike an a la carte experience which includes the chance to sample chargrilled grain and grass fed beef from the Gulf Country. Two conferences rooms, the Kajabbi and the Engine room offer seating for12 to 55, the restaurant opening to the verandah makes it easy to cater for up to. 100 for weddings. Every detail has been considered in the initial design of the Gidgee, from the jarrah timber furniture in the restaurant to the large showers in the rooms, not to mention the curriculum in place for the smooth running of the property.

Multi award winning motel in the outback AUSTRALIA’S RICHEST PASTORAL PROVINCE • 40 Units including disabled, executive and king • 4. Star and situated on 5 acres • 2 bedroom managers unit • Easily maintained and run under management • All ground floor units and in 3 wings • Located in Cloncurry Queensland • Built from rammed earth makes it a unique stopover • Large reception and welcome ‘long jarrah bar’

Len Booth EXCLUSIVE AGENT Mobile: 0438 139 422 Brisbane office: (07) 3878 3999 Email: lenbooth@resortbrokers.com.au

Nett profit: $816,590 Turnover: $2,196,630.10 PRICE: $2,600,000 REF: LH002008

30 RESORTBROKERS.COM.AU

Waterfront caravan park in pristine location

They are now ready to move on and let the new owners enjoy the beautiful location and business that they have loved all these years.

LONG TERM CROWN LEASE

• Magnificent 4 bedroom, 2 bathroom residence overlooking the River • 96 sites including 4 New Luxury, 4 Star 2 Bedroom Cabins • Long Term Crown Lease • 150 Metres of Absolute Water Frontage with Jetty and Moorings • Solid, Secure Income due to High Percentage of Permanent Holiday Vans • Located in Bustling South Coast Holiday Destination • 2.5 Hours from Sydney & Canberra • Massive Upside Potential with New 4 Star Luxury Cabins

Russell Rogers Mobile: 0416 166 909 Sydney office: (02) 9904 8224 Email: russellrogers@resortbrokers.com.au

Nett profit: $287,779 Turnover: $410,342 PRICE: $2,300,000 REF: LH001951

arely do we list a property in such an amazing location. This caravan park has so much upside potential as the new 4 star luxury cabins have not been marketed yet on the internet. If marketed effectively the rental of these cabins could markedly affect the bottom line. The other real attraction of this property is the fact that nearly all of the turnover is a form of passive income due to the permanent holiday vans, meaning you get an income all year around and are not just relying on the holiday periods like other caravan parks. The present owners have spent 22 years bringing this park to the level it is today.

RESORTBROKERS.COM.AU 31

CHINA:

set for significant investment CATIE LANGDON Recently returned from a major Government-led delegation to China and Hong Kong, Resort Brokers Australia is preparing for the rising tide of Chinese interest in Australian tourism. That interest will come not only from tourists themselves, but from those seeking tourism business and investment opportunities. The rising middle class of the world’s most populous country, now enjoying increasing freedom and wealth, has given Australia its fastest growing and most valuable overseas tourism market. In 2011, China was Australia’s third largest inbound market for visitor arrivals, but it was the largest market for total expenditure and visitor nights. China delivered us more than 540,000 visitors (up 19.4% on 2010) and A$3.8 billion (up 15%) in spending. Tourism Australia now believes the China market has the potential to be worth up to 32 RESORTBROKERS.COM.AU

A$9 billion per annum by 2020. Queensland welcomed 203,000 of those Chinese visitors last year, and they spent $422 million, an increase of 25% on the previous year. Tourism Queensland says those figures could double in five years to 429,000 visitors spending $829 million. Little wonder Governments and the private sector are courting the Chinese market.

Ibis and Motel 6 in Australia), tourism promoters and developers of projects in along the Queensland coast,” said managing director, Ian Crooks.

Resort Brokers Australia had the privilege of being invited to join a recent trade mission led by Queensland Tourism, Major Events, Small Business and Commonwealth Games Minister, Jann Stuckey, visiting Guangzhou, Shanghai, Beijing and Hong Kong.

“We met with several companies, including Shanghai Greenland Group, a Fortune Global 500 list company and one of China’s premier property developers. There is no doubt the Chinese have a great desire to come to and invest in Australia.”

“Resort Brokers was the only tourism business and property broker in the delegation which included representatives from Accor (operator of hotel brands Sofitel, Grand Mercure, Mercure, Novotel,

Immediately after the mission came the announcement that China Southern Airlines will increase daily services between Guangzhou and Brisbane. A month earlier, China Eastern Airlines’ had announced three direct flights a week

“The clear message was ‘we are open for business’ and it was a tremendous exercise in building relationships, identifying opportunities and opening lines of communication.

Chamber of Commerce in Shanghi with members from the delegation

Left to right; Dr Richard Eden, Trudy Crooks, The hon. Jann Stuckey & Ian Crooks

An impression of the proposed Jewel development at Surfers Paradise. Pic sourced from goldcoast.com.au

from Shanghai to Cairns. “Trade missions such as this highlight there are excellent investment opportunities available, not just in areas such as mining and agriculture, but in a mix of industries, and in particular tourism,” Mr Crooks said. A Chinese Ministry of Commerce spokesman recently told Queensland’s Courier Mail that Chinese investors were looking to diversify beyond the resources sector. KPMG Brisbane-based partner and President of the Queensland arm of the Australia-China Business Council described this as “definitely good news for tourism.” “There is certainly interest in property projects. There is interest in the Gold Coast, in Brisbane, but also some of the

regional areas as well. “I think that’s a wonderful message for Queensland because it means other key industries can seek access to capital through the Chinese.” There is certainly evidence of China’s rising interest in tourism assets. Earlier this year, Chinese-linked White Horse purchased Lindeman Island on the Great Barrier Reef for a sum reported to be close to $12 million. On the Gold Coast, Ridong is set to go ahead with its ‘Jewel’ development (pictured above), a $1 billion sixstar international resort project on a 1.13-hectare beachfront site at the southern end of Surfers Paradise. Riyu Li, founder of Ridong, shelled out $81.8 million for the site in 2009. Ian Crooks believes a new Federal Government visa-linked scheme is set to open up

widespread opportunities in the more accessible $5–10 million investment bracket. “The new Significant Investor Visa will help Australia compete more effectively to attract overseas investment, making it easier for investors coming to Australia by offering some concessions on visa requirements,” he said. The Significant Investor Visa initiative, expected to be implemented later this year as part of the new Business Innovation and Investment Program, will target migrants who make an investment of at least A$5 million in Australia. “It will attract investment that contributes to the Australian economy, targeting high net worth immigrants who create innovation and job opportunities,” Mr Crooks said. And, according to many respected > continues next page RESORTBROKERS.COM.AU 33

economic and foreign affairs experts, Australia should encourage more Chinese investment in domestic industries and reap the benefits of China’s vast capital reserves. “We have always needed foreign capital to help develop our industries and unlock our potential,” Department of Foreign Affairs and Trade Secretary Dennis Richardson recently told a conference in Canberra. “Foreign investment creates Australian jobs, boosts household incomes, encourages innovation and new technologies.” While there has been some discussion lately around the question of whether Australians are comfortable with increasing levels of Chinese investment, history shows we are ultimately accepting of foreign investment. And the Chinese are certainly not new to our shores. The Victorian and New South Wales gold rushes of the mid-1800s first saw Chinese people arrive in Australia in significant numbers. Chinatowns developed across Australia and, as gold and other minerals were discovered in Queensland, the Northern Territory and Tasmania, Chinese miners followed. Later, as mining became less profitable, Chinese entrepreneurial flair blossomed – in market gardening, storekeeping, importing and exporting, hospitality, manufacture, fishing and pearl diving. According to Professor of Tourism at Victoria University, Brian King, Australia’s tourism relationship with China has also been relatively long-standing. We actually had a head start on attracting the Chinese travel market, he says. In 1999, Australia (with New Zealand) was the first western country to receive “approved destination status” – allowing Chinese citizens to undertake group-based leisure travel down under. “It (the status) indicates that China’s government trusts the partner and promotes business and diplomacy,” Prof. King wrote in a series “Australia in the Asian Century”. But perhaps we have been a little slow to wake up to just how significant China’s now booming travel market would be. Other western countries have since been granted ‘approved status’, and there is increasingly intense competition for the Chinese tourist. Federal Tourism Minister Martin Ferguson recently warned Australia’s tourism operators that huge infrastructure investments had to be made if Australia 34 RESORTBROKERS.COM.AU

Horseshoe Bay, Keswick Island. One of the properties promoted to the Chinese during the delegation

was to reach its 2020 visitor target of one million arrivals a year from China. Tourism Australia managing director Andrew McEvoy chimed in, saying increasing numbers of visitors from China were “neither inevitable nor guaranteed.” He explained that reaping the benefits of the ‘Asian Century’ required being “China ready”. “You can build all the demand you want through compelling ads, but if the actual experience fails to deliver on the promise, you end up doing more harm than good.” With the Chinese trade mission fresh in his mind, Ian Crooks understands the point. “Chinese visitors to Australia see us as a destination offering great natural beauty, unique experiences, and iconic attractions, but awareness beyond this is limited, and our product is seen as dated. “Our natural environment is very important, but Chinese tourists also expect a certain level of development, comfort, quality facilities and services,” Mr Crooks said. “To grow the Chinese tourism sector we need to expand the facilities on offer – shopping, casinos, quality accommodation – and existing operators need to make a concerted effort to meet the needs of the Chinese market. “Accor, for example, is developing a specific strategy to make Chinese visitors more comfortable – Chinese dishes on the menus, access to Chinese media, and special training to equip staff to better serve Chinese guests. “If you doubt the importance of implementing such initiatives, consider the value of even a tiny slice of the immense Chinese market,” Mr Crooks said. “When China’s 8000 Amway

representatives visited New South Wales for five days last year, they injected more than $40 million into the local economy through accommodation, travel, sightseeing and shopping. “I’m told they paid an average room rate of $350 a night and pushed Sydney city hotel occupancy to 95%.” From an investment perspective, Australia has several key advantages, he said. “Our stable government, 20 years of continuous growth and, perhaps most importantly our time zone, make Australia very appealing. “The east coast of Australia is just two hours different to Beijing, whereas Europe and the USA are in completely different time zones, making them incredibly difficult to manage.” Following the successful trade mission, Resort Brokers Australia has already teed up meetings with prospective buyers of Queensland tourist businesses and will take part, with buyers, in a two-day conference explaining the new Significant Investment Visa. “We are also looking forward to attending HICAP 2012 in Hong Kong in October,” Mr Crooks said. “It is Asia Pacific’s premier hotel investment conference where the region’s preeminent players and executives gather to meet, network, explore opportunities, exchange ideas and learn.” Mr Crooks said the Chinese contribution to Australia country as business pioneers was long proven. “The catalyst for Chinese migration to Australia has always been economic opportunity, and so it will be again. “And as it has always been, the opportunities hold great mutual promise and benefit.”

Iconic outback property 30 YEAR LEASE WITH MANY INCOME STREAMS

Ian Crooks EXCLUSIVE AGENT Mobile: 0411 171 648 Brisbane office: (07) 3878 3999 Email: iancrooks@resortbrokers.com.au

Trudy Crooks EXCLUSIVE AGENT Mobile: 0477 882 210 Brisbane office: (07) 3878 3999 Email: trudycrooks@resortbrokers.com.au

Turnover: In excess of $5,000,000 Nett profit: $750,000 PRICE: $2,100,000 REF: INV001976 / LH001975 / FH001973

uy this lease and get all your money back in just 3 years! This iconic outback property is located on the Barkly Highway, gateway to both the Northern Territory and Queensland. This destination means that the occupancy for 8-9 months per anum runs at over 80%. The property has a variety of income streams which include motel units, cabins, fully equipped caravan park, camping area, aviation facilities (incl. Avgas for passing planes and helicopters) and a roadhouse. A visit to this property would not be complete without visiting the Barkly Bar & Grill (also in the complex). The kitchen is ultra modern and sets a new standard for cleanliness and attention to detail. Enjoy a meal or just a cold beer in the brand new beer garden.

This business is currently run by a family who are looking for a change in occupation after 5 successful years, which throws up the opportunity for another family or group to take over this very profitable operation. The current owners have made vast improvements to the property including upgraded ablution facilities for the caravan park, installation of 6 new self-contained cabins, a new aircraft hanger (including Avgas pumps and storage tanks) as well as modernising the comfortable separate manager’s home. • 10 motel units • 11 cabins • 60 powered caravan sites • Self-contained staff facilities • Freestanding workshop shed • Swimming pool • Fully air-conditioned throughout • Large private manager’s office

RESORTBROKERS.COM.AU 35

UNDER CONTRACT

the premier motel accommodation in the heart of Lismore, the Centrepoint is conveniently located within the CBD of this major commercial city which is fast becoming recognised as the capital of northern NSW. This business which has been owned and operated by one family for over twenty years and has always been a consistent revenue earner. It services both corporate and leisure travellers, with convenient access to shops, clubs, entertainment, business facilities and much more. As northern NSW’s Regional City and Business District incorporating many Government Offices, Lismore is often referred to as the Capital of northern NSW due its facilities: • Southern Cross University (head campus) • Two major hospitals plus many visiting specialists weekly • Catholic Cathedral and education centre head office for northern NSW • Regional Police headquarters with Magistrates and District Courts 36 RESORTBROKERS.COM.AU

Returns, returns, returns 10% ON INVESTMENT | 35% ON LEASE & 16.8% ON GOING CONCERN • Jet airport with daily connections to Capitals • Lismore has its own Television and Radio stations, plus daily newspaper • Regional Shopping Centres • AIS Sporting facilities and Conference Centres

Ian Dore EXCLUSIVE AGENT Mobile: 0412 752 238 Brisbane office: (07) 3878 399 Email: iandore@resortbrokers.com.au

Lismore’s other significant attribute is that it’s only half an hour away from the beautiful beaches of Byron Bay and Ballina. • 41 rooms • 2 bedroom manager’s residence • Occupancy 54.5% • Turnover $1,127,502 • Licenced restaurant and bar • Function / conference room • 3.5 star AAA rating • Free Austar & wireless internet

Nett profit: $626,404 (average last 3 years) Rent: $240,000 p.a plus CPI Investment price: $2,400,000 Leasehold price: $885,000 Going concern price: $3,285,000 REF: FH001985 / INV001983 / LH001982

Caretaking only in serene surroundings

SHOWING 16.47% OVERALL RETURN Tim Crooks EXCLUSIVE AGENT Mobile: 0422 208 450 Brisbane office: (07) 3878 3999 Email: timcrooks@resortbrokers.com.au

his near new complex of eighty townhouses and villa development is located in the serene area of Bellbowrie. Retirement developments have been working on this project for over five years, bringing it to the beautifully presented complex it is now. The villas offer an absolute freehold title, land and buildings so they may be sold, mortgaged or bequeathed at any time.

Nett profit: $245,135 (incl. BC Remuneration) PRICE: $1,908,000 (incl. unit)

REF: MR001779

This 55+ community is designed for independent living…. enjoy a perfect northerly aspect from the large undercover entertainer patio or verandah. The villas are conveniently located near a substantial shopping centre including a Coles supermarket and major public

transport routes are within easy walking distance. Because the estate harvests all the stormwater into huge storage tanks, there are no council imposed restrictions on hosing and watering. 4-5 days of work per week with an outstanding 2 bedroom unit or 3 bedroom townhouse with lots of extras. With resort like feature like the swimming pool & gym. Large community centre with Theatre, Pool Table and commercial kitchen which can be used by any resident for use, free of charge. The centre also overlooks a stunning pond that is maintained by council. Brand new 10 year agreement on the accommodation module. Different manager units options with two and bedroom townhouse and villas available. • 72 units built - the final 8 are already under construction • Body corporate salary $112,464 increasing by CPI • Standard module (under the act caretaking only must be on the standard due to no letting component RESORTBROKERS.COM.AU 37 37

Editorial

Achieving life balance whilst running a business K.INKY

Is it possible to achieve a balanced life and at the same time run a successful business? To have a balanced lifestyle we must be able to invest time in the things that matter to us. What these things are varies from individual to individual, but in a society that is increasingly time-poor this is a challenge that is confronting many of us.

and superseded all other needs. Few would deny that you will have few choices if you don’t earn a sufficient income. The current economic climate has resulted in many people looking for business opportunities they never anticipated seeking - due to redundancies, business closures, drops in the value of superannuation, a younger work force with new skills and an increasingly competitive employment sector. Often these

We all seem to work longer hours. What happened to that eight hour day, 40 hour week, may I ask? Often we have to travel long distances to get to and from work. Many women are working PERSONAL and raising a family at the same DEVEOPMENT time. As well as spending quality time with the kids, there is pressure keep in COMMUNITY touch with friends and family. Maintaining a level of healthy living – eating well and exercising – is SPIRITUALITY time-consuming. In what few moments we have left, we have to try to do something interesting for ourselves (or at least RELATIONSHIP do nothing at all for a bit). The pressures are real and compromises have to be made along RECREATION the way.

FINANCIAL WEALTH

A good work / life balance is an important aspect in their ability to adjust to their changing circumstances. When looking for your next move, it is possible to find a business that acknowledges these varied requirements and helps to create a certain balance to life. Many would agree that purchasing a motel or management rights could be a possible solution. After all, they offer both a home and an income. By choosing the right property in the right location you can achieve this life balance and a suitable level of income. PHYSICAL HEALTH

LIFE BALANCE

The issue is generally not that people are unaware of what they need to live a balanced life, but that the need to make money so easily becomes a priority

people are accustomed to a certain lifestyle that they are eager to maintain, but are finding it increasingly difficult to find an income to do so.

HOME

CAREER

We have identified eleven aspects of a balanced life, some of which may be relevant FAMILY to you, some of which may not. Luckily, that’s whole the point. If you are at a crossroads in FRIENDS your life, why not take a moment to consider which ones are most important to you. If you are thinking of buying a business, this might just help you to focus, narrow your search and find one that is a perfect match for your life. Have a look below at some of our ‘Life Sums’.

LIFE SUMS Relationship + Recreation + Friends

Financial Wealth + Family + Home

Stan and Sue’s youngest child has just left for University. They want to semi-retire, with the aim of spending more time together, pursuing their love of sailing and seeing more of their friends. They buy a small management rights business near the marina in Manly. The complex is small and peaceful, the managers unit has a lovely spare room with en-suite bathroom…perfect for their friends to come and visit.

Kerry and Andy have lived in Melbourne all their lives and are looking to semi-retire. Due to falling superannuation they still need to earn a decent income. They are also desperate to spend more time with their grandkids who now live in Brisbane. They manage to find a motel in Toowoomba that will pay a good income and has a nice 3 bedroom owners unit. They can live in comfort, save some money and see their grandkids every weekend.

38 RESORTBROKERS.COM.AU

Spirituality + Community Service + Physical Health Having worked in Sydney’s rat race all their lives, Richard and Donna are looking for a complete change of lifestyle. They are keen to rebuild their health, give something back to society and generally reflect on life. They invest in a small 4 health retreat in Bali that employs local people and supports local business. They mediate each morning and practice and hour of yoga each afternoon.

Netting a massive $445,000, this motel shows a 48% return! This is a great opportunity to buy a busy motel ideally located between the mining town of Emerald and bustling Rockhampton. A brand new 30 year lease makes this property a solid long term investment. This is a well presented 15 unit motel, with an addition 12 donger cabins to accommodate the high demand within the region. The property further benefits from a well presented pool and bbq area surrounded by plush palms. The on-site restaurant and bar area services the in house guests.

Don’t be fooled by the bluff… IT SHOWS A MASSIVE 48% RETURN Overall this is a very rewarding and easily run operation ideal for the first time buyer looking to join the industry. Call now and change your fortunes forever. On the market for $990,000 • Brand new 30 year lease • Nets $445,000 • Shows 48% return • Ideally located in the heart of the mining boom

Siesta at Buena Vista BRISBANE PERMANENT MANAGEMENT RIGHTS COMPLEX Nett profit: $143,000 PRICE: $1,100,000

Steve Campbell Mobile: 0407 220 668 Email: stevecampbell@resortbrokers.com.au

David Janett Mobile: 0404 204 672 Email: davidjanett@resortbrokers.com.au

Brisbane office: (07) 3878 3999 REF: MR001652

This resort style property makes the real world seem far away. Take your ‘siesta’ after lunch. An outstanding lifestyle complex includes gym, pool, tennis court, sauna and club house. Find this beautifully presented complex in Brisbane’s western suburbs which is close to all your essential amenities. The complex is a delight to live in and a delight to run. The tenants are of a very high standard, the committee are extremely supportive and the complex presents

Nett profit: $445,000 PRICE: $990,000

Trudy Crooks EXCLUSIVE AGENT Mobile: 0477 882 210 Brisbane office: (07) 3878 3999 Email: trudycrooks@resortbrokers.com.au

beautifully. The current managers have been here for long enough, and have their eyes set on Buena Vista in Mexico. An inspection will impress. • 62 in complex with 32 in the rental pool • Brand new 25 year agreements • Excellent and supportive committee • Gated complex with excellent facilities • 4 bedroom 2 bathroom managers residence • Fantastic location in Brisbane’s western suburbs • Current manager ready to move on

RESORTBROKERS.COM.AU 39

Editorial

of the Brisbane motel market over the five years to March 2012. By 2010-11, Brisbane’s average motel revenue per room had returned to 2008-2009 levels, and in 2011-12 both occupancy and average daily rate were higher than pre-GFC (with revenue per available room over 11% higher than 2008-09). Following this strong improvement in the trading environment, the sector began attracting new interest from purchasers. This renewed interest, combined with a number of vendors who had been awaiting improvement in the market for an opportunity to sell, has lead to an increase in the number of transactions of motels at all price points; in metropolitan and regional locations; and of going concern, freehold investment and leasehold interests. The going concern market has had a number of recent sales, which have mostly been in the lower price range (sub-$3 million). Yields on recent going concern sales have generally ranged from 12% to 14%, with yields below this range for entry-priced ‘lifestyle’ investments, and yields at the upper end of the range being for secondary motels or those in difficult operating markets. Demand has been particularly strong for going concern motels in the lower price ranges. Demand still exists in the higher price Brisbane motels, private hotels & guest houses range (say $5 million-plus), ADR & RevPar although there are a number of recent examples where $126 $119 larger motels have achieved $114 $114 $108 a stronger result being $91 ‘split’ with the freehold and $82 $82 $81 $74 leasehold interests sold separately.

Brisbane motel market update OWEN BARBELER - M3 PROPERTY m3property have been long-time subscribers to the Informer, and are pleased to be able to make a contribution to the magazine. For our first contribution, we provide readers with our analysis of the Brisbane motel market, which has been a very interesting and active market in the past 12 months. 2008 TO THE PRESENT MARKET The period leading up to 2007 and 2008 was very strong for Brisbane motels. A strong trading environment, coinciding with a property boom, resulted in motels being tightly held and in high demand. This market continued even into the early stages of the GFC. Although motels took a little longer to be affected, in 2009 and 2010 we saw a downturn in trade, and at the same time an increase in motel listings. Vendor and purchaser expectations were not always aligned, and through this period a relatively low volume of activity continued to prevail. However during 2011 many motel operating markets have improved and this has continued into a much more positive market in 2012. The graphs below illustrate the average daily rate (ADR), accommodation revenue per available room (RevPar), and occupancy performance 40 RESORTBROKERS.COM.AU

$140 $120 $100 $80 $60 $40

The leased investment market has been strong, $0 although this is the Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 sector with the fewest RevPar ADR opportunities available. The appeal of leased motel Brisbane motels, private hotels & guest houses investments is based around Houses Occupancy 100% the long lease term as well as secure tenants who 80% have made a substantial 75% commitment to the premises 71% 72% 68% 60% 65% in acquiring or setting up their business. In the 40% current market, purchasers are actively seeking quality 20% motels leased to good 0% operators, where the Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 business has a solid trading history, and the rent is at an affordable level. Our analysis reveals m3property Research Source: that over the past two years, yields for Australian Bureau of Statistics investment motels have ranged from Note: Data is for ‘Motels, Private Hotels, 8.25% (for high quality properties) to and Guest Houses’ with 15 or more rooms 9.75%. High quality Brisbane motels in $20

strongly performing precincts are currently at the lower end of that range, and it would be a lesser quality asset or one with lease security issues (such as a short remaining term or high rent) at the upper end of the range. As usual, the leasehold business market has been the most active, in part due to going concern vendors choosing to sell their business and retain the remaining freehold subject to lease (including for retiring moteliers). Current yields are generally in the 25% to 30% range (or exceeding 30% in less desirable markets or where significant food and beverage operations are included). The improving trading environment has proven appealing and there is currently strong demand. However, we find potential lessees are unwilling to make a commitment without paying attention to the fundamentals of a consistent trading history, a long remaining lease term, reasonable lease conditions and an affordable rent. In circumstances where there have been trading issues, we have seen vendors of new leasehold interests offering creative solutions such as lower commencing rents to allow the new business operator to rebuild trade. OUTLOOK Although strength has returned to the trading environment, we are still unlikely to see significant new development in the near future. The limited scope for new competition is a positive feature of this market for existing owners. Demand is currently strong, but purchasers are still taking a considered approach. Buyers are paying attention to the fundamentals of location, asset quality and proven trading history. In this market, it is important that vendors are properly prepared for sale, as purchasers expect good quality information to make their decision. For lessors and lessees, both parties are looking for a long remaining lease with reasonable conditions and an affordable rent. Properties that don’t meet these criteria will still attract a buyer, but only when priced accordingly. In our opinion, the most likely outlook is for a continuation of the current market. A good level of transaction activity is occurring, as a result of vendors with realistic expectations meeting with good demand from purchasers drawn to the solid performance of the motel market. If you have any questions about this article, or if there is a topic you would be interested in hearing the viewpoint of a valuer in a future article, please contact Owen Barbeler. 41 RESORTBROKERS.COM.AU

The motel lease other important issues DAVID BURROUGH - HILLHOUSE BURROUGH MCKEWON Our previous articles have considered the some important issues to be addressed in a Motel Lease. This article brings us to the conclusion of our detailed examination of the Motel Lease, however before we conclude, it is worth mentioning in summary some of the other issues that should be considered when negotiating a Motel Lease. 1. Insurances Generally the tenant will be required to take out and maintain certain insurances. For example: (a) public risk insurance; (b) plate glass insurance; (c) building insurance; (d) landlord’s loss of profits insurance; (e) workers’ compensation; and (f) all other insurances reasonably required in connection with the Motel 2. Liquor Licence If the Motel is licensed, the lease should contain provisions to protect the liquor licence. For example there should be requirements that that tenant: (a) strictly comply with the Liquor Act; (b) do all things necessary to keep the liquor licence current (including making applications for renewal, complying with all provisions of the Liquor Act); (c) forward a copy of all information supplied by the tenant under the Liquor Act to the landlord. 3. Damage Destruction or Resumption Generally if the Motel is destroyed or damaged the lease should require the landlord to, within a certain period of time, decide whether to reinstate or repair the Motel. There will be no obligation on the landlord to re-instate the motel and if the landlord decides not to reinstate the Motel then either party should have the ability to terminate the lease. If the landlord decides to reinstate the

Motel, then the lease should contain obligations for those works to be completed in a timely manner. 4. Abatement of Rent If the Motel is destroyed or damaged the lease should provide for an abatement of rent and outgoings so that the tenant is not obliged to pay the rent or outgoings until the Motel has been reinstated. If the Motel is partially damaged, the lease should provide for a partial abatement of rent and outgoings. 5. Default As with any commercial lease, a Motel lease should clearly set out the circumstances in which the tenant will be in default of the Lease and the consequences of any such default. 6. What happens at the end of the Lease A Motel Lease should set out what is to happen at the end of the lease. For example, the tenant will generally be required to: (a) vacate the Motel; (b) leave the Motel in the condition required by the maintenance clauses; (c) transfer the business name and any licences (including a liquor licence) to the Landlord; and (d) provide to the Landlord the full trading figures for the Motel for certain period of time. If the Motel Lease requires the landlord to purchase the tenant’s property at the end of the lease (as discussed in our last article) then it is important that the lease specify that the tenant must not remove that property from the Motel. As mentioned above, this brings us to the end of our detailed consideration of the Motel Lease. Our next few articles will consider the issues to be considered when purchasing a motel business (freehold and leasehold).

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INCREASED NETT!

n the last edition of The Informer, we advertised Magic Mountain on an estimated income of $450,000. New accountant verified figures show that this iconic property is on the rise. Even though the income has now risen to $504,000, the vendor has only made a slight price adjustment. This fantastic opportunity now shows a massive 18.3% return on investment (including real estate), with the business being offered at a 4.3 X multiplier. We defy you to find a better return anywhere on the Gold Coast! In addition to this, there is substantial scope to increase the income. We believe a marketing savvy manager would be able to drive occupancy of the holiday units substantially. There are also numerous externally managed units to retrieve. Maintenance income is comparatively low for a complex of this size. Option 1 – purchase 50% of business and real estate for $1.4M. Earn $100,000 management salary + 50% of remaining profit = net income of $302,000!!

42 RESORTBROKERS.COM.AU

Stop press! We made a mistake UNRIVALLED RETURN FROM GOLD COAST ICON Option 2 – purchase 100% of business and real estate for $2.745M, with a net income of $504,000. • Massive Body Corporate salary of $249,309 per annum ($1,651 per unit, CPI linked) • 151 units - 26 in holiday pool, 33 in permanent pool, 17 lock-ups, 47 owner occupiers. • 27 units managed by outside agents – big potential upside to letting commission. • Spacious 3 bedroom manager’s unit with garden / courtyard - CBRE valuation at $435,000 • Well-presented, large reception and separate office – CBRE valuation at $125,000 • Very motivated vendor – this property is priced to sell!! All serious offers considered.

Glenn Millar EXCLUSIVE AGENT Mobile: 0412 277 804 Brisbane office: (07) 3878 3999 Email: glennmillar@resortbrokers.com.au

Alex Cook EXCLUSIVE AGENT Mobile: 0467 600 610 Brisbane office: (07) 3878 3999 Email: alexcook@resortbrokers.com.au

Nett profit: $504,000 PRICE: $2,745,000

REF: MR001953

Are you buying or selling Caravan Parks, Motels, Management Rights or Hotels?? David Burrough and his team are the most respected legal advisors for those about to buy or sell an accommodation business. Why not give them a call today?

T: (07) 3220 1144 E: email@hillhouse.com.au

www.hillhouse.com.au Many thanks to Queensland Tourism for providing the image of Brisbane

Letter to the editor THE RESORT BROKER’S INFORMER IS DELIGHTED TO PUBLISH IT’S FIRST LETTER TO THE EDITOR Dear Sir or Madam, Thank you for the July 2012 edition of Informer which I read with interest. I am writing to you in relation to the editorial article by John Mahoney. I am going to agree with many of his comments but strongly disagree, with reasons, to some of his other comments. As it happens I am a client of Mahoney Lawyers and I have put in an application to work there but I have never actually met John Mahoney. I concur with a lot that Mr Mahoney says in relation to expectations and the carrying out of caretaking duties. I too have seen some complexes where I think that the caretakers do too little and it shows. Recently I spoke to one who said that rather than clean the barbecues he locked away the gas bottles and charged a $50 deposit to get them out for a resident to use. Others refuse to look after the pool or just do a poor job of everything. ln a recent ARAMA survey more than 80% of caretakers thought that training for committee members should be compulsory but perhaps there should be compulsory training for caretakers too. I also agree with some of the comments made in respect of marketing of management rights. Caretaking a complex is reasonable money for what should be a reasonable amount of work. Too many agents make the work out to be far less than it really is. lf you excuse the phrase you are in ‘dire straits’ if you think that management rights is ‘money for nothing’. The real lifestyle benefits of this industry include the commute to work and the ability to control your schedule. Not having to travel in the rush hour to get to and from work saves time, money and stress. Until you change to working for yourself at home you really can’t imagine how much better life is without the commute. Control of your schedule is the other great benefit. lf you want to play golf or go fishing on Tuesday then do the mowing on Monday or Wednesday. The work still has to be done but you control when. lf you want a few days off then get everything done and shiny and disappear for a while. Go shopping when the shops are quiet, book your car in for a service whenever it suits, not just when you can spare it. You can easily save 15 hours or more a week just in the commute and being able to do tasks when others cannot. How much better to play a leisurely round of golf on a Wednesday than to be part of a huge line up on a Saturday? When agents tell prospective buyers that there is ‘only one day a week’ to work at a complex the buyers look at them sideways. We did and I’ve see prospects who have been brought here do the same. No one will believe that you will get very well paid for next to no work. lf agents stressed the benefits of the commute 44 RESORTBROKERS.COM.AU

and control of the schedule the prospective buyers would find it easier to believe. That brings me to the point where I am in furious disagreement with Mr Mahoney. lt’s about the money. lt’s also about the concept of ‘time and motion’. Mr Mahoney uses an example of a remuneration of $125,000 suggesting about 80 hours work per week. His maths is correct, at $30 per hour it does work out to 80 hours per week. The problem is that time and motion and applying an hourly rate only tells half the story. lf a lawyer charges you $300 per hour it’s not because that’s what he gets paid and the same applies to a plumber or electrician who charges about $90 per hour. All these people have business overheads, offices, vehicles, telephones, bookkeepers or storerooms to pay for. WELL SO DO OWNERS OF MANAGEMENT RIGHTS BUSINESSES! That’s right. Caretakers have overheads too. To get back to Mr Mahoney’s example a couple getting $125,000 per annum cannot put 80 hours a week into the place or they would starve. To get that remuneration they would have had to pay close to $600,000 for the business at a 4.8 multiplier. They either have to borrow that sum, use their own capital or, more likely, a combination of both. Either way they are either paying interest or losing interest income on that sum. That is an expense of $50,000 per year before they pay anything off the loan. So, this couple is really getting $75,000 for 80 hours work a week. Out of that they have to supply an office and provide a vehicle, they have to equip the office and supply tools and equipment. They may not have to pay for consumables but many caretakers do have to. Then they have to have a place to live and to put food on the table. I deliberately have not mentioned letting income because the caretaking has to stand alone. Letting pools come and go so the income is not guaranteed, there is additional work and there are expenses to go with the letting income which is another reason to leave it out of the equation. Barry Turner agrees that caretaking income must stand alone. Which brings me to ‘time and motion’. ln my view it’s the people doing these studies who come closest to getting ‘money for nothing’. ln reality any experienced caretaker can walk around a complex and come up with a fairly accurate estimate of the work that has to be done and the time that doing that work will take. There is no magic in listing duties and times. Using a list makes sure that you are less likely to miss things so that is handy. Even if the time and motion study is useful it only tells half of the story because Barry

Turner and David Leary both ignore business overheads or give them only a cursory and partial mention. Having a study that tells you how many hours you need to provide an office that is open without providing for the expenses of paying for that office is of little use. ln the same way a study that allows for you to spend one hour per week taking rubbish to the tip without including any allowance for the cost of providing a vehicle to use is also of limited use. So the lawyer who charges $300 per hour probably pays himself less than $100. The plumber and electrician probably pay themselves less than $50 per hour. lf we take reasonable overheads away from Mr Mahoney’s example but stick to the 80 hours we end up with about $14 per hour. That’s because just like the lawyer, the plumber and the electrician we are business owners too. We are not employees of someone else. ln fact, although we have not had to put ourselves through university or through an apprenticeship we’ve paid for our business with money rather than time and the cost is high. A better way of looking at Mr Mahoney’s example is that a caretaking remuneration of $125,000 should lead to an expectation of between 30 to 35 hours per week of actual task performance. And it’s amazing how much can be done in that time. I am involved in the caretaking of two complexes each of over 100 residences and both built in the old way with lots of open space and facilities. We receive compliments in relation to each of the complexes and neither of them require more than 30 hours per week in actual caretaking. With respect to Mr Mahoney most of the remuneration reviews that are conducted are the ones within the statutory period. So you have a caretaker in place who has financed and bought a certain income. lf that caretaker can justify an increase in remuneration it’s win-win for him. He will get extra income that he has not had to finance and, when he sells the business, he will make extra profit because of the multiplier. ln this scenario using someone with a reputation to justify the hours is more likely to succeed than simply doing it himself. It’s credibility rather than actual ability. But, even so, the numbers that the time and motion people will come up with are still wrong because they still don’t take into account overheads. I think that time and motion people should just do that. Provide a proper business valuer with the results of their calculations and then stay away from the money side of the valuation. Or take proper note of overheads and include them in the calculations. Management rights is a great industry. You buy yourself a job with great lifestyle benefits. You get a reasonable income for a reasonable amount of work and you get to write your own work schedule. You don’t have to worry about being made redundant by your boss. Thank you for your time, Peter Hales LLB, Bayside Central

Industry Specialists

THE MANAGEMENT RIGHTS LAWYERS Servicing resident unit managers throughout Queensland and New South Wales Brisbane 07 3007 3777 Level 15, 167 Eagle Street Brisbane Q 4000

[

Gold Coast 07 3007 3777 Corporate House, 155 Varsity Pde, Varsity Lake Q 4227

RESORT MANAGEMENT ADVISORS

SPECIALISTS IN: Review of operations | Pre-opening planning Owner representation | Operations management For professional assistance contact: tjshort@attglobal.net or phone 0413 752 717

Circulation 7,500 - mailed hard copies 15,350 - sent digitally We believe 50,000 people in the industry across Australia and New Zealand will read this publication (it is widely regarded that at least 4 people four people read one copy of a magazine).

Prepurchase advice, preparing for sale, rent assessment, and valuation panellist for a wide range of banks.

Owen Barbeler (07) 3620 7900

Owen Barbeler

Brisbane T: 07 3620 7900 E: owen.barbeler@m3propert

Management rights experts

Associate Director

Getting the right legal advice is critical - don’t put your management rights investment at risk. Frank Higginson, Sharon Flood and the team at Hynes Lawyers can assist you with all your management rights needs. Frank Higginson frank.higginson@ hyneslawyers.com.au

Sharon Flood sharon.flood@ hyneslawyers.com.au Qualifications

Owen has worked in the valuation industry

Owen has experience across many types of accommodation properties including hotels, motels, resorts, student accommodation, management rights and affordable housing. He also has expertise in the valuation of service stations, and has provided valuation advice to oil companies, major fuel retailers and distributors (including large portfolio valuations), along with single and multi-site owners. Owen has valued many unique and specialised properties which have included marina, education and airport assets. He undertakes valuations of freehold, leasehold and going concern assets in all parts of Queensland and interstate. Owen prepares valuations and advice for first mortgage security, financial reporting, acquisition and disposal purposes, and also assists owners of specialised properties in matters such as development feasibility, rent assessments, resumption compensation and disputes.

Buying or selling Hotels Caravan Parks, Motels, Management Rights? Call (07) 3220 1144 or email@hillhouse.com.au

www.hillhouse.com.au

> Bachelor of Business

since 2002 and specialises in going concern Subscribe to our newsletter at marketing@hyneslawyers.com.au. Management (Real E valuations.

Would you like to promote your company here? You will see a range of industry specialists are advertising in our widely read Informer.

Valuations and Property Advice Specialists in Accommodation Properties and Businesses

Development), Unive Queensland

> Associate of the Aus Property Institute (AA

> Certified Practising V

> Certified Practising V (Business)

> Registered Valuer, Qu > Registered Valuer, New South Wales

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RESORTBROKERS.COM.AU 45

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Trade Page GOT A PROPERTY & WILLING TO TRADE? WELCOME TO OUR NEW PAGE ALL ABOUT TRADES

WATERFRONT MANAGEMENT RIGHTS – JUST $2.5M A real opportunity arises for a passive investor to buy this outstanding business making 575k per annum after management. Vendor will trade a home or unit on the gold coast up to $1M.

BRISBANE BAYSIDE MANAGEMENT RIGHTS Fantastic permanent management rights in Brisbane’s very popular Bayside. Excellent easily run complex. No set hours. Friendly community. Come and enjoy the sea breeze and relaxed lifestyle. Net $81,000. Will trade a motel lease or home of similar value. Price $779,000

WILL TRADE HOUSE OR APARTMENT IN AUSTRALIA Long agreements, located in Cairns the complex has 24 units and caters for both long and short term stays. It is centrally located. Property features include a pool and spa & BBQ area. Mgr’s 2 bedroom freehold apartment with granite bench tops, modern appliances Nett $209,000 | Price $1,095,00

Ian Crooks - 0411 171 648

Steve Campbell - 0407 220 668

Shane Mullins - 0447 185 001

ARCHITECTURALLY DESIGNED HOME WITH OCEAN VIEWS Full fenced property, very peaceful, but not isolated. Expansive, uninterrupted ocean views. 12 minutes from Robina shopping centre and 20 minutes from beaches. House designed by Paul Uhlmann Architects. 4 bed and 4 bath on 9 acres. Will trade!

SEAVIEW APARTMENT IN GRAND MARINER Stunning views, 3 bedroom plus large office, or 4 bedrooms, oversized master suite, 12m marina berth, only two apartments on floor, 4 wide balconies with shutters and 24 hours manned security. Will trade!

HAVE YOU THOUGHT OF A SEACHANGE TO TASSIE? Sleek architect designed contemporary residence. Absolute privacy on this 6700 sqm parcel of perfectly flat land. 460 sqm floor area of 5+ bedrooms with indoor/ outdoor living surrounded by beautifully landscaped gardens & pool. 15 minutes to Hobart CBD. Looking for MR in Qld or Nth NSW Price $1,350,000

Ian Dore - 0412 752 238

Jim Chapman - 0413 444 782

WILL CONSIDER TAKING PROPERTY AS PART PAYMENT Unique natural bush land up-market resort in south coast, NSW. 3 Bedroom manager’s residence. Has to be seen to appreciate the property & potential. Prime position close to town with very motivated vendor. Generous training period & some vendor finance Huge 100 acre block of land Price $2,600,000

WILL CONSIDER HOUSE OR LAND TRADE UP TO $600K On offer is an extremely solid MR business, along with manager’s unit, at northern end of the Gold Coast. 147 perm. residential units, 98 of which are in the letting pool. Brand new 25 year agreements agreed in 09/11 Very wellpresented 3 bedroom stand-alone manager’s house. Nett Profit $305,000 | Price $1,795,000

FREEHOLD MOTEL - CONSIDER HOUSE TRADE ONLY On offer - the freehold interest of an 18 unit motel, 2 bedroom owners’ accommodation, licensed restaurant and in-ground pool. Recently refurbished through-out, the current vendors are ready for their next challenge. They will consider all trades on houses only. Turnover $750,000 | nett $460,000 | Price $2.2m

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