Tips for Buying & Selling Caravan Parks

Tips for buying a caravan park

CRE Brokers are specialist Business and Property Agents dedicated to the Tourism and Leisure sector. Operating Australia-wide with established offices in Queensland, NSW and Victoria, CRE has a dynamic team of brokers and admin staff underpinned by three generations of experience in the sales and operation of businesses and properties.

So you want to be a caravan park owner?

When buying a caravan park business ensure you are open minded. Of course you can have your wish list but be prepared to have a look at any good business opportunity.

What qualifications do you require?

While there are normally no formal qualifications needed to own a caravan park, there are a number of courses and skills that would be of benefit. These include first aid, marketing, bookkeeping and good handyman skills. There are a number of caravan park management courses available also that can be very beneficial for first time caravan park owners. The added benefit with using CRE Brokers, is that a number of the brokers are past owners and operators of caravan parks, so you are assured ongoing support following your purchase.

As per any hospitality business, the first and most important attribute you must have is a friendly and hospitable nature. To be successful, we believe you need to adopt the attitude that you are welcoming guests into your own home.

The second most important attribute you need is a basic understanding of running a cash flow business. A specialist caravan park accountant can set up accounting systems and business plans for you.

What am I looking for and how much can I afford to spend?

This is the first critical factor you need to consider. This question really needs to be addressed prior to commencing your search. While your broker can give you a general indication, there are many important factors to consider and therefore we strongly recommend that you discuss your finances with a specialist caravan park accountant and specialist finance broker. The amount you spend will depend on whether you are buying a freehold going concern or a leasehold business.

Leasehold Business vs Freehold Going Concern

As a general rule, when buying a caravan park it is the business that generates your investment return. The park, freehold or leasehold, is valued on the performance of the business.

If you own a freehold caravan park, the value of that park is still based on the profitability of the business, unless, in some cases the freehold property has a higher and better use.

For example: an older park on a large block, well located in a thriving town is competing with newer, more visible caravan parks and therefore must keep its tariffs down to compete. This means profitability is unlikely to increase. The older park, being valued on its profitability, would not increase in value. However, because of its size and location, the land could have a much higher value as a development opportunity (e.g. a higher and better use), or capital improvements.

If a caravan park is valued based on the business profitability, then a reasonable question would be, “why not just own the business portion, i.e. the leasehold business?”

With a leasehold business you own the business goodwill, chattels, plant and equipment and through the lease document you have the right to operate that business at the freehold property for the term of the lease and any further options.

The value of the leasehold business usually diminishes as the lease term gets shorter. However, there are exceptions to this where the value can increase. For example: a leasehold business is purchased for $400,000 and shows an E.B.I.T.D.A. of $100,000 (i.e. 4 times E.B.I.T.D.A.) with 23 years available on

the lease. After three years, with 20 years available, which is still regarded as a good long lease, if the E.B.I.T.D.A. has been increased to $120,000, the value of the business could be $480,000 (four times E.B.I.T.D.A.).

A leasehold business should provide a yield on investment of between 20% and 35% after taking into account all operating expenses including rent to the landlord. However, it will normally be a diminishing asset and not provide any capital gain, unless the E.B.I.T.D.A. has been increased.

A freehold going concern should generally yield between 8% (eg. A larger coastal property) and 20% (eg. A smaller regional property), after accounting for all operating expenses (exceptions would be properties with high underlying land values). Providing the profitability keeps pace with inflation, it will normally be an increasing asset and thereby provide a capital gain.

There are a number of factors that affect the investment yield percentage for both leasehold businesses and a freehold going concern. These are explained in more detail in the complete copy of CRE Brokers “Buying a Caravan Park”. Other topics covered include: Should the Park be in a Chain or Group; How is a Park Valued?; The Lease Document. To request a copy, please write to admin@crebrokers.com.

TIPS FOR FINANCING CARAVAN PARKS

important one. There’s no point in looking at $2m parks if you don’t have the financial firepower to get a deal done. We will assess your financial position and tell you what you can spend. In doing so we consider current bank policies, your individual position, and your relevant experience. If you’ve got equity in property, we look at how much money you may have access to by using that property.

Whether you’re a first timer or a seasoned industry professional, some or maybe all of these tips are worth considering.

With a national client base and a lifetime in finance we’ve seen it all. Ok, some things still surprise us, but with a bit of pre-planning it’s possible to manage the process in a relatively stress-free manner.

By necessity this will be brief. Our services are fee free, and we are happy to provide more detailed information and assistance as required.

Our team are just a phone call away. And now, without further ado, let us begin.

Get Pre-Qualified

Every journey starts with a first step, and this is the most

As part of our calculations, we consider purchase costs, ongoing working capital allowances and any immediate capital expenditure required to maintain profitability.

Importantly, don’t assume your equity position is the value of your property less what you owe. Banks usually lend a maximum of 80 percent on a residential property less any existing debt.

Of course, maximum purchase price calculations are theoretical only. It’s one thing to know you can spend $1m, but if the property you fall in love with makes no dough, then debt servicing capacity may prove hard to demonstrate. Potentially not the end of the world but please don’t take maximum purchase calculations as a fait accompli.

Our advice, once you know your price range, is to decide your purchase parameters, engage an industry expert sales broker and go hunting. Once

you find a suitable opportunity ask your broker to send us the Information Memorandum and Profit and Loss Statement. We will review this information, calculate equity and debt service numbers, and provide you with feedback. If we see anything odd in the data, we will discuss this with you. Our job is to help you to be successful so anything we note that might present a higher than usual risk we have a duty of care to point out.

The Finance Process

Once you have an offer accepted the real fun begins. We will gather all the information we need to complete our finance tender document. We use that information to invite suitably qualified lenders to tender for your business. We then collate those tenders and present them to you. We will point out the pros and cons of each proposal and assist you to come to a decision.

Once a lender is engaged our senior brokers and our support staff will work with the lender to guide the application through to approval and settlement. In doing so we will work with your lawyer and accountant to ensure key critical dates in the process are met. In the event of any speed bumps, and only with your permission, we will keep your agent informed of progress. An effective agent can be invaluable in any negotiations during the process.

A Word on Loan to Valuation Ratios

Please know that these are guidelines only. 50 percent for leases and 60 percent for freehold going concerns. High quality transactions may attract higher LVRs. Passive freehold investments are very much on an individual transaction basis, call us. Same goes for interest only terms on all asset classes. If you want interest only, tell us early and we will factor that into our calculations. Interest only terms are very much transaction centric and may not always be available.

A Word on Business Plans and Cash Flows

Particularly for first-time operators, a convincing business plan and realistic cash flow forecast will be very well regarded by lenders. We can help with your business plan and your accountant can assist with a 12-month cash flow forecast. We encourage our clients to have a crack at their own forecast as the process can be of great assistance in better understanding the business. Please don’t do one month and then cut and paste that into the next 11 months. Business doesn’t work that way! In closing, we love caravan parks. Never had a client go broke in one and not planning on starting now. Happy hunting and we are here to help.

Mike Phipps, Mike Phipps Finance

Tips for buying and selling caravan parks

When selling or buying a caravan park, it’s essential to determine the nature of the transaction, whether it involves the leasehold or freehold. Freehold encompasses the land itself and the assets fixed to it, while leasehold includes assets like plant and equipment and the business name/intellectual property, along with the right to occupy the property under the lease.

By Richard Cook, Director, Fishburn Watson O’Brien

General Due Diligence

For buyers of caravan parks, doing the correct due diligence and understanding the business is fundamental. It’s also essential for the seller to understand this, the buyer needs to review all of the up to date business/ financial information, and if the seller doesn’t have this information ready and available the sale will be delayed or could be terminated.

Most contracts will include a due diligence period (e.g. 30-90 days), before they become unconditional. The due diligence program that should be run will depend on the state the park is in, the type of park and what’s being sold. Commonly our investigations will cover items such as; reviewing lease terms, local council and state approvals, insurance requirements, asset and land ownership structure including restrictions on title, occupancy agreements, employment contracts, potential for subdivision of land, taxation and duty consequences, financing and mortgaging requirements.

Top Tips

Over the years, I’ve noticed that the following four items consistently create issues for our clients in this field, and although not separately addressed below, we are quite recently witnessing notable challenges concerning

landlords and tenants obtaining products liability insurance. Several insurance providers are declining coverage, citing factors such as the park’s location in flood or bushfire-prone areas, among other reasons. These complications can be addressed but are introducing an additional layer of complexity to the sale and purchase of both leasehold and freehold interests, which parties should be aware of.

1. Lease Terms

Whether you are selling or buying the leasehold business the lease must be carefully considered, it’s essential to know about the rent and its increases, how long the term is, who repairs what and guarantees required, just to name a few.

Two commonly overlooked aspects for both sellers and buyers are the make-good/ redecoration obligations and the landowner’s first right of

refusal. Typically, the landlord may decline consent for lease transfer if the premises redecoration obligations are incomplete, normally sellers in the scenario are left with the options of giving money to the landlord to complete the works, or pushing the consent refusal dispute through the courts (both of which could be costly).

The first right of refusal by the landowner is frequently overlooked. I’ve acted for clients who’ve established an informal agreement with a prospective buyer only to later discover the requirement to offer the business to the landowner, resulting in the termination of that agreement upon acceptance by the landowner. Missing this clause and proceeding with contracts may force the leasehold seller into a situation where they are required to sell to two different parties, risking a court dispute and potential damages.

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Real Expertise. Real Results.

The Firm

Fishburn Watson O’Brien (FWO) has a strong commitment to the industries we specialise in and we are dedicated to achieving our clients’ objectives, which is why our clients stay with us for the long term.

Our extensive history of assisting commercial clients in securing and managing pro table land and business investment ventures underscores our expertise. We offer comprehensive business solutions across various sectors within the tourism industry.

With well over 30 years experience, FWO’s skills base and reputation is founded on its 4 accredited specialist lawyers including areas of Business and Property Law, Wills and Estates, Planning and Environment and Commercial Litigation.

Motels, Caravan Parks and Hotels

FWO has a thriving Motel, Caravan Park and Hotel Practice led by Richard Cook and John Watson and comprising two senior lawyers and two senior support staff.

Over the years, our extensive experience with Caravan Park and Hotel Owners has granted us deep insights into not only their existing business strengths and weaknesses but also their future considerations.

For decades, we’ve provided guidance on the structuring, growth, administration, acquisition, planning, construction, nancing, growth and divestment of signi cant tourism ventures spanning various segments. Our portfolio ranges from advising on caravan parks valued at over $50 million to assisting familyrun country motels across regional NSW and QLD.

What distinguishes FWO is our commitment to assisting and value adding to clients businesses, highlighted by our retention of Law Society Accredited Property, Business, and Planning Specialists. This dedication ensures that our reputation isn’t merely self-proclaimed but formally recognized by the Law Society of NSW accreditation system.

Critical to a successful Motel, Hotel or Caravan Park transaction are the following elements, all of which the FWO team has vast experience in:

• Reviewing and assigning leasehold interests;

• Complying with going concern GST provisions;

• Transferring Liquor Licences;

• Financing/Mortgaging requirements, including agreement between Landlord and Tenant’s Banks, security over leasehold interests and business assets;

• Taxation and stamp duty issues;

• Structuring for purchasing entities;

• Insurance requirements;

• Employment contracting matters;

• Asset sales and purchasers;

• Restraint and Finance Deeds;

• Subdivision and land development processes (including easement creation and removal); and

• Franchise Agreements and Transfers.

How can you get in touch?

Anyone who has legal queries can contact us by emailing the team on info@fwolaw.com, by phone on (02) 6650 7000 or via our website www.fwolaw.com.

Locations

Sydney: MLC Centre, Level 57, 25 Martin Pl, Sydney NSW Coffs Harbour: 134 West High Street, Coffs Harbour NSW

2. Lender considerations

Most buyers will require finance to assist with the purchase, where the buyer is buying the land and business usually there won’t be an issue as the lender can take a mortgage over the title of the land. However, where a buyer is taking the leasehold only then the lenders can be trickier to deal with.

It is common for a lender to require a mortgage over the leasehold interest of the business, and a security interest registered on the Commonwealth Personal Property Securities Register (PPSR) over the assets. This means that the buyer has to get the landowners permission for the mortgage to be registered. The buyer’s lender will require that it and the landowner enter a Deed of Entry providing the lender the right to enter in possession of the business and in some cases deal with the business assets. The landowner will often have issues with agreeing to this power – the Deed of Entry has to be carefully considered by all parties.

3. GST – Going concern provisions

Although this law has been in operation for over 20 years it can still cause sellers and buyers difficulties and expose them to significant extra expense if not considered properly. In the sale of a leasehold caravan park business the issue isn’t that difficult, the seller should sell all things necessary for the continued operation of the business, that being the assets and the right to use the premises through the transfer of the lease. For the sale of a freehold business, determining the necessary elements for its ongoing operation can become complex. The contract should explicitly address this issue, including provisions for potential disagreements with the ATO. In such cases, it’s not about the premises needed to continue the business but what additional requirements are essential. In a recent business park transaction I handled, the approval for use came with non-transferable conditions. This ultimately led to the inability to use the going concern provisions, which also

negatively affected assessed stamp duty and buyer financing.

4. Warranties in the contract

Arguably, one of the most important factors of any contract of sale for a caravan park is in respect of what warranties are included, and which aren’t. Warranties are promises made by a seller about the quality and performance of the assets being sold and commonly include the seller’s capacity to sell, business assets and encumbrances, plant and equipment, pending litigation, environmental compliance, employees/ OH&S, tax, and planning approvals, among others.

It is important to emphasise the competing priorities of the buyer and seller in respect of these warranties: Buyers – the coverage you can achieve in the contract with the warranties can act like an insurance policy for your business (minus the exorbitant premiums). This “policy” allows the owner to make a damages claim against the prior owner for a breach of a given warranty

or an action or thing done by the previous owner which was not disclosed or discoverable under the due diligence. Sellers – they typically prefer fewer warranties, which isn’t always feasible given the above. To address this, sellers should tie all warranties to the buyer’s due diligence investigations. In other words, no claims can be made if the risk of liability was disclosed to the buyer before the contract was finalised. Sellers should also consider limiting their liability for warranty breaches, such as within a 12-month postsale period and capping any breach claims at, for example, 70% of the purchase price.

Buying and selling caravan parks is a complex process, thorough due diligence is crucial and often determines whether a transaction goes ahead. However, due diligence is only one part of the equation; a well-drafted contract that addresses both discovered and undiscovered matters is equally essential. It’s advisable to seek professional guidance and expertise from the very moment the idea to buy or sell arises.

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Tips for selling a caravan park

CRE Brokers require more caravan park listings to supply the present demand

CRE Brokers offer a professional and flexible service – seeing every property and business as unique and tailoring marketing tactics to suit. From large scale national campaignsto cost effective local/state campaigns – to discreet ‘off market’ campaigns – by way of private treaty, expressions of interest, and tender or auction campaigns. CRE brokers work diligently and provide first class support from the early stages of listing, to the negotiating stage, right through to settlement. The value of the business will be assessed on criteria such as the park’s location and presentation, the quantity, quality and condition of the included plant and equipment and most importantly, the park’s historical financial performance.

Long Term Preparations

Have your accountant prepare financial statements for the past three financial years or at least for the time you have owned the property/business if less than three years. If you are selling in the second half of a financial year, have your accountant prepare interim financial reports or, at least, have the monthly sales breakdowns for the year to date. Often a good test is to reverse the roles, consider yourself to be a purchaser visiting

the property for the first time. Would first impressions entice you to buy? Make sure you have all the necessary documentation available. Our brokers will assist you with this.

Short Term Preparations

Proper accounting procedures and reporting should be put in place immediately, and remember to account for all income. Start work on the presentation of the property, establish a presentation plan, identify two categories of long term works, medium term works and short term works: those works that have to be done and those that you would like to be done.

Appointing a Suitable Broker

The Broker you choose should provide realistic advice in relation to the current market for Caravan Parks, the expectations of purchasers, and the presentation and saleability of your property/business. It is better to know the real story up front, rather than to live in hope, based on overly optimistic advice given to gain a “listing” or a long “exclusive agency” providing you with a genuine market appraisal of your property/ business in writing is essential. This appraisal should show a high and low selling range backed up by verifiable market yields.

Your Broker should have a strong reputation for following through with the sale. For example, assisting with due diligence, keeping in constant contact with the purchaser, the

Solicitors, the Accountants, the Financiers and most importantly, maintaining close liaison with you, the vendor. The Broker should attend the property on the settlement day to assist in a smooth transition. Your Broker will guide you in respect to the best method of sale: private sale, set sale, expression of interest, tender or auction. Marketing expenses (advertising, boards, brochures, etc) generally only relate to methods of sale other than private sale.

Commission rates by law are negotiable. However, it pays to remember the old adage “you get what you pay for”. A professional Broker, with access to a large database of potential purchasers can, ultimately, achieve a higher net result for you.

There are many other factors to consider when selling, these are explained in more detail in the complete copy of CRE Brokers “Selling a Caravan Park”. To request a copy, please write to admin@crebrokers.com.

New barbecues cook up a storm at Reflections Evans Head

By Grantlee Kieza, Industry Reporter

Gathering with friends and family around the enticing aromas of a barbecue is one of the most cherished Australian traditions.

Cooking outdoors, surrounded by loved ones while meeting new friends in the splendour of nature, has woven itself into our cultural fabric. It is also an essential ingredient in the holiday park experience that guests expect and regard highly.

Let’s transport ourselves to the heart of this experience at Reflections Holiday Park in Evans Head. Nestled in the picturesque Richmond Valley, this haven is renowned for its kayaking, paddling and fishing opportunities along the crystalclear waters of the Evans River. The experience has been elevated with the installation of various communal barbecue facilities supplied by the Australian manufacturer Christie Barbecues.

Reflections Park Manager Shane Ironside revealed how these Christie barbecues have transformed the park, adding a new dimension and multiple benefi ts to the business and the holiday experience.

He said that in the past, domestic barbecues posed challenges with cleaning, safety, accessibility, and energy consumption. These concerns have been addressed by Christie Barbecues, as their products are well designed and tailor-made for communal and public use.

“We installed more than 20 barbecues and cooktops, which really enhance our holiday park facility,” Mr Ironside told us.

“Some barbecues are in outdoor areas, some on our cabins’ decks, and some in public places. Then we have others in our camp kitchens.”

He explained that the barbecues are much easier to clean, economical to operate, and have several built-in safety features, including switching off automatically after 20 minutes. The simple functions mean they are easy for visitors from all backgrounds to use. They also off er fantastic versatility, capable of cooking many diff erent foods. Some cooktops even have hoods to be used as an oven.

Mr Ironside said: “Christie off ers a range of cabinets, including stainless steel accessible options that are corrosion resistant and very popular with older visitors who

like to sit while cooking. More importantly, their cooktops are self-contained appliances and straightforward to install, so we could easily integrate them into our camp kitchen and custom cabinets.

“We love the Christie Barbecues products, they’re fabulous. They really enhance the experience for our guests and the members of the public who use the park. People enjoy using them, and they provide a more premium cooking experience for everyone. Buying Australian made products from a local manufacturer means we also get incredible after sales support from the Christie team.”

Barbecues for everyone

Our barbecue cooktops are versatile self-contained commercial cooking appliances. They integrate discreetly with any bespoke project that requires a safe, reliable, and energy-efficient cooking facility without compromising on quality, performance, or aesthetics.

Christie Barbecues has been the market leader since 1965. The company’s expertise is in engineering self-contained cooking appliances that withstand heavy use and harsh outdoor environments that defeat most domestic and commercial barbecues.

Christie Barbecue cooktops are made from 90 percent recycled stainless steel. They are safer, more functional, versatile, and environmentally friendly than open fires.

Importantly, these products are well suited to the Evans Head environment. Heavily engineered and manufactured from 90 percent recycled stainless steel unique to Christie, they offer complete corrosion resistance and ease of cleaning and maintenance.

Joe McKinnon, Account Manager at Christie Barbecues, explained how Reflections installed various Christie barbecue products throughout the holiday park to fit perfectly into the overall aesthetics and to take full advantage of the park’s unique environment.

“The aim was to create functional, inclusive, and accessible spaces that exceed all guests’ outdoor cooking expectations,” he said. “We installed barbecues on the balconies of the cabins that overlook the beautiful Evans River, looking out towards the beachfront.

“The cabin barbecues were a custom installation. Architects designed the cabinetry, and we supplied the cooktops and sinks. They were built specifically to fit that space, blend in with the cabin’s architecture, and maximise the free space for guests. The barbecues look great and function well, and we worked with Reflections to deliver a top product they are delighted with.

“The barbeques are in a picturesque setting and provide a wonderful place for guests to sit around and eat while enjoying the views. The cabins are all very modern and have

a large open space on the balcony, where the barbecues really add another dimension.”

Mr McKinnon added: “We also installed our A Series accessible barbecues in the holiday park’s new play space to provide universal access for all barbecue users.”

The A Series won design awards in Australia and the USA and is included in the Permanent Design Collection of The Chicago Museum of Architecture and Design. It is wheelchair-accessible and adheres to strict accessibility standards, providing a safe and inclusive communal cooking

space. The barbecues’ design allows seated users to cook but prevents children from reaching hot surfaces. The cabinet is made entirely from 90 percent recycled stainless steel, and the contemporary design and seamless finish display no visible fixings.

“The A Series barbecue cabinets integrate well into the space at Reflections. They encourage people to stay longer and develop that sense of community around cooking food,” Mr McKinnon said.

Reflections also installed Christie’s robust Modular barbecue cabinets in their camp kitchen.

Mr Ironside said: “Installing these barbecues has transformed the environment, encouraging longer stays and nurturing a sense of community through shared meals. Whether on the balcony of cabins with river views, watching the children in the play space, or within the camp kitchen, the barbecues have seamlessly become an integral part of the Reflections experience.”

The installation of Christie barbecues at Reflections is a tale of enhanced camaraderie, embracing nature, and forging memories through the simple joy of cooking and dining together.

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For further information on advertising opportunities please contact: Stewart Shimmin on 07 5440 5322 or email s.shimmin@accomproperties.com.au

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