M A N AG E M E N T R I G H TS S POT L I G H T
DECEMBER 2021
The gold goes to Brisbane with “Magnificent Seven” ©Brisbane Local Marketing on unsplash.com
Brisbane has won the rights to host the 2032 Olympics and ten years out from the sporting extravaganza permanent management rights businesses in the river city are proving to be gold medal performers.
in Bowen Hills which are returning $1.95 million. They are expected to be the first buildings to achieve above the “Magnificent Seven” multiplier. The guide price is $14 million.
In February 2017, Tim Crooks, the Director of New Developments Nationwide, for ResortBrokers, achieved a $26 million sale to Mantra of FV by Gurner, the first Peppers in Brisbane.
“The reason it’s taken four or five years to break the previous multiplier record is because any of these permanent businesses returning more than say $800,000 to $900,000 are just so tightly held. They are such great stable businesses with great incomes and people don’t want to let go of them. It’s exciting to get another property where we can reach the elusive seven times multiplier.”
The property, spread across three towers, contained 918 apartments and 72 hotel rooms making it the largest off-the-plan management rights ever sold in Australia. There was little change from $10 million when Mr Crooks sold management rights to Central Village in Bowen Hills, a $1.5 million net profit building that went for a then record 6.6 multiplier. But Mr Crooks says in Brisbane’s booming market, that multiplier will be smashed with the sale of very large permanent management rights buildings with two body corporates
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“Already two parties have indicated they are willing to transact at that level,” Mr Crooks said.
since we set the multiplier of 6.6 and although we hold the record, we are confident we will break the record with these latest properties. It’s exciting to think we will soon reset the top of the market." While CBD properties relying on corporate travel and tourists have struggled through COVID lockdowns, permanent rental properties in Brisbane are on top of the podium as profitable businesses that continue to rise in price and popularity.
Mr Crooks said the multipliers across the industry had strengthened since he sold Central Village. “We are now selling $500,000 properties at multipliers between 6.1x and 6.4x,” Mr Crooks said. “Anything over $1 million net profit we call ‘Super Rights’, highlighting the super large properties. The market has moved on
John Mahoney
John Mahoney, a founding partner in the law firm Mahoneys, ARAMA’s top service provider of the last three years, says permanent management rights in Brisbane will “go from strength to
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strength” over the next decade. “There are more and more buildings popping up every day,” Mr Mahoney said, “and anyone in the permanent rental market in Brisbane is doing very well. “Rents are rising, vacancies are low, and the multipliers are high, so the businesses themselves are going well and they are very much in demand to purchase. “Unfortunately, those managers who have complexes in and around the CBD which are used for short-term rentals are still struggling because of the closure of the borders. They have been hit as hard as any other tourism area in Australia and have also suffered from the drop in corporate travel. “There was some response when the borders were opened, and things picked up dramatically but the borders closed again and those businesses have struggled since. “I think when the borders are reopened though, there will be a resurgence of visitors to Brisbane.” Mr Mahoney said the majority of properties under management rights in Brisbane ResortNews | December 2021
were permanent letting properties in the suburbs. “In the permanent space where there is little volatility, they represent great businesses and that is why they are in such high demand,” he said. Mr Mahoney has been involved in management rights for some 30 years.
“Some first-time buyers do not fully understand what they have bought, but that is changing fast, and most buyers now realise that you just don't buy management rights and watch the money come in. It can be hard work, and you have to work at it to keep everybody on side.”
“I got involved about 15 years after the business of management rights kicked off in the late 1970s,” he said. “The price of management rights in Brisbane was always under that of the Gold Coast and you were looking at multiples of three in those days. The multiple has more than doubled in that time and there are a much larger number of big complexes in Brisbane now generating those high profits pushing the multiples even higher.” Mr Mahoney said another major change in Brisbane property management rights in recent years has been the large number of Asian investors purchasing management rights businesses. He estimates that as much as 80 percent of management rights in Brisbane are held by Asian investors. “These buyers perceive management rights as being sound investments, looking primarily at the returns these businesses achieve,” Mr Mahoney said. “However, it is important that first time management rights investors understand how much work is involved in achieving the outcomes rather than just focus on the return. “I think word of mouth has been a biggest factor to attract Asian investors to become involved in management rights in Brisbane and there are some very active brokers selling management rights to this market. Word gets around. It is an attractive business with good returns that also meets visa requirements, and there are not too many businesses that you can buy with such big returns alongside a long-term contract with the body corporate. “However, all people investing in management rights need to understand that a body corporate is not going to pay you a $150,000 salary to do very little. ResortNews | December 2021
Trusted Business Advisors to the Management Letting Rights Industry Specialist Business Advisors to the Management and Letting Industry Robert Collins
Leading RAAS broker Robert Collins purchased rights to three high rise towers in 2003 in what was arguably the largest privately owned MR in Brisbane.
• Due Diligence Reports • Trust Account Audits • Structure Advice & Tax Compliance
As a first timer in the industry then, he says he now always recommends newcomers to the industry complete a course for new managers, such as that overseen by ARAMA. He maintains that management rights is one of the safest havens for investment. “COVID didn't affect permanent management rights in Brisbane at all, and it was the same when the GFC hit,” Mr Collins said.
Build your business Gain personalised support, proactive solutions, and trusted advice to fast-track the growth of your business. Brisbane Level 3, 345 Ann Street Brisbane QLD 4000 07 3002 2699
“What other business can you buy where a large part of your income is governed by CPI going up each year? In southeast Queensland there's less than 1 percent vacancy rate for permanent letting.” Mr Collins has sold more than 400 management rights and the multipliers are rising. “I've got one coming up which is a $700,000 income apartment complex very close to the city with a 6.5 multiplier and it will go for that as most of the big ones are tightly held and not coming back onto the market,” he said. “Two big ones I've sold were Belise which was an $8 million deal on Saint Pauls Terrace, and Harbour One and Two at Hamilton which was a $1,225,000 income off-the-plan.” PROPERTY
Smiljan Jankovic 0423 595 910 SmiljanJ@agredshaw.com.au
www.agredshaw.com.au 41
Alex Cook
Alex Cook, a Director of ResortBrokers, who focuses on larger management rights transactions nationwide, said even with COVID lockdowns, permanent letting properties had remained “very stable businesses” throughout the pandemic. “Our company was doing big management rights deals when Australia was in a national lockdown just after COVID broke out,” Mr Cook said.
©Casey Schackow on unsplash.com
“COVID hasn’t damaged their performance at all and if anything, it's probably pushed multipliers up in the permanent sector. “The six times multiplier was always a bit of a benchmark in Brisbane, but you only got to that with the really big management rights. That’s changed over the last three or four years. We sold a portfolio of three smaller management rights, three
completely different businesses - netting about $450,000 and we sold that at 6.3 times whereas going back four years you would need to be netting $800,000 to $900,000 to get that figure.
add-on businesses, properties that might be netting 60 or 70 grand with no unit attached”.
“Certainly, at the bigger end of the market now, anything netting over $300,000 profit there's very little stock and that's pushing up multipliers.”
“They are really popular,” he said, “but probably where the market hasn't grown a huge amount is the smaller management rights that are netting a $100,000 to $200,000 and where you have to live on site in a fairly expensive unit.”
Mr Cook said there had been strong activity with “little
But Mr Cook said when it came to the short-term rental buildings
Anton Chou: Key to success is finding the right guidance Anton Chou was introduced to management rights by a client who was a building manager. Anton told us: “He knew I was struggling with my worklife balance in my previous career and suggested I would achieve more balance in the management rights industry because not only is it safe and secure, but it also offers agreed hours and clear professional boundaries.
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Anton chose to buy a management rights business in Brisbane because he considered it to be a lower risk location compared to other states and the city also offered more choice of complexes.
“Robert Collins from RAAS helped me to avoid common errors and he offered guidance on the best industry training from ARAMA,” he said.
He said: “The city location was a priority, but I also wanted convenience and a lifestyle that suited me.”
“I visited four management rights business before I made my decision. To save time, I was clear on the location, and size of the business before inspecting any buildings.
Being new to the industry, Anton says the key to the success of his purchase was finding the right agent, industry professionals and vendor.
“I chose this West End building because it was at my price point, and I loved the area. It sits the centre of an exciting and developing urban hub
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with supermarkets, schools and Brisbane City all within walking distance but most of all the building’s residents are warm and respectful.” Anton believes it’s essential to meet and work with respected industry professionals so that you are armed with accurate knowledge. He added: “I was lucky to find Hynes Legal and my agent Robert Collins to give me the best advice.”
ResortNews | December 2021
funding. The debt servicing of the $1.0 million apartment plus the business essentially has to come from the net profit.
start making good returns next year once the borders open.” Brisbane rents have risen by anything from 5 to 20 percent according to Smiljan Jankovic, the Managing Director and management rights specialist for the accounting and business advisory firm Archer Gowland Redshaw.
“This means that you have to find a good deal of cash at the outset, as it’s very unlikely the bank will lend you the normal 70 percent. Businesses that have this issue were difficult to sell before the present boom conditions and now with strong market movements, it has only served to exacerbate the problem.
“The rising rents have been driven by people wanting to come to Brisbane where there's work and where there is more security,” Mr Jankovic said.
Smiljan Jankovic
in Brisbane there had been little joy and few sales during the last two years of the pandemic. “City apartments have traditionally relied on international tourism, corporate travel and major events and all three of those have been curtailed by COVID,” he said. “Fortunately, everyone knows that things are going to come right eventually. “People with short-term management rights are sitting tight and I expect they will
“There's a shortage of rental properties in Brisbane which is good for the management rights business because operators are getting more on commissions and from rentals. “The industry is going to grow even stronger in Brisbane. The Olympics will help that with more demand for properties and more focus on the city. There is also the big casino development happening in Brisbane and that's going to make the market even stronger. “Even with higher multipliers,
Greg Jorgensen
people will still be grabbing for good complexes.” Rising real estate values in Brisbane can be counterproductive in the management rights field, according to Greg Jorgensen, the founder of Management Rights Brokers Australia. “When you've got a unit worth a million dollars and the net profit is only $100,000, then you've got a more difficult business to sell, “Mr Jorgensen said, “with the principal issue being bank
TheManagement Rights Lawyers
“At the other end of the scale you have properties returning $400,000 to $600,000 net profit, and the real estate attached to it is only $500,000 to $600,000. Then you have a good level of income to service the loan. In these situations, and as long as they're reasonably priced the market is paying somewhere between a 6.0 and 6.5 multiplier. We can't get enough of properties like that to sell. “Return on investment is the key! Average returns on investment for management rights is somewhere between 15 and 18 percent per annum.” P46
MANAGEMENT & LETTING RIGHTS VALUATION SPECIALISTS
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OFF THE PLAN IMPLEMENTATION
1800 664 094
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ARAMA Service Provider of the year 2019 - 2021
www.mahoneys.com.au ResortNews | December 2021
quotes@australianvaluers.com.au www.australianvaluers.com.au AUSTRALIAN VALUERS SPECIALISE IN: Holiday Complexes Corporate Complexes Permanent Complexes Student Accommodations Manager Unit Valuations & Rights Time in Motion Reports & Rent Rolls Body Corporate Salary Market Assessments
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PROUD MEMBERS OF
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The Resort Accommodation and Sales (RAAS) Brisbane team
Robert Collins, Director of Sales Management Rights
Mathew Anderson, Senior Management Rights Broker & Unit Sales Executive
Robert Collins, Director of Sales Management Rights
Mathew Anderson, Senior Management Rights Broker & Unit Sales Executive
Robert Collins is an Associate Fellow of the Australian Institute of Marketing, with a degree in management majoring in marketing. Robert has been a fully licensed real estate agent since 2003 and a qualified Justice of the Peace. After working overseas for 18 years, running international breweries for Heineken and Warsteiner, Robert returned to Australia and in 2003 purchased the management rights of three high rise towers at Dockside, which at the time was arguably the largest privately owned MR in Brisbane. Robert and his wife managed this business for three years, after it sold Robert joined RAAS. Over the last 14 years Robert has sold over 400 MRs, this means 109 managers are currently running MR which he has sold! He is a specialist in ‘Off The Plan’ as well as both large and small management rights including some of Brisbane’s most iconic buildings, including Harbour 1 & 2 and more recently Belise, an almost 300 room corporate MR. Robert is well respected by both buyers and vendors for being frank and honest with his appraisals. Accountants, lawyers, valuers and financiers know him as a consummate professional he is happy for
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ResortNews | December 2021
Qualified in business and marketing and with a background in sales coaching and consulting, Mathew´s knack for employing the latest technologies to effectively market property gives his clients a winning edge.
Matthiew Hogg, Senior Management Rights Broker & Unit Sales Executive
you to check out his bonafides with any MR professional. Robert says: “If you are wanting to sell or buy or just have an honest appraisal of what your business is worth, give me a call.”
Matthiew Hogg, Senior Management Rights Broker & Unit Sales Executive Matthiew Hogg holds a Bachelor of Business Management (Real Estate and Development) from the University of Queensland and is also a fully licensed real estate agent (principal). Matthiew recently acquired a new management rights business after also selling his last one early in 2021 and still maintains his organically grown rent roll and property business around Brisbane. He previously worked at a
large financial organisation in their property department, at different times being directly responsible for industrial, commercial and retail properties nationally. Additionally, he has extensive experience with residential property, body corporates, management, renovations and sales. Mildmannered but determined, he is quickly building a reputation of success and cites integrity, honesty and authenticity as key to his success. He has experience working closely with stakeholders and delivering strong and positive outcomes. With his career and business experience, along with his passion, drive and commitment to helping others, Matthiew Hogg says he can help you today, so “let’s get started”.
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He says: “By harnessing the power of the marketing technology now literally at our fingertips we can optimise property campaigns to maximise results for you, in your suburb.” Mathew likes to provide tailored client property solutions in each suburb and make them stand out in the market, rather than a one size fits all approach. Career highlights include Top 100 Australia Salesperson in 2018 as well as coaching and consulting award winning businesses including Telstra Small Business of the Year 2014 NT, Winner Australian Small Agency of the Year 2015, Real Estate Institute of Australia. By keeping his finger on the pulse of the latest trends and movements in the Brisbane real estate market, Mathew offers his clients top-notch guidance from start to finish, ensuring the entire process is seamless, efficient and rewarding.
ResortNews | December 2021
01
Management Rights
Times are now a changing The Brisbane market is a changing scene, it is constantly evolving. When I first started years ago, many things went through to the wicket keeper but not today. I believe this is not a bad thing. Buyers are much better protected. I don’t think the Due Diligence accountants and lawyers have changed much but banks now take their time to do their thing. We used to get finance approvals in 7 days, now it is up to 30 to 40 days. The Body Corporate appointed lawyers were all much the same, but today their prices vary by up to 300% depending on who you get. Be wary and please talk to your Body Corporate
manager and give them 3 to 4 options so as you are not stuck with a high price lawyer. Agreements were easy to get topped up. In many cases they are still easy as long as you are a good manager. So again, I am fairly neutral on this as usually it is the average managers who have trouble. As far as the market is concerned, what we are seeing is fewer listings. Most web sites are reflecting one third of the stock that they were prior to COVID. Vendors are hanging on to their properties longer, multipliers are still going up. Management Rights has always been an industry that wants between 18% to 25% return on investment. This in essence, means the maximum any astute buyer will pay is a 6.5 multiplier for a very large income.
Buyers want 20 plus years on the agreements, preferably, no unit to buy, no office hours etc. Unfortunately, less than 5% of Management Rights fall into this category and can command a much larger multiplier.
Choose your broker carefully, check their credentials and track record. Management Rights is still one of the safest businesses to buy and gives you one of the best returns as well. I feel very fortunate that I have been involved in this industry for the last 15 years..
Brisbane Properties For Sale Wakerley
Fabulous Bayside Complex
A must see home and business with bayside living. Motivated vendor to retire. All serious offers considered You will fall in love with the Managers residence. Excellent condition. Long term (22.5 years) still to run on Agreements, great catchment area for tenants, larger than normal rental properties, no vacancies all year round close to Moreton Bay, schools and shopping centres. Excellent Body Corp Committee Beautiful & easy to run complex by one person. Do not let this one slip through your hands. Owner may have pet with B/Corp approval. Neat and tidy complex. Close to shopping centre with Medical & Dental and supermarket facilities. Both internal and external rentals are included in the price.
Contact: Robert Collins, robertc@raas.com.au, 0404 678 792
Income: $141,000 Business: $699,000 Home: $659,000 Total Price: $1,358,000
Nundah Two complexes close to each other (5 minutes apart)
These two complexes 10 minutes apart are sold as one. There is only one unit to buy and one office. Total complex could be run by one person. Manager’s unit is beautiful. Close to all transport and shopping. This is a great opportunity to purchase a bigger complex that is new.
Contact: Robert Collins, robertc@raas.com.au, 0404 678 792
Income: $286,526 Business: $1,691,000 Home: $699,000 Total Price: $2,390,000
GROW YOUR BUSINESS • INCREASE YOUR INCOME • PROTECT YOUR INVESTMENT
07 5593 0007 raasrights.com.au
management rights to recover further. Whilst they’re all experiencing solid trading results, almost across the board, potential buyers remain wary that there could be more COVID induced lockdowns. Simply, the concern is no guests equals no business.” Mr Jorgensen went onto say that Brisbane holiday/ corporate businesses are “trading their heads off and have been the last 18 months”. ©Steven Ungermann on unsplash.com
P43 “That’s a great return when considering what your money is returning in the bank right now, which is more in the 2 percent range.” Mr Jorgensen said he was optimistic about the future of management rights in Brisbane. “We've got an incredibly buoyant residential real estate market at the moment with places selling within a week or two, without issue” he said. “I'm not putting management
rights in the same category as houses or units, we are in a different world. But, when people start coming over the border again, there will be an awful lot of people coming and wanting to change their lives. Management rights could well provide them a great opportunity. “That migration is going to keep the residential real estate market very buoyant for most of 2022 and for the foreseeable future. People are going to want to live in Queensland when the borders reopen!
“The positive benefit for management rights owners, of this increased migration, will be strong rental demands and my predictions is that rents will rise markedly. Additionally, this will entice more investors into the Southeast Queensland market. “That will be great for property managers and management rights throughout Southeast Queensland and will have a flowon effect for most of the state. “I would love to see the buyer demand for shortterm corporates and holiday
The future: Professional residential complex management Duncan Allan is the CEO of Resplex, a professional residential apartment complex management business. Recently Duncan added to his company’s management rights business portfolio when he purchased two more complexes, HQ and The Edge Apartments, residential buildings located in Chermside, Brisbane. With a background in real estate and property management, Duncan told us that buying management rights felt like “a perfect fit for his skill set which were easily transferrable” to this sector. Duncan now owns six MR businesses in Brisbane, and he plans to continue to add more buildings if they fit his strict criteria.
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where he works, so that he can easily attend meetings and build relationships with the bodies corporate, residents and investors. He looks for permanent management rights buildings with a good mix of owners and investors, alongside secure rentals in a stable rental pool offering good returns for investors. He has a minimum salary that will be acceptable to him in order for him to employ staff, and he only buys the MR business not the real estate, so that they can be managed offsite.
Duncan Allan
Duncan is very clear about the management rights businesses he will consider. Location is the priority, he only buys in Brisbane because he likes his properties to be near
He said: “Agents were given my criteria and I waited for them to proactively come back to me with suitable properties. Greg Jorgensen from MR Brokers understood what I was looking for and presented HQ
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“Most of my short-stay clients are booked out for the Christmas and New Year period, plus a number of them have great forward bookings through to Easter 2022,” he said. “The 2022 Easter bookings is a strong signal of a very strong year ahead. The management rights market survived the GFC and came out of that reasonably unscathed. History is repeating itself and again we are seeing limited effects only for the wider industry. “The industry we work in is highly resilient.”
and The Edge Apartments. Once under contract Greg very much brought the two parties together as opposed to the ‘Mexican standoff ’ often experienced when using other agents. This made the process a lot more enjoyable and practical it was a real value add from MR Brokers.” Duncan recommends working with professionals who are knowledgeable about the industry. He added: “I am keen to double my portfolio of management rights businesses in the Brisbane area because I believe in the future of management rights and the strength of the rental market. I think the sector will continue to be strong. I believe owners and stakeholders want and deserve to receive professional residential apartment management. We are in this for the long haul and will continue to purchase suitable buildings when they become available.”
ResortNews | December 2021
HOT BRISBANE MANAGEMENT RIGHTS FOR SALE ENOGGERA + KELVIN GROVE – 2 X PERMANENTS
RESORT/HOLIDAY MR, TENERIFFE
SERIOUS SELLER LOOKING TO RETIRE
ILL HEALTH FORCES SALE
Enoggera Townhouse built in 2008 and consists of 39 townhouses units which 24 are in the current letting pool. All townhouse units come with 3 bedroom and 2.5 bathroom and 1 garage. Included in the sale, a larger standalone managers unit with 3 bedrooms, 2.5 bathrooms, office room, double garage, and additional designated car park space for manager. Kelvin Grove Apartments is a business only apartment consisting of 18 units with 12 units in the letting pool. The location is superb which is situated right next to QUT Kelvin Grove and Kelvin Grove college attracting both students and workers. A very small common area with minimal duties which can be easily managed and maintained.
This absolute riverfront business, offering a mixed range of lettings, including permanent, holiday and corporate, is on the market for the first time in many years. In the last 12 months the seller has obtained brand new agreements, built a brand new website with an automated booking system, experienced some sensational short-stay occupancies and tariffs - This business is humming! Unfortunately, the seller is unwell and now needs to sell. The figures have been verified by Tony Rossiter at Holmans Accountants and confirm the nett profit at $255,000. There are 22 short-stays and 6 permanent let apartments, allows flexibility to meet the short-stay market. The complex has a good mix of unit types.
PRICE:
$1,458,000
NETT:
$153,508
2 X MANAGEMENT & LETTING RIGHTS PLUS ASSOCIATED REAL ESTATE
PRICE:
$1,990,000
NETT:
$255,000
PERMANENT MANAGEMENT RIGHTS, HAMILTON
OFFERS INVITED CAMPAIGN - Under instructions from Receivers & Managers
$432K VERIFIED NET! RARE IN THIS MARKET!
• • • •
•
Two townhouse complexes Oxley & Durack - Only approx. 4 minutes apart. Caretaking & Letting Agreements • Permanent Residential Complexes Accommodation Modules • Combined Salary of approx. $105,000+GST (both sites) 3 Bed Manager’s Dwelling & Office at Oxley Site
Oxley: Has a managers dwelling and office on-title. Durack: Is a Management and Letting Rights Business Only with no real estate. Offers can be for both sites or each site individually.
Offers close Friday 26 November 2021.
For more information contact: Greg Jorgensen on 0407 721 335 greg@mrbrokers.com.au www.mrbrokers.com.au
• • •
Return on Investment of 15.4% on the business! And that assumes 100% borrowing! Exceptional permanent management & letting rights business located in Hamilton. Real Estate, a 2 bedroom apartment at $550,000, is very well priced. Salary reviewed every November by greater of 3.0% or CPI! PRICE:
$3,360,000
NETT:
$432,761
©Romain Terpreau on unsplash.com
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ResortNews | December 2021
Brisbane market update ©Kenishirotie - stock.adobe.com
The management rights market experienced a strong uptrend in buyer activity after a low point in 2013 reaching a peak in 2017. The market then plateaued over 2018 and remained steady during 2018 to early 2019. In late 2019 the market recorded historically high multipliers for management rights businesses as sales and stock levels remained tight and the number of buyers increased. This trend was temporarily suspended between March and June 2020 due to the sudden coronavirus outbreak however recent transactions indicate the management rights market has been rather resilient with minimal effect on permanent business multipliers. Initial indications are that the strength of the permanent management rights market has continued into 2021 aided by historically low business lending rates. It appears that the businesses netting above $200,000 are in high demand and attract strong multipliers. Various agents call it a “seller’s market”. Historically high multipliers continue to be paid for high netting businesses in advantageous locations, which are viewed as scarce product. We note that vendor price expectations remain high. Businesses netting less than $200,000 are generally attractive to the first-time buyers. Various agents call it a “buyer’s market”, considering the current economic climate. Given our outlook on the current market, we would recommend caution be exercised. ResortNews | December 2021
and domestic investors, with and without previous management rights experience. This demand creates a “market within a market”, which is considered to be above markets established in other suburbs.
Ekaterina Ivandikova, Australian Valuers
We note that there are areas in Brisbane which are considered to be attractive to the Asian community, which seem to be willing to pay a premium to secure management rights businesses in these enclaves (Sunnybank, Runcorn, Calamvale, Upper Mount Gravatt, Richlands and others). Long term let businesses with high remuneration component appear to be in particular demand as reported by various agents. These Asian purchasers comprise a mixture of overseas
Net Income Brackets
It appears that the management rights businesses with no requirement for the manager to reside on-site have gained increasing interest from purchasers during 2018/2019 (this trend continues through 2020) and this has resulted in a high number of transactions. These businesses are usually purchased by experienced operators who like to add another small business to their portfolio of similar businesses. There is an opportunity for the operator of multiple similar businesses to reduce operating expenses. Agents have been reporting a high amount of offers from prospective purchasers for this type of product. We also note that businesses
$0 to $200k
$200 to $400k
with high concentration of letting pool units (owned by investors) are in demand and attract higher multipliers compared to businesses with high concentration of owner occupiers. However, there is a risk that a business with 80 percent to 90 percent of units in the letting pool will gradually lose some of the units to outside agents or owner occupiers. The value of the business, therefore, may decline substantially. It appears that the management rights businesses with a caretaking only component (no letting) has gained increasing interest from purchasers during 2018/2019 and this has resulted in a reasonable number of transactions. We note that the multipliers are wide ranging which will mostly be determined on size of complex, location, whether a unit has to be purchased in the scheme and if the manager has to reside in the unit. $400 to $600k
$600k +
Gold Coast - Short/Mixed
3.98 to 4.57
4.59 to 5.43
N/A
N/A
Gold Coast - Perm
3.90 to 5.23
5.50 to 6.45
6.62
N/A
3.6
4.93 to 5.30
5.1
N/A
3.28 to 5.68
5.47 to 6.20
5.27 to 6.27
N/A
Brisbane - Short/Mixed Brisbane - Perm
3.58
4.00
N/A
N/A
Sunshine Coast - Short/Mixed
Brisbane - OTP
2.41 to 4.35
4.27 to 5.88
N/A
5.40 to 5.77
Sunshine Coast - Perm
4.54 to 5.01
N/A
N/A
6.1
Townsville - Short Term
N/A
N/A
N/A
4.9
Townsville - Perm
4.12
3.86 to 4.0
N/A
N/A
Cairns/Pt Douglas - Short
3.98 to 4.15
4.00 to 4.25
4.04 to 4.80
4.03
Cairns/Pt Douglas - Perm
3.9 to 4.14
4.1 to 4.14
N/A
N/A
* Standard Module **Large NRAS ^Not Settled
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Source: Australian Valuers
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Off the plan opportunity seized by dynamic management rights duo By Mandy Clarke, Editor
Kimi says: “The complex’s modern architecture and design, perfectly suits professional workers and families who want to reside in a quiet living space. The location in McDowall and Bridgeman Downs is always attractive to army officers (Enoggera Military is just 5km away), alongside families who want to downsize and young city professional couples seeking better value rents.”
The young and dynamic Brisbane management rights operators Kimi Ying and Kevin Li, Gold Fortune Property Pty Ltd already owned three existing management rights before recently purchasing an ‘Off the Plan’ business. Why? Because they consider management rights businesses to be “a solid and stable investment type business with massive potential”. Kimi told us: “I have been in Brisbane for many years, I really like where I live, and I believe Brisbane has a very bright future. We have just purchased our first ‘Off the Plan’ complex this year with the help of Tim Crooks and
Kevin Li
Kimi Ying
Jeff Keast at ResortBrokers. Their professionalism and deep knowledge about this industry were the keys that made everything happen.”
other types of properties, such as apartment hotels and short-term businesses but felt the ‘Off the Plan’ townhouse development offered so much more, with potential to increase the multiplier.
Kimi and Kevin did look at
Kimi also suggests that COVID attracted investors to the management rights market due to it being considered a “stable investment” and this has “pushed the current market to record high”. However, he adds: “I suspect the market will fall back a little bit and then hold at that level over the long term.”
Meet the ResortBrokers Brisbane team
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Nathan Eades
Jeff Keast
Jessie Shi
Frank Matus
Nathan Eades has established himself as one of the premier management rights brokers in Australia and he’s also widely regarded as one of the most respected and hard working professionals in the business. He has settled on more than 80 properties since starting with ResortBrokers in 2016 with a total value of more than $140 million. As confirmation of his success, Nathan was named Sales Broker of the Year in 2020 and again in 2021 by the Australian Resident Accommodation Managers Association’s (ARAMA).
He started his career with ResortBrokers just weeks before the start of pandemic border closures and lockdowns in March 2020, and Jeff Keast showed his ability and tenacity by completing some major deals during one of the most chaotic business periods in history. Cold hard results tell the story – in just over a year, Jeff has 18 properties either sold or under contract with a total value of more than $25 million. His superior negotiating skills and determination to help all parties in a deal are the key attributes which has led to his business success.
Her commitment to delivering positive outcomes for her clients has resulted in Jessie achieving more than $17 million in sales in just over 18 months with most of these deals achieved during COVID-19. For three years up until she joined ResortBrokers, Jessie owned and operated her own management rights business in the Brisbane CBD and this means she understands, perhaps better than most, what it’s like to run an accommodation business and the processes involved in buying and selling one.
Frank joins ResortBrokers’ Brisbane management rights team with perhaps the most diverse sales and marketing backgrounds, from an equally diverse range of locations, of any broker who has joined us. He’s directed numerous sales, marketing and event projects in a range of sectors such as event operations, aerospace, building, construction, information technology,, finance, gaming, mining, luxury travel, sustainability and wine. This passion to continually learn and challenge himself has led him to the Middle East, China, Europe and Australia.
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ResortNews | December 2021
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Management rights multipliers on the rise in Brisbane
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By Resort Brokers, Brisbane Team
As Australia’s longest established and most experienced specialist agency operating in the accommodation and hospitality sector, we’re finding that demand for management rights in Brisbane is at extremely high levels, thanks mainly to a combination of tightening rental vacancy rates and low interest rates for borrowers. Since July 1, 2020, the ResortBrokers Brisbane team of Nathan Eades, Jessie Shi, Jeff Keast and Frank Matus settled on 36 deals with a total value of $47 million and have another 14 under contact for just over $20 million. The reason for this? Brisbane’s rental market is experiencing one of the strongest periods in many years. Off the back of the impacts which resulted from oversupply a few years ago, we are witnessing some of the lowest vacancy
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rates and highest rents ever. The bounce back in Brisbane’s letting market has been swift and quite pronounced and hard data from multiple analytics firms, and the sheer volume of inquiries we’ve received, indicates that the much publicised over-supply of units in Queensland’s capital from before COVID-19 has now been absorbed. In June 2020, the Brisbane rental vacancy rate did blow out to 5 percent during the height of the uncertainty and that’s been dropping rapidly since then as interstate migration to Queensland began in earnest. In October 2021 it was at 1.4 percent across the city, according to SQM Research. Beyond Brisbane’s CBD, rental vacancies around the city’s middle ring remain extremely tight, and in Capalaba it’s at 0.2 percent and in Wynnum Manly it’s 0.4 percent. What we’re seeing on a daily basis confirms this. In some cases there are waiting lists for rentals and these permanent lettings don’t stay on the market for long. Based on this, we are receiving a high number of enquiries from existing managers looking to expand their portfolios
in addition to the already extensive number of people looking to get into the industry. This creates an unprecedented level of depth to the buyer market and, quite simply, this means there is more demand for Management and Letting Rights and naturally this puts upward pressure on prices. The post COVID shortage of good management rights stock coupled with all-time low interest rates has driven demand to record levels and throughout 2021 we have seen most management rights multipliers climb between 0.25X to 0.5X and much lower ‘days on market’ for nearly all sales. The ever strong Business Only category has continued to hit a note with buyers because they offer a substantially higher return and, again, this has forced multipliers further up. While 12-24 months ago we regularly saw properties in excess of $500k profit reaching the 6X level and beyond, we are seeing properties in the $300-400k net profit category reaching this benchmark now.
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Furthermore, at the lower end of the market, businesses netting less than $100k, which have traditionally seen much lower multipliers, are regularly being sold at 5X and above. This is up by 1 to 1.5X from a few years ago. While we don’t see an end in sight in the immediate future, it’s always prudent to “expect the unexpected”. One final point to consider RBA Governor Philip Lowe has dismissed market pricing for a rate increase next year as “a complete overreaction”, although he has softened its stance a little on its previous schedule of “not before 2024”. Against a backdrop of a bullish economic outlook, he said: “Borrowers need to be aware that rates will rise again – not quickly, and not next year; the most likely case is 2024, but it’s possible it’s 2023”. So, what does that really mean? It means that for those who are thinking about selling, it might be a good time to get your ducks in a row. The cheap money is out there right now, which is really helping fuel this demand. But will it be there after next year? ResortNews | December 2021
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