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MANAGEMENT RIGHTS SPOTLIGHT

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Gold Coast prepares to bounce back now By Grantlee Kieza, Industry Reporter

short-stay MR businesses are in trouble due to ongoing challenges. He confirms this idea is “a myth” as most businesses in the sector are now doing well.

The Gold Coast management rights industry is like a tightly compressed spring, primed for 2022. Six years ago, ResortBrokers’ Alex Cook sold Soul to Mantra for $25.7 million with a seventimes-plus multiplier. Industry experts say that while the Coast is unlikely to see a seven-times multiplier any time soon, given COVID’s carnage, good times lay ahead. Over the last two years of the pandemic, the Gold Coast management rights industry has largely been a two-paced economy, with permanent complexes bearing up well and shortterm holiday lets broadsided by uncertainty over border restrictions and lockdowns. The Gold Coast holiday market is still largely geared for international tourism, however. So, while the opening of the

Paul Mueller

Steve Campbell

Queensland border to other states will help, the operators of short-term accommodation buildings are crying out for overseas tourists. The rocky road through the pandemic has also been littered with other complications for operators including additional cleaning and sanitising procedures, the closing down of pools, and compliance matters over COVID rules. Plus, there has been the added burden of booking cancellations and refunds. More people working from home has also added additional demands on the caretaking duties in

permanent complexes. Despite the challenges faced by the sector over the last 18 months, now is the perfect time to buy a short-term management rights business on the Gold Coast, says Paul Mueller from ResortBrokers.

“Occupancy levels are now back up to pre-COVID levels,” he reports. “But there is a shortage of short-stay stock because vendors are waiting to provide a full year profit and loss with higher figures expected due to the strong last 12 months occupancy and average daily rates. “However, these vendors will be ready to sell in early 2022 and it will be a great time for smart buyers to snap them up.”

He reveals: “We have many keen buyers waiting for Gold Coast short stay management rights businesses to come onto the market.”

Additionally, he notes: “I expect multipliers will stay the same, but profits will shoot up, it’s the perfect time to buy and add easy value to your business because it’s not going to be hard to fill rooms next year.”

However, he warns, it is a mistake for buyers to assume there will be many bargains available because they mistakenly think

Fellow ResortBrokers colleague Steve Campbell agrees that now is a good time to invest in a management rights business.

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“I think there's going to be some uncertainty for a while until things really return to normal. The border reopening will certainly help but with the uncertainty still around testing I think it’s going to take a while to get back to pre-COVID times.” Jonathan reports that permanent complexes on the Gold Coast had largely fared well during COVID “and if anything, it's driven rent up”. Jonathan Hanaghan

He says: “I cover the Surfers and Broadbeach area where management rights businesses have been hit the hardest, but I am beginning to see a bounce back. Short-stay managers are reporting high occupancy levels from January onwards.

Steve adds: “On top of high holiday demand, I foresee a shortage of short-stay room stock due to an increase in owner occupiers and an uptake of long-stay rentals. A shortage of vacant rooms will lead to higher nightly rates and give operators decent figures.

“The 2022 calendar year is looking really strong.”

“I predict a strong 12 to 24 months ahead for the MR sector.”

Jonathan Hanaghan, a director of Gold Coast-based Jonathan Grant Accountants, says the reopening of the Queensland border is a light at the end of a two-year COVID tunnel after the short-term rental market in Surfers Paradise and Broadbeach was reduced to “a bloodbath”. “Certain pockets of the coast have done okay,” Jonathan told Resort News. He says: “Burleigh is doing okay short term, Palm Beach isn't too bad, and Mermaid Beach is good because there is less supply. But the big holiday areas have struggled.

“Good permanent properties are still achieving multipliers of more than six, but I don't think you're going to get that number on a holiday property for a while,” he says. Jonathan, who has spent 20 years in management rights, stresses that with unprecedented times having affected the industry, it is imperative for anyone in the sector to use specialist advisors in the field. He says: “Three or four times a year, I would get calls from someone who's had a nonspecialist accountant trying to do a verification on a

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property, only for the bank to reject financing it.”

permanent complex, and in the last 12 months its letting pool has been reduced from around 120 units to 110. They have lost 10 percent of their letting pool.

Jonathan admits that in the early stages of COVID, there was a lot of uncertainty, even over whether people would be able to pay their rent.

“It's a combination of baby boomers downsizing from big houses into units and younger people who, in order to buy a house, have to move out to the back of the Gold Coast to find something affordable.

“Now, there are waiting lists for people to rent these units because the Gold Coast is a such a desirable place to live,” he says. Nick Smith, director of Red10 Finance, spent 30 years in banking in England, Ireland, and Australia. He says that despite the COVID threat, boom times await the Gold Coast. “It's a very buoyant atmosphere, with the expectation that there will be great trading ahead. “Some holiday businesses have even managed to trade very well throughout the pandemic by offering special deals to the point that my wife and I spent our wedding anniversary at Coolangatta which is just a 15-minute drive from home. It was a great break, and we didn’t have to worry about jet lag. “From a banking point of view,

Nick Smith, Red10 Finance

David Jackson, Hospitality & Strata.

management rights is a resilient industry. Not too many things can go wrong. The business model itself is fantastic and probably not repeated in any other industry globally. Without a doubt, it would also be one of the lowest risk businesses to any financier.”

forward to those great times when all the signs on the Gold Coast say ‘Sorry, No Vacancy’.”

In particular, Nick predicts “an absolute boom” for Surfers Paradise in spite of economic challenges during the pandemic, due to the incoming a flood of festive holidaymakers.

“We are seeing a trend in both holiday and permanent complexes where the letting pools are actually decreasing,” says David, who spent 40 years in the construction, property, and tourism sectors.

“Border closures have affected people, but we are looking

The rush to the Gold Coast, though, has caused problems in permanent complexes, according to David Jackson, senior partner in Bundall-based accounting firm, Hospitality & Strata.

“We recently did work for a large

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“Instead, many of them decide to stay close to facilities and buy a two-bedroom unit. Is that trend going to continue? I'm not sure but the trend has been there for the best part of three years.” David predicts domestic tourism will be strong for the next few years especially on the Gold Coast, but he says diminished letting pools are a risk for anyone entering management rights. Another rising trend in permanent complexes, he recalls, is body corporates becoming “more demanding of managers”. He explains: “We are seeing this particularly in buildings that are predominantly residential. P42

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PROUD MEMBERS OF

The Resort Accommodation and Sales (RAAS) Gold Coast team

Kerrie Lush, Senior Management Rights Broker You may know Kerrie as the daughter of Rusty Lush the founder of RAAS, she has been involved in the industry since 2003 after purchasing her first holiday complex.

Anna Liu, Senior Management Rights Broker & Unit Sales Executive

Jonathan Yim Senior Management Rights Broker & Unit Sales Executive

David Lennard, Director of Projects and Senior Management Rights Broker

Originally from China Anna has been living on the Gold Coast for nearly 20 years and she is proud to work for RAAS Property Group.

Jonathan is recognised as a highly motivated and efficient real estate sales agent, with a customer orientated mindset excellent in achieving the highest level of customer satisfaction.

Dedicated Project Sales professional, David specialises in all aspects of project marketing, including the creation of off the plan management rights businesses within the projects being marketed. This allows developers the ability to incorporate the Management Rights sale into the project financials at inception. David brings several decades of senior management, and managing high performance sales teams, in highly regulated environments.

Kerrie was a hairdresser for 28 years, the owner of two successful salons before moving on to buy, sell and manage her own complexes and a motel.

Anna has extensive connections with Chinese communities here in Australia and in China. Her personal data base makes her successful in the real estate business.

Kerrie began working within the RAAS organisation in 2010, assisting RAAS members/management rights owners to sell units within their own complex.

Anna has an enviable reputation for professionalism and honesty for which she is well known amongst the growing Chinese buyer market.

She told us: “I was also a shoulder to cry on when needed, I looked after over 350 managers, answered their questions and helped with tricky situations when needed.”

She has been in the real estate industry for over 10 years, and has provided excellent service to customers, particularly with bilingual abilities (English and Chinese).

Kerrie decided that selling management rights was the next step because of her knowledge of, and strong connection to the industry, this is a role she has embraced.

Anna also boasts a Masters in Accounting, which enables her to provide a thorough and accurate market analysis for clients. Her guidance leads to a successful outcomes for her clients.

“I love my career and I am successful because I keep it simple. People tend to overcomplicate the industry, but it doesn’t have to be that way, sure there are hurdles but you just need to keep your eye on the end goal,” she added.

Anna is professional, ethical and full of passion to assist people when going through the process of purchasing or selling management rights and properties. Her customers find her easy to talk to and they trust her.

ResortNews | December 2021

A good communicator with a pleasant approach, he is able to connect well with people from all walks of life through his enthusiasm to learn and undertake new challenges in the fast changing multinational society. Jonathan is highly qualified with diversified skills holding two bachelor degrees in engineering and computer science, as well as two master degrees in business management and finance. He is able to communicate fluently in English, Japanese, Mandarin and Cantonese with excellent customer service and sales experiences in the Asia Pacific region including Australia, Japan, South Korea, China and Hong Kong. He is passionate about home DIY projects and always explores the latest home design and technical requirements, a self-initiated handy man transforming practical dwellings to dream home at leisure.

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Honing his skills in the financial services arena across Asia, he grew the business from a small office in Sydney to a business spanning Asia. David’s outstanding results soon saw him seconded from Sydney to the Gold Coast. David’s background sees him bring fanatical organisational, process and sales skills to the table. From the developers perspective, this gives confidence that there is consensus building and communication between all stakeholders on the vendor side, whilst giving the Management Rights purchasers comfort that they have a highly skilled, and deeply knowledgeable sales professional to guide them through the sometimes daunting “off the plan” process. ResortNews | January 2022

Management Rights

Things change monthly COVID has certainly brought about some very interesting times within our industry.

the good ol’ facetime. Same goes for the Management Rights. Purchasers are looking to buy a different lifestyle, live near the beach, near their kids’ schools or generally just to try something COMPLETELY DIFFERENT! It is a re-assessment of people’s lives because of the pandemic, so where do people want to live?... Queensland’s South East.

Real Estate prices and sales of Management Rights have prompted a very big year for most offices on the Gold Coast, including ours, and with people essentially “buying themselves a career”, it has also been a great incentive for buyers to “get into the market” having a nice salary to pay off their loans. In my opinion the Managers units have not had the same luxury of hiking price rises, they have still fetched good prices for the outgoing Manager and made up for the not so rising of the Multipliers.

Gold Coast has seen a boost in local holiday makers and week-enders. Our southern Holiday buildings have suffered, particularly Rainbow Bay being so close to the border but the Managers have soldiered on and let’s hope that this Christmas pays off for all.

People from the Southern states are flooding in and buying real estate sight unseen in many cases, other than the usual photos and

Without the traditional population growth, we are now in a completely different situation. Construction is everywhere currently in areas where people

are migrating to in great numbers we have already seen developers move swiftly to secure sites and we see a growing numbers of cranes of the horizon and new developments well under construction.

That also means Off the Plan Management Rights. Gold Coast has certainly topped the market in Residential and Management Rights sales, higher than the Sunshine Coast and Brisbane, but we have all benefited that’s for sure.

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“We’re seeing that many people who have units on the coast are now occupying them while they're building homes or simply moving into the units, so that is having an impact on the letting pools.

P39 Units are being sold from the letting pool by investors who have been largely absent. Now owner occupiers are moving into many of the permanent buildings and imposing more demands on managers.” In previous years, David’s company has had a large volume of due diligence work through the buying and selling of short-term management rights properties, but he says that “to be honest, the due diligence work has been pretty much non-existent in the shortterm sector since COVID hit. “I can literally count on one hand the number of short-term sector jobs that we have done recently. “Thankfully, we haven't had any clients fall over. But some have got pretty tight. He admits: “One of the things that has helped sustain many in the management rights industry through COVID is the caretaking fee. That obviously varies. If it's a predominantly holiday let building the caretaking fee in terms of the overall income is maybe not that high because traditionally those

“A shortage of accommodation also means an increase in rent and that puts pressure on the operators who have to then increase their prices.”

Michael Philpott, MR Sales

Phil Trimble, MR Sales

He says despite the industry going through a “correctional stage”, there was a very strong future ahead.

operators get letting commission and other holiday incomes. But you get a lot of buildings which are now predominantly residential, and the caretaking fee is actually quite a large component of the income.”

going to make a lot of money”. “But anyone who is selling now is really at the bottom of the market,” he says, “because there has been so much uncertainty during COVID.

“Money is cheap at the moment,” Michael admits, “and syndicates are still jumping on anything with a $500,000 net profit and above. We are seeing multiples well into the sixes for good properties.”

David adds: “The industry is quite resilient and if you were new to an area and wanted to buy a business that was COVIDproof, management rights stand up well even though it has been knocked around.”

“Permanent buildings have been showing very strong returns but there has been a big impact with a lot of units being lost to owner/occupiers,” Michael says.

Between them, Michael and MR Sales colleague Phil Trimble have 40 years’ experience in the management rights sector.

Broker Michael Philpott, from MR Sales, says it’s all good news going forward on the coast “because a lot of people are

“There were 30,000 (11,000 on the Gold Coast) or so, people moving to Queensland in 2021 and it’s predicted there will be another 53,000 in 2022. That will put more pressure on permanent units.

Phil says that “uncertainty” over border closures had been the key concern for short-term properties on the Gold Coast during COVID, and rising real estate prices and a loss of units in the letting pool had hit permanent complexes.

New managers for Pelican Sands Beach Resort New to the management rights industry, Mark and Dana Osborne are now the very new managers of Pelican Sands Beach Resort, in Tugun on the Gold Coast. After what Mark describes as a “lengthy” purchasing process which began in April 2021 they were able to take over the management of the resort on Dec 1, admitting they have dived straight into the deep end of a “very busy” holiday season. “Que sera sera”. Pelican Sands Beach Resort is a cute, beachfront, boutique resort with quality family sized holiday apartments that boast breathtaking beach views over the Gold Coast. The enviable location of the property initially caught Mark and Dana’s attention, but a suitable manager’s unit

along with the large office space sealed the deal. Of course, outstanding future business potential was also a factor that contributed when they finally decided to buy. Mark is a valuer by profession, and so he knows a bit about property, and Dana is an IT engineer, but when they decided to change career, they sought expert advice on management rights businesses from Phil Trimble at MR Sales. Mark said: “It is important to consult experts when you are about to make such a big decision. We are new to management rights, and we depended on the help and advice we received from MR Sales throughout the whole process. Our agent Phil is very professional, he provided an excellent support network to us; he is very knowledgeable about the industry.”

Dana and Mark Osborne

Mark grew up on the Gold Coast and chose to stay local after also considering MR businesses on the Sunshine Coast, but he was also fulfilling one of his wife’s desires, which was to relocate

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to the southern end of the coast. Mark said: “Sure, this is something new, but having been involved in professional boxing in one capacity or another, I look forward to the challenge.” ResortNews | January 2021

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“Once you get a situation where the manager’s unit is a lot more expensive compared to the business the traditional management rights concept becomes a little more difficult,” he says. “Who wants to pay $2 million for a unit when the business is costing much less than $1,000,000 and only getting around $150,000 net? “But there are good opportunities for people coming into the industry because it is the bottom of the market, and I guess the story is to watch this space next year when things will settle down.” It looks like the future of Queensland's residential property market is coastal. The QBE's Australian Housing Outlook 2021 - 2024 prepared by BIS Oxford Economics Report predicts both the Gold Coast and Sunshine Coast are on track to outpace Brisbane property prices by 2024. Cameron Wicking and Paul Grant, from Mike Phipps Finance, say that while COVID has been challenging for many short-term properties on the Gold Coast,

Cameron Wicking, Mike Phipps Finance

the market represents good buying, although they expect some savvy operators will be holding on to their businesses to build up their asset value with the imminent return of good times and visitor numbers. Cameron and Paul expect both experienced local operators and southern state migration to fuel demand for leisure assets in 2022.

Paul Grant, Mike Phipps Finance

“But I think we are coming into a period of consolidation on the coast and current operators might hold tight for a while until such time as they have good numbers behind them, particularly over what is going to be a good Christmas and New Year. “After that, I think we might see some good activity in terms of sales and purchases.

“I'm seeing and hearing from buyers who may have been jogging on the spot for a while and they are now getting into a position where they are looking to buy now with the borders reopening,” Paul says.

“I can certainly see the plus $1,000,000-net profit, rock solid businesses commanding mid-six multipliers without a doubt. That's not too far away and if the market goes berserk, who knows it could go even to the sevens.”

Sharon Flood, Flood Legal

Cameron says even with some units being lost to owner/ occupiers in permanent complexes, it has only been “a hurdle” for the industry and banks were still keen to look at transactions because of the reliability of management rights and the popularity of the Gold Coast. Management rights specialist lawyer Sharon Flood from Flood Legal says. “In terms of the permanent side of the business I've never seen so many transactions. “The strength and resilience in the Gold Coast management rights market in the last year has been unbelievable.

Full house at Columbia Holiday Apartments On November 1, Matt, and Lauren Palmer bravely “jumped into the fire” when they became the new resort managers of the beautiful and busy Gold Coast beachfront resort, Columbia Holiday Apartments.

look at management rights businesses after a friend suggested they investigate opportunities in the sector.

It is easy to see why this popular holiday resort is experiencing such a “full house” over the summer season, because it offers guests spacious two- and three-bedroom apartments with magnificent ocean views of Rainbow Bay, Snapper Rocks and pristine beaches, all the way up to Surfers Paradise.

“When we met Kerrie it all fell into place,” Matt said.

Matt told us: “We have 39 units in the letting pool and right now they are all full of the most wonderful guests, many of them have been returning to Columbia Apartments for a fantastic Gold Coast holiday

After missing out on a resort in early 2021 they contacted Kerrie Lush, Senior Management Rights Broker at RAAS Property Group who put forward the Columbia Holiday Apartments.

“The sales process happened quickly, and Kerrie held our hand throughout. I can’t speak highly enough of her helpful expertise, and I can only describe her follow up service as second to none.” Columbia Holiday Apartments

experience for many years.” Matt is a Kiwi and a plumber by trade. He met Queenslander Lauren on the Gold Coast and they moved to New Zealand where they both worked in

tourism (for Wyndham Hotels & Resorts) before moving back to Queensland just months ago. They first considered a move back to the Gold Coast about 18 months ago and began to

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Now life has become very interesting for Matt and Lauren, even more so with such a bumper season ahead. Matt laughed: “We don’t do things by halves, but we couldn’t be happier and are enjoying the challenge.” ResortNews | January 2021

The experts in Management Rights Flood Legal prides themselves on being regarded as experts in management rights.

What you can expect from engaging Flood Legal: Trusted experience: Our legal practice director Sharon and experienced paralegal Brit have been providing advice for well over a decade to the management rights industry.

We achieve this through industry experience and always having our clients’ best interests at heart.

Real support:

Real fixed fees:

Our clients deal directly with us from start to finish. Our team makes sure their clients feel comfortable with each stage of the buying and selling process which can often be daunting and challenging. We also support you once you own your business and give advice on the day to day operation of your business.

There are no hidden surprises when it comes to fees. We understand the importance of knowing what your fees are going to be and work on genuine fixed fee quotes. You won’t get charged for emails or phone calls, extensions or those little added extras that a lot of other firms charge for.

Our client testimonials speak for themselves: “I have retained Flood legal in the purchase of 6 management rights complexes and the sale of two complexes. Sharon, Brit and the team have always been very knowledgeable, accessible (easy to chat to on the phone), professional and also easy to deal with. I would highly recommend Flood Legal.” Geoffrey Long, Palladium Apartments

“Sharon Flood is amazing at what she does, her service and expertise in the industry are second to none. I am so thankful I used Sharon as my solicitor when purchasing my first Management Rights Business. Sharon was there for me day and night to answer and assist with all my questions and concerns. Couldn’t thank you and your team enough, I would definitely recommend Sharon when purchasing or selling Management Rights.” Shara Janiak, San Mateo

“We have worked closely with Sharon & Brit at Flood Legal over the past few years across multiple sales. They were a pleasure to deal with, very professional, diligent, communication and updates were great and always had time if we ever had any questions. Would highly recommend Flood Legal to anyone looking to sell/buy Management Rights.”

“Professional and excellent services! We have Flood Legal to look after the settlements and the sales for our management rights business in the past 5 years. Sharon and Brit are always helpful, quick response to all our enquiries and well organised for every single matter. We recommend Flood Legal to all our business partners and friends.” James & Tina, Precinct Apartments & Savvi Apartments

Jenna Trickett, Developer & Seller

“We have recently purchased a Management Rights business and we used Flood Legal for the legal process. We could not have been happier and more satisfied with the quality of service, value for money, responsiveness to all issues and the professionalism of staff at Flood Legal. Sharon and Brit are a great team and they performed all processes with efficiency and empathy towards us as anxious purchasers. We wholeheartedly and enthusiastically recommend Flood Legal for all Management Rights contracts and, for that matter, any legal procedures.” Gary Fox, Costa Dora “I have engaged Flood Legal on multiple management letting rights matters including purchase, extensions, exercising options. I have always found whomever I am dealing with in the office to be prompt, professional, and very helpful.

“We cannot thank Sharon enough for going above and beyond. Sharon’s attention to detail, frankness, coupled with her in-depth knowledge of the management rights industry we have found to be second to none.”

“5 Star service all the way everyday. No question too hard, or too inconsequential. Great team where each member is a superstar at their profession!”

I never feel rushed when dealing with Sharon and her team and feel they go over and above in their efforts to inform and support me in all my dealings. Highly recommend.”

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Understandably, due to the economic effects of COVID there have been limited holiday complexes coming onto the market but what that's meant is there has been pressure on the permanent complexes to sell. “People who may not have been ready to sell have realised that this is a good time and you've got buyers galore, a lot of them coming from Victoria and NSW. Of course, there's an element of rising real estate from the seller’s perspective and in terms of the buyers they are acknowledging how safe management rights businesses are compared to other businesses available for purchase. “Just like the property market

we have seen more Victorian and NSW buyers flocking to Queensland. It's made those transactions more complicated because we've had to deal with things like our clients not being able to cross the border for inspections or body corporate interviews or them having to go into quarantine before they could settle. We had to think outside the box to get those transactions settled for the benefit of both the seller and buyer.” Sharon says it is imperative for anyone entering management rights to use specialists in the industry. With a background in real estate, she graduated in 2006 with first class honours of a post graduate law degree from Bond University and since then has

specialised exclusively in property law and management rights. “Using an industry expert is crucial now more than ever,” Sharon says. Having her own business now for over six years she approaches servicing her management rights clients differently. “Management rights is a very specialised industry and it’s important that your lawyer not only is there to protect your interests when buying or selling but explains the whole process along the way. Especially for new entrants we are there to hold our client’s hand through the entire process and give them those extra little bits of information that they need.

“I have a lot of return clients and many new entrants into the industry as well, and our job is to make sure regardless of their experience that they are comfortable with their transaction. Management rights involves complicated transactions, and we aim to make the process as easy and smooth as possible.” She says COVID demonstrated that MR businesses are extremely resilient and reliable, no matter what. “If you do a good job and meet the expectations of the body corporate, management rights is a great business which offers owners flexibility and certainty in a business,” she says.

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short-term properties have struggled big time,” Paul says. “The multiples are still holding, but definitely with short term rentals, if you wanted to sell you would be losing a fair bit of your capital on your original purchase price. “Instead, we're hoping that with the borders opening up things will return to normal. Paul Gaffney, The MBA Partnership

auditing needs to ensure the business remains on track.

Michael Beddoes, Partner at The MBA Partnership, believes a specialist analysis is critical to the buyer’s success at the time of sale. Management rights specialist and fellow Chartered Accountant, Paul Gaffney explains: “We go through the books, the trust accounts, the general accounts and find out all the pros and cons of operating that business based on what we see in the records and interviewing the vendor. He says: “We've done 5000 to 6000 management rights deals and there have probably

“We have a big stable of clients, we know the industry backwards, and we give advice on structuring each business on a case-by-case basis.”

only been two where we haven't found something for the buyer to negotiate over. “If I’m paying more than a million dollars for a business, I want to know exactly what that business is making. It's a specialist industry and you need a specialist accountant, a specialist lawyer and a specialist broker or financier. “We like to do the verification of the profit on the business and then help the buyer through to settlement and look after their ongoing tax and

Paul says short-term letting had “copped a caning” on the Gold Coast during COVID, because the Gold Coast was primarily a “fly to market” rather than a “drive to market” like the Sunshine Coast which had done comparably well during COVID. “There has been a bit of weekend and three-day letting on the Gold Coast but without government support from JobKeeper, those

“There are good bookings from down south and the tariffs are pretty good, so we expect a solid recovery over the next 18 months. “Management rights is a pretty foolproof industry. It survived the Global Financial Crisis and though it took a while to build back up, the multipliers have grown strongly - anything over $500,000 net profit you’re getting a six-times multiplier.” Paul says anyone entering the management rights business on the Gold Coast most likely needed to have 40 to 45 percent of the purchase price to cover all the incidentals involved, including legal fees. “You might still be able to get

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ResortNews | January 2022

 Structuring  Income Verification  Accounting/Taxation  Superannuation  Audit a 70/30 Loan to Value Ratio, though 65/35 are becoming common,” he says. “We used to settle transactions in three months, now it's up to 120 days with the biggest hold-up being finance.” RAAS Property Group agent Kerrie Lush is buoyant about the market, suggesting the Gold Coast’s MR businesses over the next few years will follow the booming residential real estate market. “I think the Gold Coast market is going to be better than ever,” says Kerrie, who bought her first management rights business in 2003. “Some holiday properties on the coast have still done well despite COVID. Kerrie adds: “I just sold a couple of holiday properties at Rainbow Bay, and I know others at Broadbeach that are doing really well because of good management. “What I’m finding though, is that some people in management rights think because the real estate prices have gone up, they are going to cash in ResortNews | January 2022

Kerrie Lush

Are you looking for a pre-purchase financial verification report, profit and loss for sale or just an accountant who really understands your management rights business?

expecting the same rise in their business component. But that’s not the case… yet.

We provide a comprehensive range of compliance and consulting services for all entity types operating within the industry.

“I think management rights businesses will do very well on the coast over the next few years, though.

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“People are going to be nervous for a long time about travelling overseas in case they get stuck there. Instead, they can bring the whole family to the Gold Coast for a fraction of what it costs to travel overseas and have a really wonderful experience.”

PO Box 391 WEST BURLEIGH QLD 4219 Phone: (07) 5534 4333 | Fax: (07) 5534 2081 reception@jonathangrant.com.au | www.jonathangrant.com.au

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Gold Coast market update The Gold Coast management rights market experienced a strong uptrend in buyer activity after a low point in 2013 following the global financial crisis to reach 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 stock levels remained tight and the number of buyers increased. At this time several large apartment developments were being completed with the developers retaining the management rights to the buildings. The market subsequently saw a number of these management rights businesses with net operating profits over $1 million offered to the market with multipliers reaching over 6 times after a sustained period of lower multipliers. Entering 2020 vendor price expectations remained high and negotiations were weighted towards the seller. This trend was temporarily suspended between March and June 2020 due to the sudden coronavirus outbreak however transactions over late 2020 and 2021 indicate the management rights market has been rather resilient with minimal effect on permanent business multipliers. However, short term business multipliers have been affected by COVID-19 to varying degrees depending on the source of guests (corporate, international, or domestic leisure) and the location of the business.

Features of the market over 2021, are as follows… Management rights businesses without a real estate component and with no requirement for the manager to reside on-site have continued to gain increasing interest from purchasers and this has resulted in a higher

difference in achievable multipliers below this level.

Brett McCraken, Australian Valuers

number of these transactions. The businesses are usually purchased by experienced operators who look to add a further management rights 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 with a higher 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 over 90 percent of units in the letting pool may gradually lose several of the units to outside agents or owner occupiers and the value of the business may decline. Buyers are generally prepared to pay a premium for businesses netting above $300,000 and there is a significant

Net Income Brackets

It appears that the management rights businesses with a caretaking only component (no letting) have gained increasing interest from purchasers 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. Locations such as Byron Bay and the Sunshine Coast are leading the recovery from COVID-19 in the short-term accommodation sector. Regions such as the Gold Coast, Far North and Central Queensland are experiencing a slower recovery with ongoing state ordered lockdowns and border closures having a significantly higher impact on trade. Those short-term businesses that have been sold on the Gold Coast during 2021 have generally transacted at lower multipliers than during the preCOVID market environment. Those locations between Burleigh Heads and Coolangatta have feared better than the tourism locations of Broadbeach and Surfers Paradise. In most cases the losses generated by the business sale have been somewhat compensated by an improvement in the residential market which has flowed through to higher managers unit prices.

$0 to $200k

$200 to $400k

The management rights market is showing resilience within the permanent letting sector; however the majority of shortterm accommodation businesses continue to experience varying trade on a month to month basis as outbreaks of new COVID variants effect business conditions. Those managers who have a high number of leaseback agreements or performance rental guarantees in place with unit owners, have had to renegotiate the fixed returns to owners or incur significant losses due to the downturn. This has mainly been confined to those businesses reliant on the corporate and international visitor accommodation sectors which have suffered the greatest downturn. For the remainder of 2021 and early 2022, a sustained recovery in the accommodation market is dependent on the opening of interstate and international borders. Based on current vaccination take up rates and indications from state leaders, management rights operators are likely to experience an improvement in profitability from increased occupancy and room rates. An increase in cashed up buyers from the southern states over coming months is also likely as they seek an improvement in lifestyle while generating an attractive return from a management right business. $400 to $600k

$600k +

Gold Coast - Short/Mixed

3.98 to 4.57

4.59 to 5.43

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

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

6.1

Townsville - Short Term

N/A

4.9

Townsville - Perm

4.12

3.86 to 4.0

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

* Standard Module **Large NRAS ^Not Settled

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Source: Australian Valuers

ResortNews | January 2022

ResortBrokers

Our Gold Coast team

gets results, pure and simple Over the past 12 months, ResortBrokers has settled on 22 deals with a total value of $20.5m. Call us for a free appraisal. Sold

Sold

Augusta Palms

Cerulean

Turtle Bay Resort

Chevron Island

Main Beach

Mermaid Beach

Sold

Sage Apartments

Neo Apartments

Harbour Side Marina Apartments

Merrimac

Mermaid Beach

Hope Island

Sold

Aussie Resort

The Hill Apartments

Market Square and Soho

Burleigh Heads

Currumbin

Varsity Lakes

Sold

Kirra Beach Apartments

Magnoli

Vue & Encore Apartments

Coolangatta

Palm Beach

Broadbeach

RESORTBROKERS.COM.AU | 1300 665 966

From ski resort to Kirra Beach resort Last year, when Steve and Jodie Newman returned to the Gold Coast after living in New Zealand for several years, they immediately began to look at management right businesses, and last month they settled on the high net holiday management rights business, Kirra Beach Apartments in Coolangatta. Originally from the UK, Steve moved to the Gold Coast in 1995 with his Australian wife Jodie, whose family were long-time management rights operators. Jodie’s mum and dad, Graham and Robyn have owned several big management rights on the coast for over 25 years. Steve told us: “We lived in New Zealand for several years where we owned freehold backpacker

complex would not overwhelm us, the 50:50 mix of permanent and holiday units was a perfect fit and the manager’s unit suited our lifestyle.” Steve and Jodie say they contacted ResortBrokers because they consider them to be experts in the field of management rights and their agent Todd has been a constant support to them throughout the purchasing process, which only took four months. and accommodation businesses in ski resort towns on both the South and North Island. However, when the pandemic hit, our family ties pulled us back to Australia and as soon as we could we returned to the Gold Coast. We needed to buy a business and because of our family’s history in the sector, it was natural for us to consider management rights a great opportunity.” Steve and Jodie were already

on the ResortBrokers mailing list and contacted agent Todd Warner who showed them a few small permanent and holiday resorts before Kirra Beach Apartments came onto the market. On what attracted them to this resort Steve said: “Kirra Beach Apartments is in the perfect beachside location, and the timing was right. As we are new to management rights, we felt that the size of the

“I think we have purchased management rights at a very good time, and I predict a bright future ahead for the Gold Coast,” Steve said. “By Easter next year I expect that travel will be back to normal, and there will be a pent-up demand for Gold Coast holidays. I am also excited for the New Zealand borders to open, so we can welcome all those Kiwi visitors who will be very keen to soak up the Queensland sun.”

Our Gold Coast team

gets results, pure and simple Meet the ResortBrokers Gold Coast team Paul Mueller

0439 255 507

With 50 deals sold and settled to the value of more than $70 million since joining ResortBrokers in 2016, Paul Mueller has established himself as one of Australia’s most experienced and successful management rights brokers in the business. Paul joined ResortBrokers with a successful background in IT, financial computer programming and business turnaround behind him. With terrific analytical skills and a strong head for business, he was ideally placed to move into management rights sales.

Todd Warner

0438 170 763

Since joining ResortBrokers in 2017, Todd has delivered some outstanding results and has successfully sold and settled 58 businesses totalling more $78 million in sales. His achievements so far have seen him awarded the ResortBrokers’ Rising Star Award in FY18/19 and the number one Volume Broker of the Year in FY19/20 and FY20/21. Todd joined ResortBrokers as an experienced sales professional with a proven track record of sales leadership within the liquor and construction industries over more than two decades.

Steve Campbell

0407 220 668

This is Steve’s “second career” as a specialist broker with ResortBrokers which all began in 2011 and, in between his two stints, he successfully ran the management rights and renovated a landmark Brisbane building which was in desperate need of TLC and a new direction. He’s a broker who understands better than most what it takes to run a management rights business and also what it takes to buy and sell one, which means he is perfectly equipped to help vendors and purchasers.

RESORTBROKERS.COM.AU

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1300 665 966

ResortNews | January 2022

Demand for MR on Gold Coast continues to rise

By ResortBrokers, Gold Coast Team

some of the lowest vacancy rates and highest rents ever.

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 on the Gold Coast is at extremely high levels, thanks mainly to a combination of tightening rental vacancy rates, low interest rates for borrowers and people looking for a sea change in the wake of lockdowns.

Renting on the Gold Coast is now more expensive than choosing Sydney, according to SQM Research. Statistics show rental costs for all dwellings on the Gold Coast rose by 20.2 per cent, while unit costs are 17 percent higher.

Since the start of 2021, the ResortBrokers Gold Coast team of Paul Mueller, Todd Warner and Steve Campbell has settled on 22 deals with a total value of $20 million and have another 23 under contract for a further $35 million.

The reason for this? Gold Coast’s rental and residential market is experiencing one of the strongest periods in many years. Thanks mainly to interstate migration, we are witnessing ResortNews | January 2022

The median average rental price for a Gold Coast unit is $530 per week, while in Sydney it's $473 and the report says rental prices will continue to increase as a "very strong" interstate migration ramps up into Queensland. Vacancy rates on the Gold Coast have lifted to around 1.5 percent after being as low as 0.9 per cent during the winter months and SQM Research says the record high rental yields would continue to attract investors to the coast. 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, especially in the permanent and mixed complexes, and naturally this puts upward pressure on prices. 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, especially from the southern states. Our enquiry levels are up by 33 percent. There are also strong signs that the holiday-only and short-term market are set for a rebound after a particularly rough 18 months. Todd Warner recently sold and settled on Kirra Beach Apartments which is the first high netting holiday property to sell post-COVID. The short-term businesses have obviously been hit hard by the border closures and lockdowns and now it seems there is light at the end of the tunnel. A large section of that increased level of enquiry has come from the southern states where the lockdowns were long and hard. We were fortunate to escape those lengthy lockdowns and this has driven some of the demand, along with the fact that people have probably embraced the ‘work from home’ revolution and are now looking to be their own boss in a management rights business,

PROPERTY

and can you blame them? What this all means is that the multipliers for permanent and business only complexes have risen over the past 12 to 18 months while the multipliers for the short term and holiday businesses have actually held firm despite the difficult trading conditions. The fact that the short-term market has held up despite the pandemic provides plenty of optimism as we roll through 2022. One final point to consider RBA Governor Philip Lowe has dismissed market pricing for a rate increase this year (2022) 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 in 2022; 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 this year?