Management rights blockbuster rated “PG”

By Grantlee Kieza, Industry Reporter

In the accommodation industry, it’s said that Paul Grant, from Mike Phipps Finance, settles more management rights and motel contracts than anyone in Australia.

The Noosa-based finance broker, known everywhere as PG, has more than two decades of experience in the accommodation industry and estimates he has put together finance for more than 1000 properties. In the past 12 months alone, he has assisted 116 clients.

He has been the finance broker for a significant number of very well-known industry operators and has assisted in the acquisition of many iconic properties, including nearly all the benchmark transactions in Noosa over the past few years.

His multi-building portfolio clients now form a significant proportion of the company’s Tier 1 client base.

Paul counts a significant number of industry professionals as clients, and he has arranged the finance for large motel and caravan park transactions Australia wide.

He says that the strong confidence expressed by bank credit departments for Mike

Phipps Finance appears to be reflected in a “relatively hassle free” finance process.

“Also, it’s a reflection of the great relationships we have with bankers on the front line,” he said.

Paul and his wife Nicole have been based in Noosa for the last 15 years with 12-yearold twins Liam and Finn.

“I lived all over the place as a kid,” he told Resort News “My dad was in the army, so we travelled a lot and moved every couple of years. I’ve lived in pretty much every state and territory in the country, but I grew up primarily in Victoria on the Murray River at Wodonga. It’s a bit different to Noosa in that it’s a long way from the beach but it was still a lovely place to grow up.”

After studying commerce and majoring in accounting in Canberra, Paul worked for the ACT government before moving into private practice with an accounting firm in Canberra.

Then he met Nicole, moved to Sydney to be closer to her, and then they eventually found their way to the Sunshine Coast after his brief time working in Edinburgh for the Halifax Bank of Scotland.

“I have fond memories of living in the UK but also of walking to work in horizontal driving rain and my umbrella snapping in half,” he said.

“We eventually moved to the Sunny Coast which was a lot different to that.

“I was working with KPMG at the time and I moved across to Suncorp Bank and worked there for a couple of years. That’s where I got to know Mike Phipps. Mike and Steve Austin were the two management rights experts at Suncorp and they both left within a couple of weeks of each other, and I was thrust into the hot seat straight away to take over their roles.

“Then I jumped ship about 10 years ago and joined Mike at his own company.”

Paul said he was seeing more syndicates becoming involved in management rights but added that it will be interesting to see what happens as financial conditions change.

“Interest rates have increased along with the value of the properties and the price of the businesses, so the returns for investor syndicates in some cases are easing,” he said.

“We’re seeing returns that are now lower than they were 12 to 18 months ago, and it will be interesting to see what effect that has on the syndicate market.

“I actually don’t think it will slow it down too much because investors are still getting a decent return comparative to the risk.”

Paul said anyone getting into management rights or the motel industry needed to follow the basic principles for the business - have a good team around them with industry specialist lawyers and industry specialist accountants.

“They must have a real understanding of where they want to be and what they want to do,” he said.

“They also need to have their finances tidy and all their tax returns up to date (all the simple things) and they shouldn’t be closed off to where they might end up.”

Paul spends as much time as possible with his family at the beach and whenever he can, in the snow.

“I lived in Finland for a period of time, when I was in high school on a student exchange program, and it was bloody exciting. My home was just about 50 kilometres to the east of Helsinki,” he said.

“It was fabulous. We took our boys there a few years ago, just to meet the people I lived with and my mates from those days. It was very cool. I really enjoy travelling and taking the boys to do that sort of stuff.”

He said he expects strong activity in management rights sales in 2023 in Brisbane’s corporate sector and the Gold Coast leisure market.

“Apartment hotels are going gangbusters right now, for a few factors.

“There is limited hotel supply, there isn’t much new product and even established hotels are struggling to find staff, especially good cleaning staff.

“Some hotels are not even putting all their rooms online because they don’t have the staff. Ever since the floods, corporate Brisbane has gone berserk. More and more people are starting to choose to stay in an apartment rather than a hotel room, and perhaps they are finding that an apartment under management rights offers more of a personal touch.”

Paul said permanent rental complexes were also doing great business throughout South East Queensland.

“There is obviously a limited supply of new stock. We’ve seen rents rise and people lining up around the corner to try to get an apartment to rent. Now we’ve got a lot of international students returning and trying to find accommodation too, so apartment complexes are doing great business.”

There is also a lot of pressure on management rights with the attacks on term for resident managers, but Paul is confident that the issue will eventually be resolved “in a decent and sensible manner”.

“A few things might tighten up,” he said, “but fundamentally the management rights industry is simply too big and too strong for anything to strike an axe through it. Further to this, the management rights model is clearly the most efficient and effective way for these buildings to be operated. It would be a disaster on so many fronts if anyone tried.

“There are so many people and so many businesses involved, everything from students to holiday resorts to permanent rentals.

“If you try to make drastic changes to those businesses you could have problems that people haven’t even thought of yet.

“It doesn’t make sense to make wholesale changes to management rights and it will make things invariably worse in the accommodation industry if terms are slashed.

“Unfortunately, it’s the squeaky wheel that’s getting all the attention at the moment, but long-term resident managers are the best people to run management rights.”

There have been some recent changes at Mike Phipps Finance with Josh Haylen now partnering with PG as a broker. Paul said: “Josh has been in the business for just on two years, we plucked him from a non-finance related industry and couldn’t be happier with how he has learnt our way of operating and the ‘ins and outs’ of the accommodation sector.”

Prior to joining Mike Phipps Finance Josh studied Business Administration at the University of the Sunshine Coast while also working full time.

“Josh showed from day one, a strong aptitude for finance and commenced his additional study to become a broker as soon as possible.”

Josh and Paul will now partner on all their transactions.

“We think this model bolsters our service proposition to our clients and stakeholders. On every deal, people will have at least two points of contact and two phones they can ring for updates or queries. In addition to this, we also have three full time client managers working out of the office.

“Every client we have gets allocated a designated client manager who works in tandem with the broker to have their matter looked after.”