The Brisbane Brief by Resort Brokers

BRISBANE CITY NEWSLETTER

The Brisbane Brief.

Is Now The Time To Sell or Buy Management Rights In Brisbane? Brisbane’s rental market is experiencing one of the strongest periods in many years. Off the back of the impacts of the oversupply experienced only a few years ago, we are now witnessing some of the lowest vacancy rates and highest rents ever. The bounce back in Brisbane’s letting market has been swift and quite pronounced. Hard data from multiple analytics firms, as well as word on the street from managers we speak to daily, indicates that the much-publicised over-supply of units in Queensland’s capital has now been absorbed. In June 2020, the Brisbane rental vacancy rate was at 5% percent…it has been dropping rapidly since ever since. In May 2021 it was at 1.3% across the city, the lowest it’s been since Domain began its data series in 2017. Beyond Brisbane’s CBD, rental vacancies around the city’s middle ring remain extremely tight. In Capalaba it’s at 0.2 percent; in Wynnum Manly it’s at 0.4 percent.

110

DEALS SO FAR THIS FINANCIAL YEAR

What we’re seeing on a daily basis confirms this. In some cases there are waiting lists for rentals and in most cases permanent rental vacancies are absorbed almost immediately. This is creating dep confidence in the market, which has a knock-on effect to the MR market. We are receiving a huge number of enquiries from existing managers looking to expand their portfolios, as well as the extensive number of people looking to get into the industry. This is creating an unprecedented level of depth to the buyer market, meaning there is more demand for Management and Letting Rights, naturally putting upward pressure on multipliers / prices. Combined with the post COVID shortage of good management rights stock, as well as all-time low interest rates, demand has increased to record levels. In the first half of 2021 we have seen most management rights multipliers climb between 0.25X to 0.5X with much shorter ‘days on market’ for nearly all sales.

$199M

IN SALES

The ever-strong ‘Business Only’ category has continued to hit a note with buyers as they offer substantially higher returns. 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 as well. 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” as well as “make hay while the sun shines”. Now might be a good time to consider getting your property appraised.

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Year To Date Snapshot. SOLD

THE FOUNDRY

HARVEST AND MIRRA

T E N N Y S O N R E AC H

Woolloongabba

Toowong

Tennyson

YUNGABA

Z E S T A PA R T M E N T S

E N C L AV E

Kangaroo Point

Kelvin Grove

Wynnum

T E R R AC E S O N S A N D I

Oxley

VAV E S C A R B O R O U G H & B AT H E R S B E AC H S I D E

Scarborough

AT T I C U S

Everton Hills

ANCASSA EDITION

O X Y S TO N E S CO R N E R

B E L L A I R E A PA R T M E N T S

Cannon Hill

Stones Corner

Mitchelton

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DevCorp

U P CO M I N G

P O R T F O L I O

UNDER OFFER

Bayside Element Deception Bay

Riverview Gardens South Brisbane

975 Views on resortbrokers.com.au

126 Enquiries Enoggera Manors & JQ1 Enoggera

Nero Newstead

11 Offers from financially qualified, experienced buyers

Verde Monte & Villa Rinella Sunnybank

Gleneagles New Farm

4 Over Asking Price

UNDER OFFER

5 Shortlisted parties for interview

Thornclyffe Residences Kangaroo Point

The Grove Edition Richlands

Why our deals don’t fall over at the BC Consent Stage. It’s become one of the hottest topics in the management rights industry and securing body corporate consent for an incoming purchaser has become a much more robust process than ever before. Up until a few years ago, this part of buying a management rights business was virtually guaranteed to proceed without any dramas, usually after a very informal meeting over a cup of tea or coffee. This has changed completely and, these days, body corporates are getting “lawyered up” and the consent meeting can sometimes resemble a cross examination of the incoming purchaser. Body corporate committees are now increasingly scrutinising the credentials and experience of incoming operators, usually on the advice of their lawyers, and they have every legal right to do so and we respect that. You may hear on the grapevine of some horror stories of buyers being rejected by body corporates at consent and, increasingly, a lot of clients/vendors bring this up when we discuss the possibility of listing their business for sale. “How can I be sure this deal will go through? How do I make sure I don’t waste my time and a lot of money by having a buyer rejected?” This question we totally understand. Nobody wants to go all the way to the end of the sale process to have the incoming managers rejected by the body corporate. You should ask your agent, “So what can we do to ‘de-risk’ the process?”. And if they can’t give you a detailed and structured answer, then we would very much question their experience and credentials. By the time the ‘Consent to Assignment

of your agreements’ stage of the transaction comes around, the buyer and the seller will have outlaid large amounts of money on accountants and solicitors, not to mention the time already spent with contracts, due diligence, finance approvals and all the while juggling their day to day lives. Good brokers have recognised the changing expectations of the body corporates and have reacted accordingly. The Brisbane team at ResortBrokers have been at the forefront of this shift and developed a system of processes to ensure we don’t put our vendors’ deals at unnecessary risk when we get to the consent process, as outlined below. Even before we get to the mechanics of what we do to get the purchaser over the line, the first thing we always do is attempt to get the right buyer for the right deal. Sometimes the best buyer isn’t the one with the highest offer, if they cost you money and you don’t get to settlement! So, if a first-time buyer were to phone up and say, ‘I want to buy that business you have listed’, it’s our responsibility as good agents to qualify them to find out about their background and exactly what they’re looking for and what they’re capable of both from a qualifications and financial perspective. There’s no point in pushing a buyer into something they will not be able to handle. We certainly don’t discourage or dissuade first time or inexperienced operators. They are the lifeblood of the industry and are vital to its ongoing success, and many first timers go on to become outstanding managers. Once we’ve found a great business that’s the right fit for a purchaser, we then help everybody involved in the deal by ensuring

the buyer starts preparing the following documents which will be requested by the body corporate solicitors for consideration of the assignment: • References, both professional and personal • Evidence of previous experience in management rights or other fields • A detailed business plan • Police checks • Financial standing via a statement of assets and liabilities • Copies of the buyers’ Real Estate licences But above all, there is now a recognised standard for the “minimum qualifications” required of all buyers, as referenced in the consent questionnaire, that is required to be completed before the interview takes place. If you don’t know what these three items are, or the buyer hasn’t undertaken them, then you and your agent are putting your consent process at huge risk. Quite often we discuss these minimum requirements with buyers and even make them a condition of accepting an offer….. that’s why our deals don’t fall over! It’s also important to understand that although it appears “tougher” to get assignment approval as a buyer, this is not always the case especially if you are well prepared for this stage of the deal. The final takeout is we make sure buyers are well prepared to take on their new business. We make sure they are flexible and willing to work with the body corporate and when they reach the consent stage, the buyer has demonstrated they are willing to do what it takes to perform above and beyond, and that they are well trained and qualified to be a great manager in a great industry! As always, If you need help or advice with any of the above, get in touch with us and we’ll talk you through it.

WE’VE GOT YOU COVERED. MEET OUR BRISBANE TEAM.

N AT H A N E A D E S Broker - Brisbane

JEFF KEAST Broker - Brisbane

JESSIE SHI Broker & Chinese Liaison

M. 0448 339 920

M. 0414 669 007

M. 0422 935 428

RESORTBROKERS.COM.AU | 1300 665 966