Coast. Volume One by Resort Brokers

VOLume one VALUABLE INSIGHTS INTO THE SUNSHINE COAST MANAGEMENT RIGHTS MARKET, RECENT SALES AND EMERGING TRENDS.

COAST. Demand outstrips supply in surging management rights market BY GLEN N M I L L A R As visitor spending in the Sunshine Coast region continues to climb, and after three years of exceptionally strong sales activity, demand for management rights now far outstrips supply. Latest TEQ figures show we welcomed 3.3 million domestic and 307,000 international overnight visitors YE March 2018. Combined, they spent an estimated $2.3 billion (+1% YoY). News reports consistently reflect what many resident managers tell us: they haven’t seen trading this good for a long time. Our tourism market is certainly enjoying a purple patch. So, it’s timely to review our management rights market, particularly in regard to holiday accommodation. HOT SPOTS While the entire Sunshine Coast is enjoying robust demand, there are certainly several locations best described as ‘hot spots’. The common feature, or course, is beach frontage. Noosa - Noosaville is and will remain a highly sought destination, and Noosa’s Hastings Street the most prized. Other popular beachside precincts Mooloolaba, Caloundra and Cotton Tree follow closely as among those in highest demand.

MULTIPLIERS I am always asked what multipliers are doing. It’s tough to generalise. They vary from location to location, and really depend on how many ‘boxes have been ticked’ by the seller at listing. Consistently, Noosa attracts the highest multipliers. And Hastings Street, particularly beachside, will always come in a few points above comparable properties elsewhere, due to scarcity and high net returns per unit to the manager. We have negotiated several recent sales in the street that have exceeded expectations. That said, businesses that deliver very high net incomes, circa $400,000 - $500,000, will command a premium anywhere, purely by virtue of demand (high) and supply (very limited). Recently, a large number of management rights sales have occurred throughout the region, leaving a marked shortage of stock coming to market. Competition is strong for any quality business to enter the market at this time of high demand. FINANCE SITUATION Banks still support management rights on the Sunshine Coast, albeit more cautiously and with a higher level of | ONE |

scrutiny, given recent credit tightening. The ‘Gallery Vie’ ruling, after which many banks reviewed lending policies, can still be an issue, making it critical for buyers to seek the right advice. Your choice of lender may never have been more important. This is where specialist industry finance brokers come to the fore. They know who has what policy, and how to navigate the process. The period for finance approval also takes longer now, so brokers and advisers should allow for this, to avoid extensions in the contract process. BUYER PROFILE Large investor groups and corporate buyers are tending to dominate the higher end of the market, making it harder for ‘mum and dad’ investors to gain access to larger management rights offerings. Still, we frequently deal with many successful private operators who’ve worked their way up, building businesses, upgrading and going on to own bigger and better properties. We’re also seeing the buyer profile slowly change from baby boomers to 30-something couples, many with young families, moving into the industry.

REFRE REINVENT, OR BE LEFT BEHIND

So important is it for tourism operators to ‘Refresh’, that Tourism Noosa recently dedicated an entire conference to the subject. For management rights operators, the need to update and refurbish their product is absolutely critical. Floral bedspreads with matching curtains no longer cut it with today’s guests. But, disappointingly, many complexes are outdated. Managers must always think about how your units and facilities measure up, before guests start looking elsewhere for newer or upgraded accommodation or, worse still, for new destinations. True, lot owners can be reluctant to spend on refurbishment. So, any request for them to invest in an upgrade requires a strategic approach. The aim is to add value and increase cash flow, not a makeover for the sake of it.

They need to know what’s in it for them: • It will guard against depreciation and diminishing returns, that would otherwise be likely. • Present your business case with projected results, eg. $20,000 spent on a renovation has the calculated aim of increasing the property’s value by $40,000 - $50,000. • Most importantly, the upgraded unit will not only maintain returns, it is highly likely to command a higher nightly yield, eg. lifting from a ‘standard’ to a ‘superior’ unit tariff. So, before approaching your owners, preparation is critical. Present your strongest possible case, as you may only

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get one chance to convince them it’s a smart move. Here are some tips: 1. Explain that, without an upgrade, current returns may not be sustained, as guests start looking for newer and better options. 2. Show your owners any relevant comments from guest reviews about the standard of the apartments. 3. Illustrate on a spreadsheet the tariff increase likely to be achieved by lifting the standard. If possible, use actual examples of results achieved by other owners who have upgraded. 4. Discuss the potential impact on property value – the positive effect an

VALUABLE INSIGHTS INTO THE SUNSHINE COAST MANAGEMENT RIGHTS MARKET, RECENT SALES AND EMERGING TRENDS.

SH upgrade will have versus potential loss of value as the unit deteriorates. 5. Present a realistic budget. Obtain quotes upfront from a specialist accommodation refurbishment company detailing what your owner will get for their investment. There are a number of specialist firms offering this service. 6. Point out potential tax benefits. Depreciation is one of the tax deductions most commonly overlooked by property investors. Research suggest around 80% of unit owners fail to maximise available deductions, potentially missing out on thousands of dollars. Also vital will be to set your upgrade priorities. High use areas, particularly kitchens and bathrooms, will have the biggest impact. A newly renovated kitchen and bathroom can add significant capital value as well as major guest appeal. New floor coverings, a fresh coat of paint, new door handles, window furnishings and light fittings can vastly improve the look, without costing a fortune. And soft furnishings need regular replacement. Very important these days is current technology, so ditch small screen TVs, and ensure WiFi is fast enough to support demand for families’ daily digital needs. A unit refurbishment done well will, on average, have a life of 7 – 10 years before it needs another makeover. Competition is coming from everywhere – outside letting agents offering holiday rentals, Airbnb, and online agents like Stayz are all chasing your market. It has perhaps never been more important for your owners to support necessary upgrading of their assets. Refresh! Your business depends on it.

COAST.

The Awesome Foursome Four major sales negotiated by Resort Brokers’ Sunshine Coast senior broker Glenn Millar have grabbed headlines in recent months. From private operators to major hotel groups, they demonstrate a broad buyer profile.

1. OCEANS RESORT & SPA HERVEY BAY The 128-unit resort, conference centre and spa was bought off-market by Oaks Hotels & Resorts, a division of global Minor Hotels. It was sold on behalf of Oceans Queensland (formerly Landmark Mooloolaba, Oceans Mooloolaba and The Rise Noosa, currently Breeze Mooloolaba Resort).

3. R UMBA RESORT CALOUNDRA Bought by SC Resort Management, headed by former On The Beach Noosa operators, Benn and Leslie Wilson from Village Management Corporation, the rights included a 2brm unit and commercial lot with bar, conference rooms and kitchen.

2. AIRE WEST PERTH Singapore-based asset manager ZACD Group bought listed developer Finbar’s Aire Apartments for $12.5 million off-the-plan through Resort Brokers’ Glenn Millar and Steve Dawson of Prime Resort Sales .The 64 studio apartment hotel is now operated by Accor Hotels as The Sebel West Perth Aire Apartments.

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4. BAY VILLAGE NOOSA The caretaking of this Hastings Street gem, with its stylish eateries, shops and salons, was offered off-market exclusively by Resort Brokers and sold to an existing Hastings Street accommodation operator.

MY TOP 10 SUNSHINE COAST SALES 1.

MA R OO C HYD O RE

Verve on Cotton Tree N O O S A

Maison Hastings Street 2.

3. S U NS HIN E

B EA C H

La Mer 8. C A L O U N D R A

H E RVE Y

B A Y

Rumba Beach Resort

Oceans Resort and Spa

4. C OTTO N

TREE

Aqua Vista 9.

N O O S A

Bay Village 5. NOO S A

On The Beach 10.

A record of sales that adds up to the success you want A lifelong career in the hotel and resort industry has given RESORTBROKERS® Sunshine Coast senior broker Glenn Millar an undisputed edge in the management rights market. His sales record says it all. RESORTBROKERS® is Australia’s longest established commercial agency specialising in accommodation property and businesses, operating since 1985. For more than 13 of those 33 years, Glenn has excelled as one of our most successful brokers. His sales have included many of the region’s most iconic properties, as well as major recent national deals including The Beach Resort, Cabarita, 140 Little Collins St, Melbourne and the Aire Apartment Hotel, Perth. This high level of expertise is backed by the superior resources of RESORTBROKERS® including a growing national team of 35+ specialist brokers who are all at your service, the industry’s most widely read journal Informer (circ. 25,000+), and an unmatched database of more than 20,000 active industry contacts carefully compiled over four decades. Glenn’s sales in the last year added up to $69 million. Know-how and market strength combined with exceptional service, energy and enthusiasm: that adds up to the result you want.

TOTAL VALUE OF SALES

M A R CO O LA

B E A C H

Marcoola Beach Resort

MO OL O O L A B A

Nautilus

$69M 1300 665 966 RESORTBROKERS.COM.AU

GLENN MILLAR

Senior Broker Sunshine Coast

0412 277 804 glenn@resortbrokers.com.au

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