The Many Faces of the Accommodation Industry by Resort Brokers

INFORMER

No. 67 | July 2012

Australiaâ&#x20AC;&#x2122;s No.1 tourism & business

The many faces of the accommodation industry

resortbrokers.com.au

Hotel Furniture Specialists

1300 500 815

admin@resortinteriors.com.au

www.resortinteriors.com.au

Constantinou, Quest Apartments founder, did us the honour of addressing our recent sales conference. We’ve been selected to work closely with Tourism Queensland, through regular meetings, to keep them appraised of industry opportunities. And we’re delighted to be on the panel at ANZPHIC 2012 (July 25-27), leading discussions on future challenges and strategies for hotels, resorts and serviced apartments. There is another important aspect to this focus on relationships, within our company. We are delighted at the collaborative culture that has developed at Resort Brokers – a culture of encouragement and support between everyone on our team, nationwide. Many younger people have joined the mix, injecting new energy and enthusiasm. They are thriving alongside experienced brokers with knowledge and insights gained over years in the profession. It’s a fantastic dynamic.

The people you meet Ian Crooks MANAGING DIRECTOR

ou know the old saying about ‘who you know’ and ‘what you know’? At Resort Brokers, the ‘what’ is tremendously important. We pride ourselves on exceptional product and market knowledge. But, in this edition, I want to talk about the ‘who’. On a recent trip to Singapore, we met with high profile businessman, Michael Kum, whose family company owns multiple hotels in Asia and Australia. I was also pleased to catch up with an old workmate. He now sells extreme luxury apartments in the island nation and in London. And I mean extreme … really serious money!

COVER STORY:

“If you set out to profile a ‘typical’ motel or management rights owner, you would soon find ‘typical’ is not a word that applies. So, who are the people who drive our industry? Where have they come from? And how did they get here? We begin a new series profiling the many faces of the accommodation industry.”

It set me thinking about all the contacts I’ve made in the 26 years since Resort Brokers started. Connections are struck, networks formed, relationships developed. The tentacles reach out across industries, across the world, further than we ever imagine. The links extend through valued industry associates – specialist solicitors, accountants, bankers, mortgage brokers, FF&E companies, and other skilled experts we’ve been lucky enough to meet and stay in touch with. Many have been very supportive of our business, and the mutual benefits are significant. For example, we have been appointed ‘preferred agents’ by leading groups including the Choice Hotels chain, Best Western International and Quest. Paul

As an indication of the productive environment, I’m proud to say 60% of our sales in 2011-12 were shared between our agents, achieved by collaboration and teamwork. It’s a big advantage for vendors … when you list exclusively with one of us, you have 19 other consultants across Australia working every bit as hard for you! So now we look forward to a new financial year, confident it promises continued recovery and growth. This edition offers some great reading to kick off the season, including a thought-provoking perspective on inflation. We continue our popular series on the evolution of management rights, and introduce a new ‘Trade Page’, which I’m sure will spark plenty of interest. Vendors and buyers will find some attractive options to include ‘trades’ as part of their transactions. Finally, to finish where I started – talking about the wonderful people we connect with – our cover story launches a new series on the many faces of our industry. We are a diverse and interesting bunch! Please send your feedback to: carlacook@resortbrokers.com.au or PO Box 5004, West End Q4101.

INSIDE FEDERAL BUDGET OVERVIEW

AGENT & AREA PROFILE

FACES OF THE ACCOM. INDUSTRY

MANAGEMENT RIGHTS SERIES (cont.) 26 TRADE PAGE

EXCLUSIVE LISTINGS

RELIEF MANAGERS

INDUSTRY SPECIALISTS

RESORT BROKERS DIRECTORY

RESORTBROKERS.COM.AU 3

oin the 8Hotels Collection and be the first to benefit from their sophisticated management model. 8Hotels is rapidly expanding in quality venues throughout Australia, Asia and Europe. With this expansion comes an exciting opportunity to lease one of Sydney’s iconic properties whilst benefiting from the outstanding marketing and management systems of the 8Hotels Collection. The Kirketon Hotel is located in the heart of Sydney’s restaurant, bar and nightclub district, minutes from Oxford Street and Kings Cross Station and nestled in a quiet corner of the Darlinghurst, Potts Point and Kings Cross Triangle. Moments’ walk to Woolloomooloo, the Sydney Financial District, and Botanic Gardens, home to the award winning ‘Eau de Vie’ Bar/nightclub and Sydney’s famous ‘Fu Manchu’ restaurant, The Kirketon is ideally located for all accommodation needs. The Kirketon enjoys an excellent turnover of over $2m and market leading occupancy which is a great platform for a new owner 4 RESORTBROKERS.COM.AU

Rare premium leasehold offering in Sydney’s CBD AUSTRALIA’S FASTEST GROWING BOUTIQUE CHAIN to take this property to the next level. Included in the offering are full back-ofhouse accounting, marketing and booking systems that will allow the new owner to focus on delivering outstanding service and customer satisfaction, which is the benchmark of premium boutique hotels. • 40 boutique hotel rooms • 4 star luxury hotel • Prime Darlinghurst location • Close to restaurants, bars and nightclubs • Sophisticated operating systems • No food and beverage • Internationally recognised brand

Shane Wynhoven EXCLUSIVE AGENT Mobile: 0424174592 Sydney office: (02) 9904 8224 Email: shanewynhoven@resortbrokers.com.au

Nett profit: $246,365 Turnover: $1,900,000 PRICE: POA

REF: LH001944

he Territory Manor Motel and Caravan Resort is situated in Mataranka, NT.

The current owners have worked tirelessly to improve the property and to offer a true Territory experience for their guests. Income and profit has doubled each year for the last 3 years, now offering new owners an opportunity to step in and run a very successful business. The property is a popular destination for travellers on the Stuart Highway and is also in high demand for functions and events in the district. The owners have obtained approval to split the property into 2 titles giving the opportunity to sub divide the land. As well as a large 3 bedroom owners home, there is additional staff quarters and accommodation for managers. The property boasts a billabong stocked with Barramundi. There are daily fish feeding shows which attract travellers to the resort.

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Beautifully presented resort complex in the Territory OUTSTANDING MOTEL & CARAVAN PARK The Territory Manor presents an outstanding opportunity for new owners to secure a very successful and profitable business as well as enjoying the Territory lifestyle.

Chris Rowe Mobile: 0408 225 220 Brisbane office: (07) 3878 3999 Email: chrisrowe@resortbrokers.com.au

The freehold is being offered for sale, but the vendors will discuss lease options as well. • 26 motel rooms, 50 caravan sites, ensuite sites and unlimited camping • Licensed restaurant and bar catering for 95 guests • Over 70 hectares on 2 titles - room for massive growth • Home of the famous Barramundi feeding shows • Swimming pool, spa, camp kitchen & BBQ’s • Renovated owners accommodation • Freehold is offered, alternatively a new lease could also be negotiated

Nett profit: $358,710 Turnover: $1,052,755 PRICE: $2,200,000 plus SAV

REF: LH001852/FH001785

World Heritage opportunity FREEHOLD RESORT IN CAPE TRIBULATION

Shane Mullins EXCLUSIVE AGENT Mobile: 0447 185 001 Brisbane office: (07) 3878 399 Email: shanemullins@resortbrokers.com.au

Nett profit: $315,000 (adjusted) Turnover: $1,660,000 Sales Price: $1,750,000 REF: FH001909

erntree Rainforest Lodge is based in a stunning location within the main commercial hub of Cape Tribulation, approximately 75 kilometres by road north of Port Douglas. This 3.5 star resort consists of 54 rooms, is relatively modern and presents in good condition. The property is located on approximately 8ha set amongst the world heritage rainforest. The property has a large reception building with an entry pavilion, restaurant (with dining huts), bar facilities, two resort pools and amenities block. Ferntree Rainforest Lodge makes the very best of this setting, featuring low pitched buildings that are set harmoniously within the vivid green landscape.

Cape Tribulation (Trib) is in the heart of the Daintree Rainforest, home to some of the oldest trees on the planet. This World Heritage listed rainforest is adjacent to the Great Barrier Reef. The Daintree is the only destination in the world where two World Heritage areas meet. Ferntree has been operated in more recent years by a corporate company, always under management. This corporate company has provided a foundation of marketing and has performed an exceptional mission to sell this resort to the rest of the world. It provides a great opportunity for an owner occupier who is prepared to operate the resort to its full potential – ENQUIRE NOW! • 54 rooms – mixture of resort, hostel & staff accommodation • Located on 8ha • 3.5 star • Restaurant & bar facilities • Two resort pools • Located only minutes from the coral sea

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This beautifully maintained motel is ready for new owners to walk in and turn the key. Over the last nine years the entire motel has been brought up to a very high 3.5 star standard. Two rooms are brand new and all other rooms are in first class condition throughout. The massive park-like grounds are ideal for expansion - cabins or more motel units. Be quick to grasp this amazing opportunity! • Spacious open plan 3 bedroom residence with huge back yard • 14 fully refurbished units including 2 new units

Rare freehold offering under $1 million BEAUTIFUL NSW SOUTHERN HIGHLANDS • Large 6,000 square metre land area, allows for future development, STCA • Adjacent to café & clubs • Motivated vendors ready to retire • Easy to manage husband and wife property • Good turnover large profit, 17.5% on asking price • Great upside as yet to be listed with wotif booking.com etc • Only motel in town - minutes from Hume Highway

Manage from anywhere in the world VIRTUAL BUSINESS WITH ONLINE MANAGEMENT SYSTEM Nett profit: $77,275 Turnover: $230,000 PRICE: $250,000

Shane Wynhoven EXCLUSIVE AGENT Mobile: 0424174592 Sydney office: (02) 9904 8224 Email: shanewynhoven@resortbrokers.com.au

REF: LH001927 8 RESORTBROKERS.COM.AU

This is an exciting opportunity to work from anywhere in the world with a versatile and new age business model. La Krisp is an online management arm of 10 luxury apartments in Ettalong Beach that are remotely managed through a virtual management system. The key mediums and business drivers include group buying sites i.e. Deals Direct, Deals.com.au, Our Deal as well as frequent updates to its existing database members.

Nett profit: $164,207 PRICE: $940,000

Russell Rogers Mobile: 0416 166 909 Sydney office: (02) 9904 8224 Email: russellrogers@resortbrokers.com.au

REF: FH001890

This model has proven results since the implementation of the business. This offering is a fantastic way to earn a lucrative income from your office, home or anywhere with internet access. The business has structured systems including online booking, cleaning and management that ensure maximum efficiency and low costs. A 24-hour call centre, on call cleaners and modern facilities cater to the tech savvy operator who embraces the future of apartment management. • 10 resort style luxury beach side apartments • Located on the beautiful Central Coast of NSW • Opportunity to expand

Fantastic opportunity to purchase the passive investment of a motel with an incredible turnover and highly impressive bottom line, situated in a booming mining town on the west coast of Tasmania.

Tassie F\H passive investment opportunity

The town is a regional centre and hub of many developments covering the area. This is a AAA 3 star motel, offering 40 years of trading history comfort. Queenstown, Tasmania is a very special town and a great tourist destination. Situated as it is in the wilderness area of Tassie, the town has a rich past. Recent tourism attractions in the area include the famous Rack and Pinion Wilderness Railway (that takes visitors from

10% YIELD ENJOYING ANNUAL CPI ON 24 YEARS Queenstown to Strahan), museums, mine tours, bush walks, chair lift and the lure of the wilderness. • 55 units incl. family, king and twin combinations • Established in house restaurant and lic. bar • Diverse business incl. coach, tourism, corporate and mining • Lessee pays all outgoings incl. land rates, insurance etc. • Interior and exterior of the buildings have been recently repainted

Passive investment showing 10% yield FREEHOLD OPPORTUNITY - LESSEE PAYS ALL OUTGOINGS PRICE: $3,875,000

Len Booth EXCLUSIVE AGENT Mobile: 0438 139 422 Brisbane office: (07) 3878 3999 Email: lenbooth@resortbrokers.com.au

REF: INV001897

This is a large imposing property situated on the north side of a major northern NSW town on a busy highway. It boasts 46 units including 13 new self-contained and is both a destination and a stopover motel. Occupancy sits at 83% and continues to grow. It sits on 2.08 hectares - the grounds and landscaping are well maintained.

Rent: $172,947 + GST + annual CPI paid annually (monthly rent: $14,395.58 per month) PRICE: $1,730,000

Len Booth EXCLUSIVE AGENT Mobile: 0438 139 422 Brisbane office: (07) 3878 3999 Email: lenbooth@resortbrokers.com.au

all over the world. The local council and tourism board promote the water as therapeutic and a great source of relaxation and replenishment. • 46 units including 13 new s/c • Fully licensed restaurant can seat up to 98 • Excellent depreciation for the investor • 3 in ground pools including artesian spa pool • Major renovations have been recently completed • Rendered concrete block construction

The motel has a hot artesian spa bath complex which is visited by guests from RESORTBROKERS.COM.AU

Editorial

Mike’s Road Report: Don’t worry be happy MIKE PHIPPS - MIKE PHIPPS FINANCE For those of you who study such things this will come as no shock. It turns out the name Rebecca, loosely translated, is ancient Hebrew for Born Under a Bad Sign. I kid you not and should there be any doubt I’ll introduce you to my daughter, innocently christened by that very name. Yes, it is true that as an infant she was truly beautiful of mind and spirit but as the teenage years approached the awful truth became clear. The thousands of dollars on private school fees translated to numerous false starts at a variety of jobs, an ill-fated attempt at law, a pretty good sun tan and a love of the beach and Facebook. After much pressure from mum and dad the lovely Rebecca started making serious attempts to get off the couch recently and actually tidied up the resume and went job hunting. She also did some TAFE training in accommodation management and scored a part time gig with a Hastings Street resort. Didn’t last long but those managers (thanks Woodsy, I owe you a beer) gave our Bec enough of an insight to know she liked working in accommodation. She also scored a great reference which always helps. Anyway, one of the jobs applied for is as a guest services officer on Daydream Island. Go for it Bec, there’ll be hundreds of applicants, you have limited experience but if you score the job I’ll drive you to Airlie Beach and put you on the boat personally. What are the chances? Just to spite me she gets the gig, so the Managing Director and I hit the road with the devil child in tow. First nights stay with clients in the motel industry in Rockhampton is an eye opener. I know this part of Queensland is booming but you really need to go there to appreciate the scale. What’s really interesting is that Quest are constructing a serviced apartment building at Rocky and those guys don’t go anywhere that hasn’t been extremely well researched with strong long term prospects. Needless to say the moteliers and apartment operators are all saying that most weeks they are booked solid with a need to book up to 4 weeks ahead to get a room.

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Next stop Airlie Beach with a stay at the magnificently positioned Airlie Reflections. I really had forgotten how beautiful the views at Airlie are and how fantastic the water colour is. There are a few more places to eat since last I was there but it still feels like a backpackers town surrounded by luxury accommodation. My clients in Airlie tell me it’s been tough since the GFC although some are saying that there’s some demand from people in the resource sector coming to Airlie for a bit of R and R. Let’s hope that continues as it would be great to see the leisure accommodation sector benefit from the resources boom. So, we put her ladyship on the boat, wave goodbye with a few tears from the MD and head west. If you are thinking of travelling in this area book well ahead. When I was a little bloke living in Clermont you could shoot a cannon through the place and not hit anyone. Now you can’t get a room. It’s even more difficult in Emerald where I’m told 2 month ahead bookings are not uncommon and motels are running at over 100% occupancy due to prepaid but unused rooms. We hit Barcaldine late in the day and find lodgings at a motel just on the outskirts of town. The motelier greets us in bare feet with an open shirt and impressive girth. No need to go to town to dine, we have a restaurant here. Turned out the wife was a great cook and the restaurant exceeded our admittedly limited expectations. The room was dated but very big and comfortable. I couldn’t help thinking how close and yet how far this operation was from being a really good motel but why bother when the miners are desperate for rooms. We leave Barcaldine reflecting on the birth place of Labour and the magnificent monument that now commemorates the Tree of Knowledge. Seemed like a waste of tax-payers money when I read about it but you need to actually stand under it and reflect on the history of the place before coming to a conclusion. Not sure my grandfather, a former ring barker who worked hard and ended up shire clerk (now known as CEO) of the Barcaldine Shire would have agreed but either way he would have had to be impressed with the progress in the bush. Next stop Mitchell just west of Roma. We score the last bed in town and the motelier almost dances

to the footpath with the No Vacancy sign. What is it about blokes in accommodation and No Vacancy signs? The motel car park is virtually empty at 4pm and full of Toyota four wheel drives by 5pm. Judging by the sort of vehicles I’m guessing a combination of sales reps, mining industry employees and tourists. A quick survey at the pub that night confirms my observations and also confirms that demand for motel and serviced apartment accommodation shows no sign of abating if the general views of the patrons are anything to go by. Onward to Toowoomba via Roma, Yuleba and Dalby. I’m sure you’ve heard of two of these places so please forgive me if I give the little town I first grew up in a quick plug. It used to be a one horse town but I think even Ned has now left. Having said that I couldn’t help noticing the prefab motel accommodation now attached to the pub. Seems all you need to fill a room is proximity to water, steak and beer. When my dad was shire clerk here (yes, it’s a miracle I’m not working in local government) the pub was still of the old school variety with rooms upstairs and the bar at street level. It burnt down in interesting circumstances just before we moved to Toowoomba. Rumours of a small boy with matches lurking that night are completely unfounded. So, what have I learned from all this ? Well, I think the governor of the RBA is right, the glass in most areas is certainly half full and if you want to get inspired in terms of the possibilities this great country offers go west and have a look. If you run a resort and can figure out a way to entice the R and R resource sector dollar I think you’ll go well. And, if you’re already going well, don’t take off your shoes, unbutton your shirt and take it all for granted. Plan B is always a good idea. PS : Any stories of me dancing on the jetty at Airlie are pure fabrication! PPS : R and R (Rest and Recuperation)…..not a free plug to you know who. ■

Editorial

The Motel Lease – Mortgages and Deeds of Consent DAVID BURROUGH - HILLHOUSE BURROUGH MCKEOWN LANDLORD’S CONCERNS

RESPONSE

The financier may appoint an operator unsuitable to the Landlord

Invariably this operator must be acceptable to the Landlord as an assignment of the lease by the financier will take place pursuant to the terms of the lease

The Landlord will have no say in the appointment of a new operator

The terms of the transfer must be in accordance with the Lease

The financier will run the complex without regard to the Landlord

The financier will be required to comply with all the terms of the Lease

The Landlord should not execute any document that it is not legally obliged to sign

This type of agreement is a commercial fact of life for Motel Leases. Every year many landlords sign these agreements

Having a financier involved necessarily means time delays in dealing with the operator

The financier will agree to act as promptly as possible in the terms of its security

The financier’s operator may not have any experience in operating a motel

The financier generally will only engage highly competent professional operators. The financier will have the same motivation to maximise the profit of the business to ensure that it is sold for the highest possible price. To this end the landlord can be assured the financier will install a professional and experienced operator

Acknowledging the financier’s rights will cost the Landlord money

The covenants between the financier and the Landlord mean that the financier must meet any extra costs incurred as a result of the operator’s default.

The Landlord is losing its rights of termination.

The Landlord’s rights of termination are still available if the financier declines to rectify the breaches

The Landlord is losing its rights against the operator

The Landlord’s rights as against the operator remain intact so that the operator may be sued by the Landlord for breach of lease. Some agreements contain an express clause acknowledging this

If the financier enters into possession then they should be responsible for all breaches of the Lease (even those caused before the financier entered possession)

This is asking the financier to be responsible for an unknown liability and in effect guarantee the obligations of the tenant (something which the financier will never agree to). The Landlord will continue to have rights against the operator for any past breaches

The financier is able to remove the Chattels leaving the Landlord with nothing to run the Motel

In the rare circumstance that the financier needs to exercise their rights under the agreements they will want to negotiate to sell the Chattels back to the Landlord (this is the simplest way for the financier to obtain the most value for the Chattels). Once the Landlord buys the Chattels back he is able to appoint an operator to run the motel business, build that business up and then sell the business to a new leasehold operator (generally at a profit to the Landlord)

Get social!

Become friends and ‘like’ Resort Brokers on Facebook. It’s a great way to view all our new listings, get hints and tips about managing your property and find out what we are up to. facebook.com/resortbrokersaustralia

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An excellent five year old complex with a first class residence and a solid management rights business • The manager’s residence is a free-standing 3 bed, 2.5 bath townhouse. It is the stand-out residence in the complex, with a massive private back yard, an office and a storage room attached on title • The current managers have tenants of a high standard and this pet friendly complex enjoys 100% occupancy • Located in beautiful South East Queensland, just a short drive to the Gateway Motorway or to the café and club precincts of Redcliffe and Scarborough

A top business EXCELLENT BRISBANE MANAGEMENT RIGHTS • All e quipment supplied and maintained by the body corporate • 80 units - 68 in the permanent letting pool • This is a great opportunity for a couple to earn a substantial income from a well established business and enjoy a great lifestyle in beautiful South East Queensland

MANAGEMENT RIGHTS - 15 MINS FROM BRISBANE CBD

Neville Littleton Mobile: 0407 727 194 Brisbane office: (07) 3878 3999 Email: nevillelittleton@resortbrokers.com.au

REF: MR001882 12 RESORTBROKERS.COM.AU

Neville Littleton Mobile: 0407 727 194 Brisbane office: (07) 3878 3999 Email: nevillelittleton@resortbrokers.com.au

REF: MR001898

Large off the plan Nett profit: $ 250,000 (projected on 94 in the letting pool)* PRICE: $ 1,572,500 (+ GST on the M/Rights)

Nett profit: $223,000 Business price: $1,110,000 PRICE: $1,440,000

• This is a fantastic opportunity to purchase a new management rights in a strong rental area, within easy reach of motorways and only 15 kms from the Brisbane’s CBD • Stage 1 (32 units) of this quality Heran Building Group development is due for completion approx Oct/Nov 2012. Stage 2 (33 units) approx Jan/Feb 2013. Stage 3 (41 units) approx Apr/May 2013. • Total of 106 units including 46 AMC NRAS, giving that extra rental security

• The manager’s free standing townhouse has three bedrooms, two bathrooms, powder room, open plan kitchen/dining/ lounge, double garage, attached office and storage room on title • The price of $1,572,500 (+ GST on M.R. is subject to a claw back per unit if less than 105 units are in the letting pool at the final adjustment date • Buy early and set up each stage to your standard as they become available. Earn all the new let fees and pay GST on the business in lieu of stamp duty/transfer duty * All information contained herein (including projected figures) is supplied to Resort Brokers by the vendor and/or third parties. Resort Brokers, its employees and agents are merely passing on this information and to not endorse or adopt it or make any representations as to its accuracy. Projected figures are estimates only and no guarantees are made as to their achievability. Interested persons should rely on their own enquiries to verify the information contained herein.

This 88 townhouse complex lies in Brisbane’s western suburbs, 15 km’s from the CBD. The complex was completed in 2005. A credit to the current managers, the business runs like a well-oiled machine with excellent tenants and outstanding systems in place. Vacancy has been 0% since the current managers arrived, and there is currently a waiting list for tenants. The vendors are seriously committed and motivated to selling this fantastic business and moving on. As such, figures have been verified by an industry specialist. The offering is priced to meet today’s market. This is the best permanent management rights on the market in Brisbane! Inspection will impress.

Permanent complex in Western Suburbs BRISBANE MANAGEMENT RIGHTS • Range of 2, 3 & 4 bedroom residences in complex • 23 years on term • 53 of 88 in letting pool • Friendly and cooperative committee • Long list of inclusions • Large 4 bedroom, 2 bathroom managers residence • $109,200 body corp remuneration • Net profit verified by specialist accountant

TARINGA MANAGEMENT RIGHTS

Email: stevecampbell@resortbrokers.com.au

Location, Location, Location. Conveniently located in Taringa, this 47 unit complex has a bus stop at the door, train station within 500m, is minutes to the Wesley Hospital and Westfield Indooroopilly is within 400m. The hard work has been done by the current managers both on the unit and on the business.

REF: MR001867

The managers unit has been very tastefully renovated, and has a current registered valuation for the purchase price. The

Steve Campbell EXCLUSIVE AGENT Mobile: 0407 220 668 Brisbane office: (07) 3878 3999

Steve Campbell Mobile: 0407 220 668 Brisbane office: (07) 3878 3999 Email: stevecampbell@resortbrokers.com.au

REF: MR001630

Inner city Brisbane corporate letting Nett profit: $178,000 PRICE: $1,299,000

Nett profit: $226,000 PRICE: $1,546,000

business is thriving with demand for these well-appointed self-contained rooms growing month by month. The large office is directly below the manager’s unit. After hours phone support system takes care of any after office hours enquiry. • Recently renovated 2 bed 2 bath manager’s unit - best on the market • 81% occupancy last 12 months • Fantastic long term clients • All rooms are self-contained with kitchen, full laundry, phone, internet and Foxtel • First time offered to the market for 6 years

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from the 2013–2014 financial year; • A $1 million cap on the amount of losses able to be carried back; and • Refunds will be limited to the balance of a company’s franking account.

Editorial

The Australian Government has also announced that the loss “carry back” will be subject to integrity rules, however no details of these rules have been provided. This measure is seen by the Australian Government as a major tax reform to assist small businesses, although the benefits of the measure will be available to all companies regardless of size. Specifically, the $1 million cap on the amount of losses able to be carried back translates to a real cash benefit of up to $300,000 per annum for eligible companies (based on a corporate tax rate of 30 per cent) and is realised at a time when they are most vulnerable to cash flow concerns.

2012-2013 Federal Budget: What it means for you BY TONY ROSSITER - HOLMANS ACCOUNTANTS Overview The Australian economy is in somewhat of a holding pattern despite expectations that it will continue to outperform other developed economies. Our two-speed economy continues to define economic performance, with: • The mining boom continuing to grow at just under nine per cent per year through to 2013–2014, with $120 billion of investment in 2012–2013. We are however moving into a new phase, with export prices having already peaked. • The non-resources sectors are expected to grow at around two per cent per year – with retail prospects continuing to be hampered by greater levels of consumer saving and the higher than average Australian Dollar. This Federal Budget has prioritised spending on areas such as health, social policy and other equity initiatives, but has not provided a comprehensive road map for lifting productivity and future economic growth. As part of our Federal Budget analysis, we provide the following commentary on topics that will be relevant to many Management Rights operators. Corporate Tax Company tax rate cuts not to proceed The Australian Government has announced that it will not proceed with proposed reductions to the company tax rate. The proposed reduction in the company tax rate to 29 per cent (from the current rate of 30 14 RESORTBROKERS.COM.AU

per cent) was to apply from the 2012–2013 financial year for small business taxpayers. For Management Rights owners operating their business through a company structure, the anticipated reduction on the company tax rate is unfortunately off the table – at least as far as the current Australian Government is concerned. Loss “carry back” measure for companies In the lead up to the Federal Budget, the Australian Government announced a loss “carry back” measure for companies to commence from the start of the 2012–2013 financial year. Under this measure companies will be able to “carry back” losses to offset prior year profits, and obtain a refund of tax previously paid on those prior year profits. This measure is intended to assist corporate businesses facing pressures from the patchwork economy and encourage growth and investment. While the specific details of the measure announced by the Australian Government are still to come and will be the subject of a discussion paper yet to be released, it appears that the Australian Government has largely accepted the model put forward by the Business Tax Working Group (BTWG). Key features of this model will include: • An initial one year carry back period from the 2012–2013 financial year (i.e., 2012– 2013 tax losses can be carried back and offset against tax paid in 2011–2013); • A two year loss carry back prior to apply

A loss “carry back” regime will bring the Australian tax system in line with a number of international tax systems including the United States, the United Kingdom, Canada, France and Germany. Some further practical observations include: • Only companies (and entities taxed like companies) can benefit from the proposal. Therefore, businesses operated by sole traders (individuals) or through Trusts will miss out on the benefit of this measure; • The loss “carry back” applies to revenue losses only – no relief is given to capital losses; • The measure is aimed primarily at assisting companies that experience a temporary setback which results in a period of losses following a period of profits. It is of limited benefit to start-up companies and businesses that typically experience a sustained period of losses before generating a profit; • The limit on carry back refunds to the balance of a company’s franking account means that companies will need to consider this as part of planning for the payment of franked dividends. Paying out franked dividends to shareholders may limit the ability of a company to carry back losses in future income years; and • For those companies which are looking to carry forward losses to later income years, we are yet to see if there will be any future reforms to the application of the same business test which is often onerous and difficult for many companies to pass. For Management Rights owners operating through a company structure, we recommend you seek advice from your accountant as to whether you can access the loss “carry back” regime. Indirect Tax GST compliance program extension The Australian Government has announced that it will provide $195.3 million to the Australian Taxation Office (ATO) in 2014–2015

and 2015–2016, effectively extending the GST compliance measures announced in the 2010–2011 Federal Budget for a further two years. These measures are intended to ensure that the ATO can continue to closely examine issues relating to: • fraudulent GST returns • under-reporting of GST liabilities • failure to lodge GST returns; and • outstanding GST debts. It is notable that the expected revenue increase from this measure is significant – $986.2 million. It is clear that while the Australian Government continues to move forward with its GST administration reform agenda, the ATO will maintain a high level of scrutiny on taxpayer compliance. For Management Rights owners, this is a reminder to ensure you are receiving sound accounting advice as to your compliance with the ATO, in particular GST legislation. Small Business There was much speculation that the 2012–2013 Federal Budget would be a “small business budget”. Changes directly impacting small businesses that satisfy the “$2 million turnover test” from 1 July 2012 relate to previously enacted or announced measures, these include: • allowing small businesses to write off depreciating assets of less than $6,500 • the introduction of simplified pooling rules for depreciating assets of $6,500 or more; • and an immediate tax deduction of up to $5,000 for the cost of a motor vehicle. For Management Rights owners the increase to the write-off amount of depreciable assets is a bonus – given that most plant and equipment used in the day-to-day operation of your business should fall within these capital expenditure parameters. In addition, from 1 July 2012 that new company car you had your heart set on may now be a taxeffective option. Personal Tax Although the 2012–2013 tax rate changes for resident taxpayers are welcomed by low income earners, higher income earners will receive no real benefits. Higher income earners will also feel the full impact of the reduced Private Health Insurance Rebate which is to apply to premiums paid on and after 1 July 2012. Some limited relief for higher income earners will come from the removal of the Flood and Cyclone Reconstruction Levy which will no longer apply after 30 June 2012. Individual taxpayers will be disappointed that the proposed 50 per cent discount for interest income and the standard tax deduction for work-related expenses – both due to commence on 1 July 2013 – are no longer being introduced. Personal income tax rates 2013 The Australian Resident Individual Income

Tax Rates for the 2012–2013 financial year are set out below. The most significant change from the 2011 financial year to the 2012 financial year is the increase in the tax-free threshold from $6,000 to $18,200. Taxable income threshold range ($)

0 – 18,200 18,201 – 37,000 37,001 – 80,000 80,001 – 180,000 180,001

2012–2013 marginal tax rates (%) 0

19 32.5 37 + 45

For Management Rights owners the increase in the tax-free threshold is a welcome relief. Superannuation It appears the so called “simpler super” measures introduced in 2007 are gradually being wound back. The biggest concern is the growing proposition of additional complexity with respect to the administration of superannuation. Additional tax on concessional contributions The Australian Government has confirmed an additional tax of 15 per cent on concessional superannuation contributions from 1 July 2012 for individuals whose income exceeds $300,000. The additional tax paid on a $25,000 contribution will be up to $3,750. Income for this purpose will include taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax-free Government pensions and benefits, less child support. For Management Rights owners superannuation still remains an attractive investment vehicle despite the possible complexities and administrative costs involved, due to the tax concessions provided on contributions, the 15 per cent tax rate on investment earnings and the tax-free status of investment earnings and pension withdrawals in retirement, commonly referred to as “transition to retirement”.

A reduction in the concessional superannuation contributions cap for individuals aged 50 years and over will provide even more pressure on the cumbersome and costly excess contributions tax regime as more and more individuals inadvertently breach their caps. There were no changes to non-concessional superannuation contribution limits. Fringe Benefits Tax Further reform of living-away-from-home allowances and benefits Building on the 2011–2012 Mid-Year Economic Fiscal Outlook measure Fringe benefits tax – reform of living-away-fromhome allowances and benefits, additional reforms have been made to living-awayfrom-home (LAFH) allowances and benefits to better target the concession to people that are legitimately maintaining a second home in addition to their actual home for an initial period. The updated measures are as follows: • access to the tax concession will be limited only to those employees who maintain a home for their own use in Australia that they are living away from for work purposes; and • providing the tax concession for a maximum period of 12 months for an individual employee for any particular work location. The welcome news is that the Australian Government has listened to extensive feedback from the recent consultative process associated with the previously proposed LAFH changes and indicated that there will be transitional relief through to 1 July 2014 for arrangements entered into before 7.30pm (AEST) 8 May 2012. Any arrangements entered into post the Federal Budget will cease to be eligible for FBT concessions from 1 July 2012.

Concessional superannuation contribution caps reduced from the 2012–2013 year

Tax Administration

The Australian Government has deferred to 1 July 2014 its previously stated policy of a $50,000 concessional contributions cap for individuals aged 50 years and over, where their accumulated superannuation balance does not exceed $500,000.

More funding provided to the Australian Tax Office to collect debts.

The concessional contribution limit for individuals aged 50 years and over will therefore reduce to $25,000 from 1 July 2012. Concessional contribution limits will be as follows, including indexation adjustments expected to apply in 2015: Year

Under age 50 years

Over age 50 years

2012 2013

$25,000 $25,000

$50,000 $25,000

2014 2015

$25,000 $30,000

$25,000 $55,000

The Australian Government has announced that it will provide $106 million over four years to the ATO to improve its management of the collection of tax debts and superannuation guarantee charges. It is intended that the funding will be used by the ATO to make contact with taxpayers earlier than would otherwise be the case with a resulting projected increase in cash receipts over the forward estimates period. For Management Rights owners with outstanding debts with the ATO, it is critical that you discuss your options (such as ATO payment plans) with your accountant. > continues page 32 RESORTBROKERS.COM.AU 15

his is one the best returns available in the market place at the moment, showing a whopping 21.5% return on overall investment. This 76 unit complex is beautifully quiet yet close to all your daily amenities. It’s a peaceful place with lovely gardens, some of which are looked after by the unit owners and tenants. This over 55’s complex is for like minded people looking for independent living. No care is involved, nor are nurses or doctors. There are also no age restrictions for the manager. The current owner does not have a RLA certificate and is not interested in letting. With over twenty units being managed by an outside agents this represents a great potential upside for the incoming purchaser. The managers have at least one direct enquiry for people looking to rent per week. Remuneration is very good for the caretaking workload, which is on average 2.5 days a week. Brand new gardening equipment bought only 4 months ago. All repairs/replacement of any equipment to run the business are covered by the

16 RESORTBROKERS.COM.AU

Showing a whopping 21.5% return on total investment VERY LARGE MANAGEMENT SALARY body corporate, including expendables. Food preparation is not mandatory but the option is there. The current managers prepare lunch, this is to be confirmed if mandatory or not. A purchaser can put managers or representatives in the unit and live off site, if they please. The managers unit is lovely with two bedrooms and one bathroom. • 15 years on the agreement • $118,000 body corporate salary • Small real estate component • Pets permitted • Healthy sinking fund • Amazing potential for letting business with over 21 units with outside agents • No set office hours • Supermarket, gym, tavern, food court and more at a large shopping centre, 800m walk from the complex

Tim Crooks EXCLUSIVE AGENT Mobile: 0422 208 450 Brisbane office: (07) 3878 3999 Email: timcrooks@resortbrokers.com.au

Nett profit: $139,860 PRICE: $655,000

REF: MR001916

Award winning gem LEASEHOLD OFFERING - BEST WESTERN CHAIN

Tony Payne EXCLUSIVE AGENT Mobile: 0418 329 421 Melbourne office: (03) 9347 3100 Email: tonypayne@resortbrokers.com.au

Nett profit: $199,217 Turnover: $514,178 PRICE: $570,000 REF: LH001893

he current leaseholders are proud to announce that at the last Best Western Conference, they were placed in the Top 10 Motel operators, competing against 278 Best Western Motels located in Australia and New Zealand. The awards are over a number of categories, including customer convenience, cleanliness, presentation of motel and customer service. This beautiful motel speaks for itself. Inspection makes you a believer. Add to the fact that Bairnsdale is a fast growing regional city with a comfortable 3.5 hour drive from Melbourne. Whilst it is a very strong corporate town, tourism also plays it’s part as Bairnsdale

sits at the Western Gateway to the vast Gippsland Lakes System and the Ninety Mile Beach, as well as the junction of the Great Alpine Road and Princess Highway. This position provides easy access to the Alpine Regions of Omeo and Mount Hotham. The Best Western Colonial is conveniently located to all amenities, licensed clubs, restaurants, local shops, hotels & tourist information centre. • Strong corporate clientele with escalation in gas exploration off the Coast • Western Gateway to Gippsland Lakes System and Great Alpine Road • Nothing to spend - new linen and beds in most rooms • Beautifully maintained, comprising of 14 rooms with a spread of deluxe, standard, family suites etc. • Owners accommodation is a spacious 4 bedroom 2 story apartment with kitchen and lounge • Outstanding potential motel for first timers RESORTBROKERS.COM.AU 17

esort Brokers Australia are proud to offer one of the biggest management rights opportunities available in Australia today. The close proximately of these two beach front properties, and the requirement not own a unit or live onsite in one of the complexes, means that we can offer both properties in one proposition. Profits close to 25% of selling price enable a purchaser to run the complexes under management while they sit back, relax and enjoy a massive passive income! One of the two complexes is only 18 months old and has been developed above an arcade with shops and restaurants. It boasts 42 x 2 and 3 bedroom apartments, all completed with the best fixtures and fittings. All units enjoy fantastic views of either the beach front or CBD surrounds. This property is crowned with a fantastic rooftop pool and BBQ area with lots of space to relax and take in the breath-taking views. The second complex, a short distance away, is an older style building consisting

18 RESORTBROKERS.COM.AU

Two properties, a great opportunity for one purchaser BEACHFRONT PROPERTIES NETTING $960K! of 64 units, of which 41 are in the letting pool. This has consistent trade given itâ&#x20AC;&#x2122;s monopoly over the bus trade in central Queensland. It has a spacious, easily run restaurant that caters for in-house guests and is managed efficiently by the permanent staff. These two businesses will enjoy constant growth given their location, being a popular holiday destination and within close proximately to other cities being affected by the spoils of the mining boom. Here is the ideal opportunity for either a motel buyer looking for big returns or for a syndicate or group looking to buy two easily run businesses showing strong nett figures. However, unlike motel leases there is no rent to pay. Inspect today!

Ian Crooks EXCLUSIVE AGENT Mobile: 0411 171 648 Brisbane office: (07) 3878 399 Email: iancrooks@resortbrokers.com.au Trudy Crooks EXCLUSIVE AGENT Mobile: 0477 882 210 Melbourne office: (03) 9347 3100 Email: trudycrooks@resortbrokers.com.au

Combined nett profit: $960,000 PRICE: $3,987,000 REF: MR001877 / MR001871 REF: MR001865 / MR001797

Voted top hotel in Australia on Trip Advisor LUXURY HERVEY BAY MANAGEMENT RIGHTS Glenn Millar EXCLUSIVE AGENT Mobile: 0412 277 804 Brisbane office: (07) 3878 3999 Email: glennmillar@resortbrokers.com.au

Nett profit: $326,000 PRICE: $1,795,000

REF: MR001907

esort Brokers Australia have been appointed exclusive agents for the sale of the management rights of the AAA 5 star rated Akama Resort located in Urangan, Hervey Bay. As Trip Advisor winner 2012, Akama was voted overall winner out of the top 25 best hotels in Australia. Akama has also been awarded a certificate of excellence for 5 star customer service 2010, 2011 and 2012. The complex in a prime location and overlooks Fraser Island, the Great Sandy Straits and the Marina from where all whale watching and Fraser Island tours depart. It is positioned in a prime location on the esplanade in the marina precinct and is a stone’s throw from the marina’s bars, shopping, beaches and restaurants.

Guests have a choice of one, two and three bedroom apartments, as well as penthouse apartments, all architecturally designed with style and convenience in mind. Akama Resort’s features include BBQ areas, a heated swimming pool, sun loungers and a spa pool set amongst lush tropical gardens. The Resort also offers secure undercover car parking and secure boat storage. The complex consists of 23 luxury apartments of which 22 are in the manager’s letting pool. These have all been in the letting pool since the resort opened in 2007. The net income is $326,000 and return on investment is an exceptional 18%, compared with the industry average in SE Qld of 14% The business is being sold on a 3.7 multiplier. Again, this is exceptional buying. • No owner occupiers - all 22 units in the letting pool, all unit owners live interstate • Minimal body corporate duties, pool gets serviced weekly by outside pool company, few easy care gardens • Fantastic receptionist at present employed 5 days, by choice of managers work only 1.5 days per week if desired RESORTBROKERS.COM.AU 19

Agent & area profile Shane Wynhoven - Sydney CBD, Greater Sydney & Central NSW Our agents pride themselves on their local knowledge. They each look after a geographical patch, and grow to learn it intimately. We feel this adds greatly to the confidence with which a property can be sold. In this new feature we will get some thoughts on their local area and will also learn a bit about their personalities. Tell us about your area

What did you do before Resort Brokers?

Opportunities

I have a dynamic and exciting area that includes Greater Sydney, as far north as Port Macquarie and west to Orange. I really enjoy the diversity of my area. Being based in Sydney, one week I can be visiting the beautiful beaches of Mid North Coast of NSW and the next I can be in the majestic Blue Mountains.

Before Resort Brokers I spend 12 years in the liquor industry in Australia, UK and the USA. From humble beginnings as a young sales rep in regional Queensland I climbed the corporate ladder whilst travelling abroad. I worked in some amazing sales roles on some great global brands and I particularly enjoyed managing executive sales teams in and around London. After many adventures and over six years abroad I decided my future was back in Australia and this was a great catalyst for me to explore a new career opportunity.

There is no doubt that the Greater Sydney region is a hot bed of incredible opportunities and I look forward to expanding my current network even further.

How did you end up at Resort Brokers?

I wish I had more spare time however I do enjoy a morning surf to start the day.

Your thoughts on your area I am lucky enough to call on a wonderful area with incredible scenery and interesting characters. I am constantly reminded of the â&#x20AC;&#x2DC;two speed economyâ&#x20AC;&#x2122; in which we work, as I see areas like the Hunter Valley and Central Tablelands thrive in the resource boom whilst our coastal tourist areas are doing it tough under the current economic environment. With that in mind there is no doubt that in time our tourist centres will return to their former glory and the good operators continue to perform even in these challenging times. 20 RESORTBROKERS.COM.AU

I have always had a great interest in commercial real estate and my time in the liquor industry helped my understand hotels and motels extensively. After meeting with Ian Crooks I was impressed with the Resort Brokers model and the quality of the business. Ian and I put together a plan for me to join the Resort Brokers team and take on my own patch.

Challenges Every property is unique and the challenge lies with us to bring those unique features to our buyers. Getting the right people into the right businesses is key for our continued success.

Spare time?

What makes you laugh? My girlfriend singing (she makes up her own words) - cracks me up.

What annoys you? Boy bands.

A great motel in a premier seaside location

The Esplanade motel is situated in the heart of Lakes Entrance and boasts beautiful views of the lake directly across 11% ON INVESTMENT, 48% ON LEASE & 21% ON GOING CONCERN the road. Nett profit: $583,513 Lakes Entrance has a swelling population of • 11% return for an iconic motel in a great Rent: $220,000 up to 28,000 people and is a thriving holiday seaside location, 48% for leasehold FREEHOLD PRICE: $2,000,000 (11%) spot in the summer. operator or 21% for going concern LEASEHOLD PRICE: $750,000 (48%) • New 30 year lease to be drawn up with The property is situated on a massive GOING CONCERN: $2,750,000 (21%) freehold purchaser input peace of land (5268 square metres). The • 36 comfortable units from studio to 36 comfortable units range from studio to Tony Payne family suites family suites. It also includes Tiks Thai, a EXCLUSIVE AGENT • Large bus company contracts and fully licenced restaurant offering an upMobile: 0418 329 421 patronage market experience with a magnificent cook. Melbourne office: (03) 9347 3100 • Breakfast/dining room with alfresco area Expansive renovation and refurbishment Email: tonypayne@resortbrokers.com.au • 45 seat conference room of the property has been ongoing over the REF: INV001775 / LH001859 past 5 years.

$5000 per week & live for free! NSW BEST LEASEHOLD OFFERING Nett profit: $261,114 PRICE: $850,000

Russell Rogers Mobile: 0416 166 909 Sydney office: (02) 9904 8224 Email: russellrogers@resortbrokers.com.au

REF: LH001949

17 spacious units, no restaurant and a massive 4 bedroom owner’s residence makes up this fabulous 4 star motel, situated in the Riverina area of NSW. Despite being ten years old this property presents like brand new. Built of brick and colour bond, this building is maintenance free. Not a penny to spend as the vendors have recently replaced all bedspreads throughout and new carpets and curtains have been updated where needed. Painting

has been freshened and the overall ambience of the property is delightful. The central location of this motel in regional NSW means that it benefits from consistent drive-by traffic as well as business reps and government personal. • 87% occupancy • No restaurant - easily run • Room for tariff increase meaning greater nett profit • 27 years left on lease with friendly landlords • Other facilities include swimming pool • Extra land that caters for truck parking • First genuine looker will buy! RESORTBROKERS.COM.AU 21

The many faces of the accommodation industry DIFFERENT PATHS LEAD TO ACCOMMODATION OWNERSHIP BY CATIE LANGDON - A NEW SERIES If you set out to profile a ‘typical’ motel or management rights owner, you would soon find ‘typical’ is not a word that applies. So, who are the people who drive our industry? Where have they come from? And how did they get here? No formal qualifications are needed to enter the accommodation business. Certain licence requirements must be met. And training in hospitality and management can be valuable. But no traditional career path really exists. Resort Brokers’ consultants meet dozens of motel and management rights owners day in, day out. We are always struck by the depth and diversity of the characters behind Australia’s dynamic accommodation industry. Many come from senior public and private sector backgrounds – former executives, bureaucrats, bankers and professionals. Some have hospitality backgrounds, but most have no previous experience. From plumbers to pilots, tellers to teachers, they come from all walks of life, and often from very humble beginnings. John ‘Foxy’ Robinson, for example, a titan of the Northern Territory’s accommodation scene, began his working life as a boner at the meat works. After starting with a small caravan park in Katherine, he went on to develop a multi-hotel complex around Darwin Airport. Last year, he sold two of the properties to a Sydney Hotel group for a reported record $70 million. Another success story that springs to mind is that of Tony and Jackie Segat. After entering the industry in 1978 with a small $30,000 motel lease, they went on to own multiple motels in New Zealand and Australia, before doing very well in management rights. Tony started out as a migrant construction worker. This month, The Informer introduces the first in a new series of articles exploring the many faces of our accommodation industry. We hope you enjoy meeting some of your inspiring colleagues and hearing their stories.

Richard Arbon

The series begins with Richard Arbon, a straight-talking former farm boy turned management rights mover and shaker.

Healthy crop under management These days, Arbon Property Management commands a management rights portfolio which, at various times, has ranged from 15 to 25 properties and stretches from the glittering Gold Coast to tropical Cairns. It would be easy to describe Richard’s story as a ‘rags to riches’ tale. He has battled a few times to keep the wolf from the door. But really, it is a story of determination driven by necessity, of self-belief and perseverance. 22 RESORTBROKERS.COM.AU

As a young bloke on the farm, being a Gold Coast businessman would hardly have seemed conceivable. Not that you get the impression Richard would have been daunted by the prospect. It’s just that it wasn’t on his radar. “I was brought up to take over the farm,” he says simply. Football, on the other hand, was on his radar. “I was very keen on football, though. So I moved to the city, to Adelaide, and played A-grade for Woodville in the SANFL.

That was 1987 and ’88,” he says, seemingly unaffected by this impressive achievement. But country life beckoned again. More to the point, Richard had his eye on the future, and he knew football stardom was not a secure long-term prospect. “I saw some of my footy idols retire with very little money or prospects,” he said. “That’s not the future I wanted. I retired, got married and bought a mixed livestock and cropping farm on the York Peninsula.” Life on the land is never easy. But the rough patch that hit the Arbons from 1989 was enough to break anyone’s spirit. First they were in an horrendous car accident, then interest rates climbed to 22%, and drought ravaged the land, followed by flood and mouse plague. One after another the live sheep trade, wool and grain prices collapsed. “I’d borrowed heavily and the farm wasn’t able to support the debt and our growing family,” Richard said. “We struggled to make ends meet. It was a turning point. I had no choice but to look off-farm for our security.” Always a strong shearer, Richard could make decent money in the sheds, and his wife was a nurse. Over time he developed other businesses, including what turned out to be a successful venture, buying a liquid fertiliser franchise. In fact, he did so well, the fertiliser company invited him to go to England to help set up the UK operation. Now, this is where you might expect a young farmer with a wife and three children under four years old, to hesitate. Not Richard. “We leased out the farm, put all the machinery in the shed, took what money we had, and poured it into this business opportunity. It was hugely successful …. until my business partner took me for everything I had!” The Arbons were back at square one. Worse than that. They were on the other side of the world, penniless, with no family support, and a fourth child due in a matter of weeks. Richard’s trademark

determination was about to be severely tested again.

had changed his mind!” In the end, the deal went through.

With difficulty, he managed to bring his family back to Australia. At least, at the farm, they still had a home. And, he eventually worked his way through the legal mire left by the UK crooks who perpetrated the elaborate swindle that blind-sided him.

Living on site with five children wasn’t exactly ideal, though. “The kids just thought the whole place was ours, and all the other residents were visiting us,” he laughed. “They’d keep disappearing into other people’s houses.” After 18 months, it was clear they needed to move off site.

“It set me on the back foot for four years,” Richard said. It was also the catalyst for a big life change. “I put the farm on the market straight away. I just needed a new start.” Looking for a way forward occupied most of the four years it took to sell the property. He began business studies at university, but soon realised that a slow climb up the ladder was not the answer for a man in his 30s with four children to support. “The prospect of a job, or placing our future in someone else’s hands, wasn’t something I knew or trusted. In business, I felt I could control my own future. So small business was my only real option,” Richard said. “I looked at hundreds. But my biggest problem was finance. You have to buy goodwill, and not too many financiers would lend on the thin air that is goodwill.” Then, by pure chance, a visiting family friend from Queensland introduced Richard to the concept of management rights. “It just clicked. I could see I would actually be able to borrow enough to buy management rights, and I felt sure it was something I could do.” Furthermore, there was the back-up security of a caretaker’s salary. Two days later, Richard hopped a plane to the Gold Coast and started his search. It was early 2001. By May, the Arbons had bought the management rights at a 217-unit residential complex, Sailfish Cove. Even that was not without a heart-stopping hiccup. “I arrived from South Australia, all our belongings in two trailers, my wife and (now five) children following by plane, drove in to settle the sale and the owner

But, with everything tied up in the business, they couldn’t afford to. Richard’s solution? “The only way to grow was to buy another management rights. I bought Central Brunswick, a serviced apartment hotel in Brisbane’s Fortitude Valley. Talk about chalk and cheese!” While Richard speaks calmly of this time, it’s clear he was on a steep learning curve, and it was very hard work. Still, he was not afraid of either. And a pattern for growth was emerging. After turning around the Brisbane property, he moved to sell it and signed up to buy another at Main Beach. Again his mettle was tested. Just as the purchase went unconditional, his sale fell over. Nail-biting times. In the end, a three-quarter share in Central Brunswick was sold, and Richard was yet again on the lookout for opportunities. Arbon Property Management has flourished under Richard’s confident stewardship. He still has his very first management rights and owns, either outright or in partnership, many others across the Gold and Sunshine Coasts, Brisbane, Whitsundays and Cairns – permanent and holiday, corporate and student complexes. “I’ve always believed determination is the key. You can always put in the hard work, and acquire the knowledge you need, but you have to have the belief and determination to succeed,” Richard said. “In my case, need was the primary driver. With five kids to look after, the farm just wasn’t going to do it. My children gave me the energy to succeed.” RESORTBROKERS.COM.AU 23

agic Mountain Resort is uniquely positioned high on Nobby Mountain, with breathtaking views of the Pacific Ocean to the North and lush hinterland to the South-West. This Mediterranean-style resort is tranquil and secluded, yet within easy reach of the beaches, theme parks, shopping, bars and restaurants that make the Gold Coast so inviting. The complex is nestled in mature tropical gardens and offers first class facilities. There are 3 pools to choose from – Lagoon Pool, Infinity Edge Pool and Heated Rock Pool – as well as a gym and sauna. The peaceful Nobby’s Beach is a short stroll down the hill, as are numerous parks that line this beautiful stretch of coastline. There is a mixture of 2 and 3 bedroom units, along with 2 penthouses. The holiday units are very spacious, well-equipped and range from 3.5 star to 4.5 star. We believe that a new marketing savvy manager would be able to drive occupancy of the holiday units considerably.

Big opportunity on Magic Mountain HUGE BC SALARY PLUS BIG UPSIDE • Massive body corporate salary of $249,309 per annum ($1,651 per unit, CPI linked) • 151 units - 26 in holiday pool, 33 in permanent pool, 17 lock-ups, 47 owner occupiers • 27 units managed by outside agents – big potential upside to letting commission. • Very low maintenance income of $17,224 – big upside for handy incoming manager. • Spacious 3 bedroom manager’s unit with garden / courtyard - CBRE valuation at $435,000 • Well-presented, large reception and separate office – CBRE valuation at $125,000 • Very motivated vendor – this property is priced to sell!! All serious offers considered

Glenn Millar EXCLUSIVE AGENT Mobile: 0412 277 804 Brisbane office: (07) 3878 3999 Email: glennmillar@resortbrokers.com.au

Alex Cook EXCLUSIVE AGENT Mobile: 0467 600 610 Brisbane office: (07) 3878 3999 Email: alexcook@resortbrokers.com.au

Nett profit: circa $450,000 PRICE: $2,645,000

REF: MR001953 24 RESORTBROKERS.COM.AU

Editorial

Golden age to global financial crisis THE GROWTH OF MANAGEMENT RIGHTS continues ... BY CATIE LANGDON - PART 3 OF A SERIES Resort Brokers’ Informer continues our series on the evolution of the management rights industry. Valuable insights are provided by industry advocate, SP&G Lawyers partner John Punch. From 1998, Queensland’s pioneering Body Corporate and Community Management legislation provided the management rights industry with an excellent foundation on which to build. The new Act, balanced and succinctly expressed, meant financiers, developers, existing operators, buyers and sellers all knew where they stood. So began what John Punch described as “quite the golden age of management rights.” “There was plenty of development in Queensland, plenty of need and opportunity for new management rights, and settled arrangements for everyone to work within,” he said. “So there was a rapid increase in the value of management rights.” For example, Punch recalled, after the Raptis Group developed The Phoenician at Broadbeach, they sold the management rights in the late 1990s to industry veteran Frank Picone for close to $4 million. Just three years later, 26 RESORTBROKERS.COM.AU

Picone on-sold the rights for a reported $15 million. What’s more, financiers were prepared to lend at that level. It was into this environment that two ambitious Gold Coast-based players launched their highly publicised forays into management rights – logistics and travel entrepreneur, Chris Scott, and former AFL player and Schoolies accommodation pioneer, Tony Smith. Punch, who acted for Scott at the time, says there was an obvious “corporate agenda” from day one. Scott saw the opportunity to conglomerate a series of large buildings sufficient to create a viable public company, founded S8 Ltd in 2001, and set about capital raising to build an accommodation empire. Similarly, Tony Smith founded BreakFree Limited, listing on the ASX in 2002. He brought in the holdings of the respected Frawley family, successful management rights operators for many years. Other key industry operators, such as John Gardner and Russell and Adrian Leary, also sold in. “It changed the ballgame completely,” Punch said. “Management rights drawn into these public companies effectively achieved a stock exchange valuation. You might have owned your rights at a 3.5 multiplier, but as shares on the stock exchange, that value would jump to a

multiplier of double or more that rate.” This world of big business was a far cry from the traditional family-owned management rights model that had previously prevailed. Opinions on the new paradigm varied. Many investment unit owners were pleased, enjoying better returns thanks to the marketing power of the corporate managers. “While traditional mum and dad management rights owners had to rely on accommodation wholesalers as a source of guests, the corporates vertically integrated, owning their own wholesalers and marketing their stable of buildings direct to the public, creating a better supply of guests for owners,” Punch said. Resistance to the public companies came from some body corporate committees who were displeased to find their influence over management diminished. In place of their resident owner-manager, they now had to deal with an employed manager answerable to a corporation. In some cases, antisentiment even led bodies corporate to write into letting agreements that the rights must never be go to a public company. By and large, however, the corporate push drew in large resort-style accommodation buildings. Smaller properties and permanent complexes continued to operate as before. But they would not be insulated.

Editorial While the various management rights models coexisted, this period would have far-reaching consequences for the whole industry. Properties large enough to be an acquisition target for the public companies now commanded greatly inflated prices. This drove the multiplier up and fuelled the expectations of everyone in the market. At the same time, a soaring residential market drove the property component (manager’s unit) to ever higher levels. “The effect was certainly to skew the market and it started making it very difficult for traditional independent operators to buy in,” Punch said. For those management rights owners in a position to capitalise on rising values by selling to the corporates, this time may well have been regarded as a “golden age”. But those who bought into the booming sector at newly inflated prices, were to find this period of corporate excess would not end happily. By the mid 2000s, the likes of S8 and Breakfree were so successful they were being eyed as takeover prospects. “They were certainly hectic times where the stakes were high,” John Punch said, recalling some contentious legal challenges over turf.

Tips to ensure a smoother management rights sale BY FRANK HIGGINSON - HYNES LAWYERS If you are going to list your management rights business for sale, you need to make sure that it is in as healthy a position as possible. To ensure that you have ticked off what we see every day in matters that become issues for the purchaser, we have set out below a quick checklist you can use when you are considering selling. If you have ticked all these items, your sale process will be a lot smoother. 1. Are your PAMDA 20’s signed by every owner? Missing PAMDA forms are still the bane of every transaction. Without them you cannot charge commission. Purchasers (and their accountants) will ask for them. Be ready for that question if they are not all there and chase them down if you don’t have them. 2. Are those PAMDA 20A’s assignable? If they are in the current form (effective from 1 July 2009), has the assignment section (section 4.4) been ticked AND initialled by all of the owners? If not, it is not going to be automatically assignable.

Each tried unsuccessfully to take over the other, leaving the door open for others. Investment group MFS Ltd took over both and merged them to form the Stella Group, with its signature brands Mantra, Peppers and Breakfree.

If you used earlier PAMDA forms (which is fine for appointments signed prior to 1 July 2009), have the owners agreed to making the appointment automatically assignable by a separate agreement?

But then came 2007 … dawn of the global financial crisis!

Missing appointments, and those that are not automatically assignable, remain the single biggest issues on every sale.

For companies who’d been on spending sprees, overpaying for assets using excessive debt, the crunch had come. Returns on investment couldn’t sustain high levels of borrowings when the credit crisis struck in early 2008. The “golden age” was characterised by stable laws, a wealth of new development and burgeoning demand for investment in Queensland. Prosperity in the management rights industry was also underpinned by the strong advocacy of QRAMA, later ARAMA. (see our interview with longtime president, Kim Cox, on Page 33) But a major shake-out was about to unfold. The legacy of the “golden age” will be covered in our next edition. To catch up on previous articles in this series, go to http://resortbrokers.com. au/informer-archive.htm ■

3. Are there any outstanding due diligence issues from when you purchased? Were there certain things that your lawyers recommended should be corrected in the agreements? Have you done these? If not, be ready to have that same conversation with the purchaser. 4. What is the status of the term of your management rights agreements? Do you know the term remaining on your agreements? This is very important to any purchaser. Do you need to top your agreements up as part of the sale? Have you exercised your options and documented that with the body corporate? Failing to exercise an option can have diabolical consequences. 5. Do you have up-to-date sales figures? We cannot stress the importance of having upto-date sales figures. Most purchasers require a verification of records to within at least two

months of the date of the contract. It is very rare to find a financier that requires any less. Having sales figures that are (say) six months old means that there is more than likely going to be a discrepancy between what you think the net profit is and what it verifies to when done by the purchaser’s accountant. This will more than likely lead to a price renegotiation (or you selling for less than you might otherwise have to if the profit has gone up!). 6. Are there any body corporate issues? Are you having a ding dong battle with the committee? Are there building defects that have not been dealt with? These issues will normally be revealed in the purchaser’s due diligence when they look at the body corporate records. Our experience is that if these type of issues are managed up front and disclosed to the purchaser before the contract is signed, then the outcome will be a lot different to the position where the purchaser identifies it during due diligence and then asks the question as to what they were not told in the first place. 7. Are you being realistic on your settlement timing? Almost all management rights contracts are subject to verification of figures, legal due diligence and finance approval. These usually take about 28 days from the day the contracts are signed to complete. You then need to seek body corporate approval. A body corporate is allowed up to 30 days from when it gets everything it needs to consider an assignment to make a decision on the assignment itself. This can happen more quickly if the committee agrees. Signing a contract and expecting settlement in under 2 months (unless you have a great working relationship with your committee), is potentially unrealistic. Making sure you have the right time frames from the start of the transaction will usually save a lot of panic at the end. There are a lot of moving parts in every management rights transaction and the unfortunate reality is that it is rare to have a management rights transaction that is straight forward. That said, if you make sure you have sorted all of the above items we can guarantee it will take some of the immediate issues off the table from the start. If you have any questions in relation to this article, please contact Frank Higginson. RESORTBROKERS.COM.AU 27

his 24 room motel is a family run business located in Traralgon, the largest regional city in Gippsland, a comfortable 2 hours drive from Melbourne. The city’s large commercial centres include the Stockland Traralgon shopping centre and South Side Central, which incorporates the major regional railway station. The landmark building in the town centre is the elegant and towering post office building which dates back to 1887. A short drive south of the town is the Loy Yang Power Complex and open cut coal mine. The Highland Highway passes right through the complex and there are a couple of visitor lookouts provided to marvel at the massive scale of coal mining and electricity generation. The power station’s two chimneys are 260 metres high, roughly the same height as Melbourne’s Rialto Towers. North of Traralgon are extensive alpine ranges, which include such attractions as the ski resort of Mount Baw Baw, the Thompson Dam (which provides Melbourne with its largest supply of water), a number of state and national parks and the historic community of Walhalla.

28 RESORTBROKERS.COM.AU

Prestigious motel priced to sell LEASEHOLD OFFERING - FAMILY OWNED • Extremely strong rep trade with Loy Yang Power Complex 30 Kilometres away • Excellent combination of twin, family, queen, deluxe and executive rooms • Beautiful restaurant with bar used for breakfast only. Great evening dining potential • Secluded outdoor pool area • Split system air conditioners in all rooms with the sought after Daikan Expertise • 32 Inch LCD Sharp brand TVs • Great tourist area with the Strzelecki Ranges, offering scenic tourist drives • Experience the national parks and marvel at the massive twin towers at Loy Yang

Tony Payne Mobile: 0418 329 421 Melbourne office: (03) 9347 3100 Email: tonypayne@resortbrokers.com.au

Nett profit: $251,841 Turnover: $761,096 PRICE: $650,000 REF: LH001900

Are you buying or selling Caravan Parks, Motels, Management Rights or Hotels?

MOTELS

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MANAGEMENT RIGHTS

David Burrough is the most respected legal advisor for those about to buy or sell an accommodation business Before you go ahead & talk with David and his team learn everything you need to know: • What really is and isn’t included • The language the experts use • How to minimise risk • What your agent, banker & accountant need to know • Critical differences between new & established businesses

Call: (07) 3220 1144 Fax: (07) 3220 3434 Email: email@hillhouse.com.au www.hillhouse.com.au

Tasmanian management rights

ocated adjacent to Tasmania’s most famous tourist attraction at Port Arthur is Stewarts Bay Lodge, situated on 22 acres of pristine land with magnificent ocean views. On offer is the management rights and leasehold interest of Taylors Restaurant and Conference centre together with associated freehold real estate. The management rights agreement has 25 years to run and all 40 units are in the manager’s letting pool. The leasehold interest at Taylors Restaurant and Conference Centre Is 21 years with market rental. The freehold real estate includes a three bedroom manager’s residence, two bedroom assistant manager’s residence and separate building incorporating a commercial laundry, private office and potential retail/commercial area. Accommodation facilities incorporate 21 two bedroom deluxe cabins constructed in 2008 of which 20 have spas and 1 is designed for disabled access. In addition there are 19 log cabins comprehensively

30 RESORTBROKERS.COM.AU

2.35 MULTIPLIER - 42.4% RETURN

refurbished in the past 4 years. Site facilities include an internet kiosk, tennis court, BBQ shelter and spa facility. • 40 units in letting pool (100% of units) • Term of agreements - 25 years from 2008 • Body corporate remuneration $62,400 p.a adjusted annually by CPI on min 5%. • Taylors Restaurant and conference centre has a 21 year Lease - market rent • Management rights and leasehold business provides 42.4% return • Freehold real estate consists of three bedroom manager’s residence, two bedroom assistant manager’s residence and separate building with commercial laundry and retail/commercial space.

Glenn Millar EXCLUSIVE AGENT Mobile: 0412 277 804 Brisbane office: (07) 3878 399 Email: glennmillar@resortbrokers.com.au Jim Chapman EXCLUSIVE AGENT Mobile: 0413 444 782 Melbourne office: (03) 9347 3100 Email: jimchapman@resortbrokers.com.au

Nett profit: $314,048 PRICE: $1,240,000

REF: MR001755

Iconic outback property 30 YEAR LEASE WITH MANY INCOME STREAMS

Ian Crooks EXCLUSIVE AGENT Mobile: 0411 171 648 Brisbane office: (07) 3878 3999 Email: iancrooks@resortbrokers.com.au

Trudy Crooks EXCLUSIVE AGENT Mobile: 0477 882 210 Brisbane office: (07) 3878 3999 Email: trudycrooks@resortbrokers.com.au

Turnover: In excess of $5,000,000 Nett profit: $750,000 PRICE: $2,100,000

uy this lease and get all your money back in just 3 years! This iconic outback property is located on the Barkly Highway, gateway to both the Northern Territory and Queensland. This destination means that the occupancy for 8-9 months per anum runs at over 80%. The property has a variety of income streams which include motel units, cabins, fully equipped caravan park, camping area, aviation facilities (incl. Avgas for passing planes and helicopters) and a roadhouse. A visit to this property would not be complete without visiting the Barkly Bar & Grill (also in the complex). The kitchen is ultra modern and sets a new standard for cleanliness and attention to detail. Enjoy a meal or just a cold beer in the brand new beer garden.

This business is currently run by a family who are looking for a change in occupation after 5 successful years, which throws up the opportunity for another family or group to take over this very profitable operation. The current owners have made vast improvements to the property including upgraded ablution facilities for the caravan park, installation of 6 new self-contained cabins, a new aircraft hanger (including Avgas pumps and storage tanks) as well as modernising the comfortable separate manager’s home. • 10 motel units • 11 cabins • 60 powered caravan sites • Self-contained staff facilities • Freestanding workshop shed • Swimming pool • Fully air-conditioned throughout • Large private manager’s office

RESORTBROKERS.COM.AU 31

2012-2013 Federal Budget: What it means for you

Editorial

Make inflation your friend

> continued from page 15

Tax Reform Agenda What’s next on the tax reform agenda?

IAN CROOKS - RESORT BROKERS AUSTRALIA Inflation. We’ve all been conditioned over decades to fear it as the economic bogeyman. And with the carbon tax now in place, many are warning Australia will face an inflation spike. For accommodation operators, however, there is a way to turn this to your advantage. Inflation is the rate at which prices rise and purchasing power falls. It can be demand-driven, when the demand for goods and services exceeds their supply. Or it can be cost-driven, when businesses raise their prices to cover higher supply and production costs, in order to maintain profit levels. The latter is our current concern in relation to the carbon tax – that the tax imposed on major emitters will be passed on down the line, increasing the cost to consumers for just about everything from food to fuel, equipment to electricity. Most economists agree moderate inflation is a sign of a growing economy. Yet research shows that just about everyone else views it as harmful, something to be feared and avoided. Inflation is seen as pushing up prices ahead of wages and pensions, thus lowering standards of living. The popular media is perhaps somewhat to blame for this widely-held perception. Inflation is one of the most commonly used economic term in news bulletins. Politicians, central bankers and commentators are always being quoted on the need to keep inflation “under control”, “in check” or “within the target band”. While Australia’s current inflation rate is quite moderate, there have been numerous predictions that the introduction of the carbon tax, combined with rising wages in the resources sector and a weaker Australian dollar, will put upward pressure on inflation. Most of us are already watching prices for utilities, insurances and fuel, to name a few, climb at a frightening rate while incomes do not seem to be rising to compensate. 32 RESORTBROKERS.COM.AU

No surprise then that financial advisers are warning us to be adequately protected or ‘hedged’ against inflation. Put simply, this means investing in assets which reduce or negate the adverse effects of inflation. Property, particularly commercial property, has long been considered a good inflation hedge. Rental rates are either linked to turnover, which rises directly with inflation, or to the Consumer Price Index (CPI). So income tends to rise along with inflation. In our industry, owners of accommodation properties and businesses are even better placed to not only keep pace with inflation, but benefit from it. Here’s how. If you have a motel of 25 units, in the recent economic environment where inflation has bumped along in the 1% - 3% range, you would be hard pressed to put tariffs up by much more than $5 a year. But, if inflation were to rise to say 6%, you could increase tariffs by double that – lifting them by $5 on 1 January, and again by $5 on 1 July. Let’s look at the impact of a tariff increase somewhere in that range – say the mid-way mark of $7.50. An extra $7.50 per unit per night at the average occupancy of 60% ($7.50 x 25 units x 365 days x 60%) equals a $41,000 increase in turnover. Of course your operating costs will rise too, at the new inflation rate of 6%. If those costs are assumed to be 40% of gross income, which is usually the case, they would rise by $16,400 ($41,000 x 40%). That means, thanks to the higher inflation rate, your profit will be $24,600 higher. Not only is that great news for your bottom line, it enhances the value of your property. An extra $24,600 per year would add $80,000 in extra value to your lease! So our message to the accommodation industry is this: don’t be afraid of inflation. Inflation builds equity. Harness it. Put it to work for you.

The Australian Government has committed to a long term plan of major reform to build a stronger, fairer and simpler tax system. The current reform agenda has its origins largely based on Australia’s Future Tax System Review (the Henry Review), which was commissioned by the Australian Government in 2008 and released on 2 May 2010. During the two years that have passed since the Henry Review was released, significant progress has been made in implementing reforms (although note that many of these measures are yet to be enacted into law), including: • a resources tax which applies from 1 July 2012, albeit in a different form to that originally proposed in the Henry Review • a limited loss carry back rule for companies in the lead up to the 2012–2013 Federal Budget • an increase in the superannuation guarantee rate to 12 per cent • changes to the capital allowance arrangements for small businesses, including an immediate deduction for the acquisition of depreciating assets costing less than $6,500, to apply from 1 July 2012; and • a process currently underway to update and re-write the rules regarding the taxation of Trusts. As part of the Federal Budget, the Australian Government released its “Tax Reform Road Map” which outlines the Australian Government’s plan for tax reform for the future. It is disappointing that the Australian Government announced in the Federal Budget that a number of measures originating from the Henry Review that were previously accepted, such as the 50 per cent discount for interest income and the standard tax deduction for work-related expenses (both due to commence on 1 July 2013) and the 29 per cent corporate tax rate, are no longer proceeding. The latest trend around retrospective tax law amendments introduces a new element of tax risk and uncertainty for taxpayers, which may require careful planning. If you are in any doubt as to your compliance with any of the matters above, or require advice in relation to any particular aspect of your taxation and accounting affairs, please consult with your professional representatives. The information, recommendations, opinions or conclusions provided above are generic in nature and do not express individual advice. You should always consult your professional representatives before taking any action. Holmans welcome any queries you may have in relation to the above matters.

Editorial

ARAMA:

A lot more than just a social club An interview with ex-president, life-member, tireless campaigner and all-round good guy - Kim Cox BY ALEX COOK - RESORT BROKERS AUSTRALIA QRAMA (Queensland Resident Accommodation Managers Association) was formed in 1991, primarily as a defensive force to work against legal challenges to the status and operation of the management rights industry. From these beginnings, QRAMA (later ARAMA) has grown hand-in-hand with the growth of the management rights industry to become a leading industry voice. Just as management rights have developed from small ‘mum and dad’ based businesses to a highly legislated multi-billion dollar industry, ARAMA has grown to become a respected and widely subscribed organisation. Today ARAMA has 900 members, managing over 43,000 units, with property value in excess of $12 billion. The revenue generated from these businesses is estimated to be well over $600 million. Kim Cox has undoubtedly been a significant driving force behind the growth of this important group. Soon after purchasing his first management rights business on the Sunshine Coast in 1996, Kim became interested in the wider issues that affected the industry he had joined. Not content to simply follow the herd and do as had been done before, Kim set upon a search to gain an intimate knowledge of the industry, to fight against those who denigrated it and to provide better security and opportunity for those that worked in it. The obvious platform from which to do this was QRAMA. Kim is quite frank about the fact that he has always regarded the organisation as an important formal institution, not a means of widening his social circle. From the outset, Kim began writing discussion papers on contentious issues and pushing for opinion to be heard by bureaucrats and politicians. Working closely with John Anderson, who would be Kim’s battle partner over the next decade, QRAMA began to take on its most critical role…that of political lobbying. That is not to say that QRAMA became a voice to be heard overnight. John recalls his early years being primarily centred on ‘knocking on government doors’ and writing paper after paper. However, as early as 1999, 2 years after Kim and John started lobbying, the tide began to slowly change. Instead of simply pushing opinion, they began to be

approached to provide it. Resident managers for the first time began to gain an industry voice. Kim mentions his gratitude towards industry stalwarts such as John Punch and John Mahoney for providing the support, knowledge and advice necessary to get to this stage. The growth of QRAMA membership also played a small part. However, the advent of this new-found representation must be attributed largely to the tireless efforts of Kim and John. Today ARAMA is regularly called upon by politicians, bureaucrats and a variety of stakeholders to provide advice and assistance. Another principal objective of Kim’s during his early years at QRAMA was to increase membership and to raise awareness of the role that the organisation needed to take. When Kim became president of the Sunshine Coast branch of QRAMA in 1998 there were fewer than 100 members. Kim used a holiday guide book to make a list of every management rights business in the area and, with the help of other branch committee members, started knocking on doors. What he found surprised him. Instead of understanding the importance of having an effective industry voice to protect their interests, a large proportion of owners had a ‘what’s in it for me’ attitude. As Kim says, ‘small business sometimes breads small minded mentality’. Despite his obvious frustration, Kim quickly harnessed a pro-active solution. QRAMA had already teamed up with a major national bank to offer a centralised and reduced cost EFTPOS system. It was structured so that the savings made on card transactions covered the membership fee of joining QRAMA. This won over the stragglers and soon the membership was well over 100 managers (at the time thought to be over 90% of the possible market). However, Kim feels that this attitude of determining membership fees based on what managers were willing to pay, rather than what QRAMA needed to function effectively, has continued and has ultimately restricted ARAMA’s work. ‘From the early days, QRAMA has always been under-resourced’, Kim explains. ‘Although we were, and still are today, a

highly mobilised, dedicated and effective organisation, we have always been punching above our weight’. Kim is a strong believer that membership fees should be increased, quite significantly in some cases. ‘Due to lack of funds, we have always been a reactionary body, in that all our resources have been pumped into defending ourselves’ Kim states. Although ARAMA has had more pro-active initiatives in recent years, such as the accommodation finder service, Kim feels this is only scratching the surface of its potential. In light of the recent political discussion brought about Paul Lucas’s discussion paper and a minority of zealots at the Unit Owners Association (see ‘If you care about management rights, read this’ - May Informer) it is easy to see where Kim is coming from. Although the UOA represents perhaps only 1% of unit owners (by membership), their extreme and potentially devastating opinions and requests have found an ear in Parliament. As Kim points out, ‘Governments and politicians do not always make decisions based on rational and value, but often on political necessity.’ In other words, there will always be people who want to pull the management rights industry apart, and as long as there are politicians needing votes, someone will listen. Critically, leading figures at ARAMA (alongside other industry stakeholders) have had the expertise to make sure that balanced objections to these attacks have been heard by the right people. However, political lobbying is not a pastime that you learn overnight. It takes years of networking, research and dedication. As Kim says, ‘if we are serious about defending our industry, we should be managing the big issues going forward. We cannot risk losing the knowledge of how to deal with these attacks, essentially gained by a few people working for free over a number of years. If we are to maintain consistency, we must continue to train and recruit….the only way we can do this is with more funding’. In a nutshell, I think Kim wants to reiterate to managers that it is their responsibility to maintain membership of ARAMA and to be open minded about membership fee increases. He uses the classic car insurance comparison. ‘You wouldn’t think twice about spending $1000 a year to insure your $40,000 Holden, a lot of managers would think twice about spending $1,000 per year for a unified voice that defends and insures your million dollar management rights’. He goes on to ad, ‘managers don’t even need to be active…we’ve got enough activists…we just need their financial support. As I finish this article I am writing a cheque to ARAMA for an annual corporate membership.

RESORTBROKERS.COM.AU 33

Editorial

Managing Expectations JOHN MAHONEY - JOHN MAHONEY LAWYERS There is no doubt that in these tough economic times there has been no shortage of disputes between resident managers and bodies corporate. There are various reasons for that, none the least of which has been owners watching the capital value of their units (and other assets) decrease and investor owners watching their returns diminish yet at the same time observing that the resident manger’s remuneration keeps increasing each year. Even worse, they may have bought into a new complex where the resident manager has successfully used the statutory review provisions to dramatically increase the remuneration. Not surprisingly, owners are looking closely at what they are getting for the money they are paying out. Unfortunately they usually look just at the manager’s total remuneration, rather than look at the actual cost to them. It sounds much more dramatic to say “What are we getting for the $150,000 we pay our manager?”, than “What do I get for the $25 per week that I pay the manager?” Even so, there is justification for owners to look at the manager’s total remuneration package – just as a manager does when having a remuneration review undertaken. I have been involved in dozens of remuneration reviews and have observed firsthand the conflict they can cause to owners, particularly those that are illinformed. I do though have empathy for those owners who have been putting up with substandard performance from their resident manager but are subjected to an increase in the manager’s remuneration. Whilst I am very much in favour of the “time and motion” concept utilised by the small number of independent consultants that carry out remuneration reviews, I do object to the abuse of the concept by a small number of managers. It is one thing for a detailed remuneration review to set out the various tasks required of the manager, allocate the time taken 34 RESORTBROKERS.COM.AU

on a daily, weekly, monthly and annual basis to perform the tasks and then apply an hourly rate to that time. However it is unfortunately sometimes an entirely different matter as to whether or not the manager actually performs all the tasks or does them well enough that they actually take the estimated time. You can not blame a body corporate that has been through a review process where the manager’s remuneration has been increased because of stated tasks and times to perform them, being thoroughly annoyed to find that the manager is spending nothing like the stated time to perform the manager’s duties. It is not surprising to find a number of complexes where there is genuine concern about the overall poor presentation of the complex coupled with anger about the manager’s level of remuneration. Regrettably, many intending sellers go to great lengths to sell their business on the basis that there is minimal hours involved in the management/caretaking side of the business. Management rights ads claiming “You’ll be playing golf 5 days a week” or “Only 10 hours a week for caretaking” are examples of misleading claims that inevitably lead to problems if the unsuspecting buyer relies on them. The reality is, or at least should be, that bodies corporate and owners have a valid expectation that a resident manager will put in the hours needed to perform all the duties required and that, at a reasonable hourly rate, the value of the time taken will roughly equate to the remuneration received. I have seen a number of cases where a buyer looks at buying the rights but believes that the amount of work needed to do the caretaking are much more than the seller indicates. In those cases I suggest that the buyer work out from the remuneration being paid what the body corporate might reasonably expect

in the way of hours per week. As an example, using the dollar hourly rate of approximately $30 that Barry Turner from Building Management Consultancy and Services uses, a remuneration of $125,000 equates to 80 hours per week. So in that example if the seller is claiming that it only takes 6 hours a day to do the work, and that is all the buyer intends putting into the caretaking, then the buyer can expect to have problems with the body corporate. I see similar problems where existing managers have conflict with their bodies corporate or owners who perceive that the manager is doing a bad job and/ or not putting in the hours expected. In such cases I suggest that the manager does a rough calculation of the hours that might be required to earn the remuneration being paid, and compare that to the actual hours being spent doing the work. If that shows that the manager is working many more hours than the remuneration indicates then it is likely that the body corporate’s expectations are too high. Conversely if the calculation indicates that the manager is working many less hours than the remuneration suggests, the body corporate is likely to be justified in believing that its expectations are not being met. Any manager, and especially any buyer of management rights, needs to understand the expectations of the owners and the body corporate. Doing the rough calculations referred to above is a simple rule of thumb exercise that is a good starting point. Of course much also depends on the nature of the complex – is it an upmarket scheme in a prestige suburb with well manicured lawns and gardens or is it an outer suburban complex where the expected standards are not as high? Whatever the case, the manager needs to establish and understand the reasonable expectations of the owners.

Low rent, high profit IN DEMAND TOOWOOMBA MOTEL LEASE

Lindsay Cooper EXCLUSIVE AGENT Mobile: 0418 711 047 Brisbane office: (07) 3878 3999 Email: lindsaycooper@resortbrokers.com.au

his property is a 21 room, self rated 3.5 diamond bed and breakfast motel situated in Toowoomba, Queensland’s largest country provincial city. The motel provides short and long term accommodation. All one and two bedroom suites are self-contained and studio apartments come with basic kitchen facilities. This property benefits from fantastic amenities including a full-sized tennis court, swimming pool and brand new BBQ area.

Nett profit: $273,089 Turnover: $594,390 PRICE: $925,000

schools, universities and shopping centres. Toowoomba is the major centre for the coal seam gas projects in the Surat Basin and accommodation is at a premium because of this. This property is a fantastic buy, not only due to its great location but because the rent is far lower than industry averages. This ensures continuous high profit. No money to spend, just take over and watch the dollars roll in! • Facilities include a coin operated laundry, free undercover parking, a large swimming pool and undercover BBQ area • 21 units - all on the ground level • Austar • Short and long term accommodation • Wireless Broadband • Full sized tennis court

There is no restaurant on site, but evening and breakfast meals can be delivered to rooms as required. The property is located close to Toowoomba’s major hospital as well as RESORTBROKERS.COM.AU 35

Trade Page GOT A PROPERTY & WILLING TO TRADE? WELCOME TO OUR NEW PAGE ALL ABOUT TRADES

HAVE YOU THOUGHT OF A SEACHANGE TO TASSIE? Sleek architect designed contemporary residence. Absolute privacy on this 6700 sqm parcel of perfectly flat land. 460 sqm floor area of 5+ bedrooms with indoor/ outdoor living surrounded by beautifully landscaped gardens & pool. 15 minutes to Hobart CBD. Looking for MR in Qld or Nth NSW Price $1,350,000

VENDOR WILL CONSIDER TRADE HOUSE UP TO $400K 3.5 AAA rated freehold motel. Situated in arguably NSW wealthiest country town. 4 bedroom, 2 bathroom owner’s accom. 18% return on investment. Highway frontage. Proven business that has been owned by current owner for last 18 years. Near tourist attractions including Artesian Spa. Price $1,050,000

WILL TRADE HOUSE OR APARTMENT IN AUSTRALIA Long agreements, located in Cairns the complex has 24 units and caters for both long and short term stays. It is centrally located. Property features include a pool and spa & BBQ area. Mgr’s 2 bedroom freehold apartment with granite bench tops, modern appliances Nett $209,000 | Price $1,095,00

Jim Chapman - 0413 444 782

Lindsay Cooper - 0413 444 782

Shane Mullins - 0447 185 001

WILL TRADE HOUSE OR APART. TO VALUE OF $400K The complex is located within an easy walk from the centre of Cairns and the stunning Esplanade Lagoon. The manager’s unit is a well appointed, two bedroom, one bathroom apartment situated above the main office and reception. Nett $125,00 | Price $695,000

FREEHOLD MOTEL - CONSIDER HOUSE TRADE ONLY On offer - the freehold interest of an 18 unit motel, 2 bedroom owners’ accommodation, licensed restaurant and in-ground pool. Recently refurbished through-out, the current vendors are ready for their next challenge. They will consider all trades on houses only. Turnover $750,000 | nett $420,000 | Price $2.2m

LOOKING FOR TRADE OR EXCHANGE This is a 3 bedroom ground floor absolute beach front luxury apartment has its own access to the beach and all the latest technology complete with keyless entry. This apartment was featured on Getaway. It is an opportunity to acquire just the best of the best. Looking at an exchange or sale value of $2.5 mil. All offers considered.

Shane Mullins - 0447 185 001

Trudy Crooks - 0477 882 210

WILL CONSIDER TAKING PROPERTY AS PART PAYMENT Unique natural bush land up-market resort in south coast, NSW. 3 Bedroom manager’s residence. Has to be seen to appreciate the property & potential. Prime position close to town with very motivated vendor. Generous training period & some vendor finance Huge 100 acre block of land Price $2,950,000

WILL CONSIDER HOUSE OR LAND TRADE UP TO $600K On offer is an extremely solid MR business, along with manager’s unit, at northern end of the Gold Coast. 147 perm. residential units, 98 of which are in the letting pool. Brand new 25 year agreements agreed in 09/11 Very wellpresented 3 bedroom stand-alone manager’s house. Nett Profit $305,000 | Price $1,795,000

INVESTMENT 10% RETURN - WILL TRADE HOUSE Fantastic opportunity to purchase the passive investment of a motel with an incredible turnover and highly impressive bottom line. Located in Queenstown, Tasmania this property boasts 55 units, a restaurant and bar. The owner is willing to take part payment of a house in Qld. Rent: $172,947 | Price: $1,730,000

Russell Rogers - 0416 166 909

Alex Cook - 0467 600 610

Len Booth - 0438 139 422

36 RESORTBROKERS.COM.AU

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DESCRIPTION Awarded best hotel in Australia 2012 Ideal passive investment showing 9.74% Beach front cabin, caravan & camp site

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Keeping up Appearances GLENN MILLAR - RESORT BROKERS AUSTRALIA Imagine to scenario….. After depleting the sinking fund and raising special levies, your building has just been refurbished and looks better than it ever has. In order to meet the requirements of the star rating you are looking for, many of your owners dig deep and refurbish their units to a new high standard. With glistening paint, freshly laid gardens and a new reception plus stunning units with modern bathrooms, new fittings and granite kitchen surfaces….. your guests are blown away. So much so that you put the tariffs up and not a sole complains. With the complex looking so great, the units finally up to standard and your income climbing by the day you think….

perhaps now would be a good time to sell. Within long you’ve appointed your broker and it’s time for the first inspection. The tour is going fantastically well. The buyers are blown away by the appearance of the complex and can’t believe how great the units look. They are buzzing, buying signals are flying off them. Then whammo…..it happens! You finish the tour on the manager’s unit, which happens to be the only unit in the complex that hasn’t been updated. It looks tired and depressing. The buyers are deflated and doubts begin to surface. Believe me, this happens time and time again. From my experience, 90% of buyers will walk away in this instance, and however hard the broker works it cannot be retrieved.

I cannot stress enough how important it is to see your property from a buyers perspective. ‘How can I show people these glorious apartments all day, then come home to this’, is what they’ll think In any property investment, it is equally as important for your unit to be kept updated as it is for your owners. If you don’t, not only will your investment be devalued but buyers will be put off. A 2 star managers unit in a 4 star building doesn’t work and never will. A poorly presented and out-dated manager’s lot is simply not acceptable by today’s buyers – after all, they are going to live in it for the next few years. Take a look at your apartment - does it need to be brought up to date?

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