Management rights – the old and the new
The commercial reality of buying and selling management rights using the same parameters as any other business transaction has finally, after nearly two decades of lobbying, become the normal in most current transactions.
Gone are the days of selling a secret. In actual fact, gone are the days of many quality management rights of high net profit and accepted industry returns being heavily advertised as there is no need. Currently there are at least three buyers for every quality listing.
Back in late 1994, the industry normal was a 3-3.5 multiplier of the net year’s profit and the real estate at an agreed price. The listing brokerage firm would list the management rights with a portfolio number (it was unheard of to name the scheme) in the local newspaper.
Remember there was no World Wide Web or emails, we all used very expensive mobile telephones and facsimiles. As the business world grew in size and intellectual property the exposure of the secret industry or an industry very exclusive to Queensland, started to gain recognition as a very viable and profitable business. Yes! this was the management rights industry back in those days.
Along comes the early and mid 2000s. Due to greater exposure the industry had a renaissance, the so-called industry multiplier or year’s purchase factor increased to multipliers of 4-5 times, driven by simple supply and demand. Not only did sales in the industry increase, the so-called corporate player arrived. S8, Breakfree, the Dreamtime model and MFS, now rebranded as Mantra and recognised as the industry leader in marketing holiday accommodation to Australia, New Zealand and the South Pacific.
The influx of the new multiple purchaser not only placed the management rights industry on an even higher footing, it attracted a new breed of buyer, couples, families and individual purchasers looking for a diversified career in the hospitality industry and prepared to purchase at market price – “A management rights sale or commercial transaction by two willing parties at arms length”. The industry was now attracting multipliers sometimes in excess of 6 times the years net profit.
The global GFC had little bearing on the management rights industry. No doubt a collection of receivership sales were implemented, the majority caused by overprotective banks calling in fresh valuations in a depressed holiday market. All that is the “old” industry.
Now let’s have a look at the “new” management rights industry. Sales continued to occur with common regularity from 2008 until mid 2013. Industry so-called stock became harder to list due to most Vendors wanting to replace their current management rights with an even larger business.
It was soon realised by the active full time management rights brokers that a point of difference was required to motivate a sometimes reluctant industry vendor to sell.
The answer was simple; to accomplish the highest market price think commercially as you would with any other large sale. A valuation on the residential real estate, communicate with your committee or at least chairman and tell them you’re selling. We can now name the management rights for sale along with all the strong points that attract a high market price. If you are a purchaser, be prepared – gone are the days of high negotiation, low offers and unreasonable conditions of sale.
The management rights industry of 2014 offers buyers and sellers whom both think with the same commercial dedication, the opportunity to purchase or sell in a current win/win market.
The above comments are not made without substance, I walk into the administration room next to my office and view 26 current contract files from Port Douglas in the north to Sydney in the south – all going through the normal verification, due diligence and finance conditions. Surely this is testament to the “new” management rights industry.
