The Anatomy of a Deal
The Anatomy of a Deal
By Greg Jorgensen
It’s common, at least in the inner city suburbs of Brisbane, to see a management rights business with associated real estate in the range of $750,000 to $1,100,000. Add to that a Standard Module and you’re probably saying, unsaleable! However, no, not only are these types of businesses and associated real estate saleable, they are something that can attract good interest! Like any business, you have to wait for the right Buyer.
In late 2017 I sold The Grosvenor Apartments located on the edge of the Financial district in the Brisbane CBD and within walking distance to the Botanical Gardens. A triple A location for sure, however, unit sizes that very much suited owner occupiers, although, there were a number of long term owner-investors who could see that receiving $800 to $1,200 each and every week and the manager having a waiting list, was a positive!
I had folks tell me that these rents weren’t sustainable, that eventually they would all sell off to owner occupiers and that the sky was going to fall in and take out Brisbane first! Needless to say, none of those things happened.
I was very fortunately to have a life experienced, pragmatic (first time) seller, who knew that good advice on the way-in and the way-out was a maxim to live by, and she was 100% correct!
Her accountant was spot on with the numbers, her paperwork was exceptionally well organised, her agreements were regularly topped-up and those Deeds of Variation were on-hand for anyone to view.
The business, as far as I was concerned, was set and ready to go.
The real estate was big, in that it might have only been two bedrooms and two bathrooms, but it was on an upper floor and had river views! Views and outlooks sell, as its the very true adage of the Buyer seeing him or herself there looking out at this view everyday.
Sales of comparable apartments within Grosvenor were all around $1,150,000 and it is this consistency that saw an independent valuation come in at this figure. This valuation set the tone for expectations as to where this was going to land. Now it was down to the multiplier!
Multipliers for a similar Accommodation Module business were in the 5.75 range and Standard Modules were 1.0 point less and that rang true for this sale. For a while there in 2018, the difference between the two types narrowed to around 0.5, however, this ‘may’ have sorted a bit and be heading back toward the whole point difference once again.
As I said in my opening paragraph, Standard Modules with high value apartments attached are saleable, it just takes good preparation, good communications to the marketplace and an understanding that it will take longer to sell. But they do sell! All it needs is a good dose of reality, determination and an eye for detail!