The WIFM (What is in it for me) attitude has never been stronger than it is today for both owners and purchasers. At all times it is in your best interest to be well organised with your management rights, so you can either borrow money or sell when you want and save your money through the process.
The more organised you are the better your business will value and appeal to purchasers and funders (banks) alike, in addition to attracting potential buyers when the time is right it will cost less to sell. Your business needs to be a standout example.
All vendors at some time in their career decide to sell their management rights. But when is the right time? Are buyers looking? Are financiers active? What is the market going to do? We are continually asked these questions and more.
Regardless of whether it is a buoyant market or a depressed economy, there is always some form of prospective purchaser looking for what they imagine is their perfect match. Some are wanting /needing a job and others are after a lifestyle. Owners need to be conscious that if they decide to sell they also maximise the position, we need to put the best picture forward and make the entire process an easy and smooth one for all
To maximise the desired result, you will often get more by professionally preparing for sale and this outcome can only be achieved by blending the near perfect match between the vendor and their choice of a competent professional industry broker.
Contracts are most often terminated because of the failure to meet contract conditions and these are normally in the following order: the verified net profit is incorrect, the due diligence of agreements has legal issues, the manager’s real estate fails to value up and the financier’s valuation falls short of the contract price. Unfortunately, in some cases, the broker handling the sale has sat on their hands throughout the process, failing to give the vendor the service being paid for. This can be an expensive and stressful time/process for all parties, but if managed correctly, it can be avoided. Do not let the management rights sale be handled by a broker trying to buy your listing. The listing becomes just that - a listing and not a sale. Buyers are conscious of this in the marketplace.
None of these contract breakers will occur if you prepare for sale with the same positive professional attitude that you adopted when you purchased. Purchasers and banks who lend the money needed, prefer to deal with well organised professionals with established simple systems. The key word being ‘simple’.
Check your caretaking and letting agreements and deeds of variation to ensure they have as many years as possible to run. The banks and buyers are keen to see 10 years on standard module and 20 years or better on accommodation module agreements when the buyers are looking. The longer the term, the more appealing the loan conditions offered by financiers and typically the more a purchaser can borrow and afford to pay.
Often managers neglect to top agreements up and occasionally that can be a sign of personal issues with their committees and this usually comes home to roost at the worst possible time, resulting in not being able to meet contractual requirements. Had they been topped up along the way these issues would not have arisen. It is of vital importance to have committees accustomed to managers saying “I would like to put a motion to the AGM with committee support to top my agreements up”.
Check your authorities to act and make sure they are up to date so you are not chasing unit owners to get them done at the last minute. The annexure of charges should also reflect the actual charges to unit owners.
To have the best chance, have a current profit and loss (P&L) statement prepared by an industry-recognised accountant, and if you have cleaners and a receptionist in your business, have those expenses included on the P&L. It is easy for a verifying accountant to pick things up and identify when someone is increasing the bottom line by removing some expenses, be honest.
Manager’s residences are always a contentious issue with buyers who don’t understand the commercial value of the manager’s residence and office. It is in your interest to have an independent valuation that eliminates the argument of price of the real estate.
Everyone knows someone that has access to RP Data and therefore the sale price of units in the building. Although generally this is not a true reflection, it does create doubt in a buyer’s mind of the real estate value.
With lending criteria very strict and committees and their lawyers wanting more and more from both managers and buyers, it is paramount that everything lines up as a team to make the sale process easy for buyers, not difficult. All of the above and pricing the business to market expectations, can be achieved by working closely with an experienced broker. It is about achieving a sale of the business.
You are entitled to achieve the best possible result and you owe it to yourself to approach an impending sale with the same dedication you had when buying the management rights. Your ability to achieve the desired conclusion to a contract of sale is 100 percent dependent upon correct information being provided and then collated by your professional management rights broker.
We all want a harmonious conclusion - the settled sale.
Select a broker carefully, a full time professional with a proven track record. Present the facts backed up by prepared documentation. Market the management rights at “today’s marketable and achievable price”. Lost opportunities can be expensive, and we only have one life to live. Together, let’s make it the best we can!!
