by Greg Jorgensen,
28th November, 2017
The inner city market
It’s fair to say that if I had 10 off the plans with a net profit of $250k or better and no real estate to buy that I could sell all ten within a week or two! Demand for off the plans remains strong, despite the doom and gloom predictions of over supply within the inner-city suburbs.
I had a small off the plan business at South Brisbane with a one bedroom managers unit available recently and within 7 working days I had 5 genuine and written offers, with any one of them being suitable. If there is an oversupply it has to be in the South Brisbane and West End suburbs, but when it comes to interest in these businesses, there’s lots of it.
Multiplier have softened a little, but much depends on location, size of business. But 5’s are still being achieved in the inner city for nets of $250k or above. Although, when the associated real estate is $900,000, this can be a detractor.
What I can say though is that if your net is $200,000 and your expecting 5.5 that’s no longer going to happen and if/when it did happen, it was a very small window in 2012-2013 when we had a strong influx of mainland Chinese buyers buying up big and at very good prices. Those days are now behind us and a more steady and realistic market has returned.
The message I would like to get across is that the key to a successful sale is all in the preparation. By that I am meaning having a good and well recognised and well regarded management rights Accountant prepare your numbers; if your unit or managers property is unique get it valued by a management rights Valuer. This way it simply takes the negatives out of the negotiations and tends to just lock the real estate figure away with the focus then turning to the net profit and mores the multiplier.
In addition, it really is ideal to top up your agreements regularly. When I’m going to the market with an 18-year agreement, everyone asks “why haven’t they topped up?”. In other words, Buyers think that there’s a bad relationship between the BC Committee and the outgoing Manager.
Documentation is critical. Legal Due Diligence is all about looking over the Caretaking & Letting Agreements, the CMS, the Occupation Authority or Exclusive Use areas and seeing that it’s all in order with no ambiguities. A critical review of all of your documents before you list is my suggestion.
Lastly, Gallery Vie. If you haven’t tackled this as yet, my strong suggestion is that you do so. Get your Banker to write to you and state the Bank would like you to update your Agreements to include the Gallery Vie clause. Get you Solicitor to draft up the wording for the Motion and run it at the next AGM. If you don't, you can almost bet that when you sell and your under contract, the Buyers Bank will ask for it, then it’s an EGM and potentially at your cost.
Otherwise its business as usual and enquiries are still coming for well located and good businesses. Happy to have a chat at anytime on any aspect.