Management Rights Valuations
Management Rights are a unique beast in that they were ‘invented’ in Queensland’s Gold Coast to provide an on-site management service within the then newly built high rise holiday let apartment buildings. Since then the concept has spread to New South Wales, (also under State Legislation), Victoria and Western Australia.
Most, but not all, Management Rights businesses have the business and the real estate components. But within these are many variations as to type and who owns what real estate. Here’s some bullet points on types:
 Permanent complexes
A typical permanent let complex is an apartment building where the on site manager has a pool of units under his management on behalf of Landlords/Investors. He rents those units to tenants for 6 or 12 months periods under a General Tenancy Agreement.
He manages the Tenant, collects rent, arranges repairs & maintenance as needed and charges the Landlord at the end of month monies disbursement, a percentage (8%) of the collected rent for his service.
 Holiday complexes
Similar to the Permanent complexes in that there is a letting pool but the units are let out as holiday accommodation. The term of stay by the holiday maker varies, but often the unit is let on a weekly basis. The larger complexes do allow over nights or one night stays and sometimes run the businesses closer to the hotel model with 24 hour reception and the ability for the guest to order local take-away delivered to his room.
The remuneration to the Manager is at a higher percentage (12%) plus charges to the Landlord for linen and room cleans and other sundry expenses.
These style of businesses certainly can and do return a significantly higher reward for effort, but holiday complexes are not for the first time buyer of a Management Rights. We say this as these businesses are in the Australian Tourism sector being one that can be volatile to external forces such as the Australian Dollar; Bali and South East Asia competition; the Australian economy.
In summary these can be and are very rewarding businesses and well sought after in good times, but they come with an inherent level of risk.
Corporate complexes
Corporate complexes are generally Capital City Central Business District located and can vary in size from smallish boutique to hotel style. Often these complexes are located on the CBD fringe and offer a cheaper bed than the traditional Hiltons or Marriotts.
The ‘normal’ corporate complex is a hotel style of business, again with a letting pool and Landlords/Investors that provides one night stays for guests or longer if and as needed.
Again, a higher percentage of the collected tariff (12%) is charged together with linen and cleaning charges. Other sundry lines of income, which can add up, are also part of these businesses.
Like all Management Rights businesses these too are susceptible to market forces and other dynamics. Here’s some examples:
- The price of airfares can positively or negatively affect the occupancy of the complex and achievable tariff.
- Federal and State Tax/Charges increases are generally not conducive to growing or maintaining the Net Operating Profit.
- Economic factors.
- Age and condition of the common areas and units.
 Student Accommodation
These are mostly purpose built where an individual apartment can have 3 or 4 bedrooms which are let separately to a student or student couple.
The Tenancy Agreements in these situations are generally under a Rooming Accommodation Agreement (Form 18) wherein the tenant agrees to rent the room and that he acknowledges the kitchen, lounge and bathroom are treated as common areas for the residents as a group.
The risk points in this style of business was primarily the long Christmas University break of around 2 to 3 months, ie risk of long vacancies. However it is now reasonably common now that Student Accommodation providers only offer 21 or 50 week tenancy contracts, therefore allowing only minimal vacancy and potential a good time for maintenance.
Tel: (07) 3221 2449
Fax: (07) 3221 2497
Email: admin@australianvaluers.com.au
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