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Image: Lachlan Sinclair - Pendium Advisory.
Pendium Advisory’s Associate Director of Valuations, Lachlan Sinclair, and his team have over six years of experience in providing tailored rent roll and real estate business valuations. During their time in the industry, they have developed a knack for making the complex simple — and turning professional legacies into tangible figures.
Considering post-Covid market fluctuations, industry trends and indications, our team have seen a staggering 85% increase in the number of businesses seeking valuations over the last three years. This is due to a number of factors, namely:
- With rental values across the country hitting record heights, business owners have been seeking to understand the flow-on effect of what the upside of this increased revenue within their portfolios has created in asset value.
- Slippage within portfolios has been at an all-time high with more landlords selling their investment properties and capitalising on increased market prices. This has resulted in negative growth within many portfolios and business owners have been seeking clarity as to the effect this has had on the value of their portfolios.
- With the above in mind, the acquisition of portfolios has been the key driving force for many business owners. They have been motivated to top up their portfolios to ensure they are as close to 100% of the previous number of properties under management. This has put significant pressure on rent roll multipliers, with some markets achieving up to 25% higher than those prior to Covid.
- In some cases, the motivation to purchase has been driven by the negative growth of their portfolio seeing them unintentionally breach the LVR on their debt funding.
From the above points we have seen the following outcomes:
63% of businesses have sold due to the following circumstances:
- Capitalising on the market and staying as a sales-only agency – 49%
- Capitalising on market conditions and selling due to retirement – 30%
- Sale due to unforeseen circumstances (health, partnership dissolution etc.) – 21%
The remaining 37% have had valuations for the following purposes:
- Management buy-in or buy-out – 38%
- Refinance/financing purposes – 36%
- Court appointments – 24%
- Other purposes – 2%
From these valuations, some key metrics we identified in the last three financial years. Businesses saw:
- A net loss of 12.32% in the number of properties under management.
- A median rental increase of 28.94%.
- A median increase in AAMI of 18.63%.
- A median decrease in management fees of 3.22%.
- Ancillary revenue increased by 28.51% (letting fees contributing largely).
This data was compiled from reviewing more than 50,000 Properties Under Management across all states in Australia.
In short, the best time to understand the value of your business is right now. To make the most of our expertise, get in touch
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