In recent times many commercial property management rent rolls have been changing hands.
As long time commercial real estate agents look to change direction in their lives and perhaps play a bit more golf, many new and existing agency businesses are looking to grow their market share more aggressively through acquisition.
The ease at which your commercial rent roll can be traded comes down to a few basic criteria.
1. Are the management agreements well documented with appropriate transition clauses?
2. Is your current financial management software likely to help or hinder the process?
3. Are your key personnel likely to move to the acquiring party, or will they try and ride off into the sunset with some of your longtime clients?
4. Are you prepared to see the transition process through to obtain full value?
These are questions that will ultimately determine the financial success of the sale of your commercial rent roll.
Well documented contracts with your clients add value to you rent roll. Any potential purchaser will gain additional comfort in the knowledge that the rent roll they are buying has clearly articulated fee entitlements and has robust transition clauses that facilitate the acquisition.
The Right Software Platform
It is best to be on the same software platform that the acquisitive parties are already using. It makes the onboarding process far easier and is less disruptive to your property client who will continue to receive the same reports as they did previously. Efficient cloud-based software like cirrus8, that is well supported and continuously enhanced, is a good bet.
If you are currently on an outdated server-based software product, the data migration will be more difficult and the chance of loosing clients in the move will be greatly enhanced. Get onto the system that the likely buyers are using.
In bigger rent rolls, key personnel will often transition to the acquiring business. It is important to have built in sufficient flexibility in their employment contracts that contemplates the sale of your rent roll.
Perhaps even include an incentive clause where the staff member will qualify for a bonus if they constructively facilitate the sale transition.
Be Prepared to Hang Around for a While
Unlike the sale of a car, you can’t just handover the keys once the paperwork is done. Selling a commercial rent roll requires months and sometimes years of commitment to ensure full completion of the sale contract is achieved. Often the deal will be “Earn Out” based, where much of the sale proceeds will be back end loaded. Meaning leaving the business early, or falling out with the new purchaser, will only lead to many of the managements being poached by competitors or opportunistic past staff members. Purchasers generally don’t pay for management business that does not transition across, so the final payment for the years of work in aggregating the rent roll may end up substantially reduced.
Steven M Carulli B.Bus (Curtin) Cert Real Man (PTC) AICD
Steven has 28 years commercial real estate experience as the Founder of NSC Corporate (WA) which was sold to Jones Lang LaSalle in 2008. Steven was Managing Director of JLL(WA) for 4 years before retiring from the industry. Steven is now a Non-Executive Director of cirrus8 Commercial Property Management Software.