Compliance costs and market changes
The current market for rent roll sales and acquisitions in New Zealand is changing. Government and legislative changes mean more compliance costs and changing income streams for operators. Smaller operators on a whole are becoming more stretched and for some, inclined to look at selling.
Increased compliance cost means a very real “dent” to profitability. Smaller sized businesses who find themselves wearing a lot of “hats” are having to spread themselves or staff further whilst larger operators are focussed on harnessing improved structures and systems. There is also a very strong focus on using software to aid operators with their labour time use.
Multipliers have not changed as such over the past 12 months with our major cities seeing sales generally in the 2.20 – 2.80 across annualised management fees and 2.00 – 2.50 in the smaller city regions (generally speaking).
High market demand
The major, more recent change with rent roll sales and acquisitions is that the banks that have traditionally supported rent roll lending have tightened up somewhat, causing pressure on results of larger sized “books” selling. The market demand for rent rolls is still very high and we are still seeing a strong amount of independents around the country opening their doors each month.
Retention periods
Typical retention periods for acquisitions has been 3 months around New Zealand with a general 4-6 months more the case in Auckland. We are still a little way off our Australian cousins in as much that 12 months retentions are standard. We are seeing a change in retention split of 90/10 to 80/20, which again is more typical of our Australian cousins.
