Selling a commercial rent roll

Macquarie bank recently surveyed their real estate industry clients and the response was nothing short of astonishing. Mac bank reported that 67% of real estate Principals in WA are 51 years of age or above, and 60% are actively considering retirement or removing themselves from day-to-day involvement.

The commercial property sector is dynamic, and to thrive, agents need to be agile to adapt to changing demands. On the other end of the spectrum, you may find property management no longer aligns to your desired service offering.

Perth Commercial Property recently expanded through the acquisition of a rent roll from a local boutique commercial real estate agency. The transaction was marked by its private nature, as well as fair and equitable commercial terms, all achieved without the use of a broker. On the back of this successful collaboration, we wanted to help clear the fog on what can be a taboo subject for agency owners and help you assess whether a rent roll sale is the right call for your business, and if so, how you might want to go about it.

So, why do real estate agents sell their rent roll in the first place?

Opportunity cost – what is your rent roll costing you?

Are you primarily a sales Agent that has found themselves swamped with PM duties?

It’s a common theme in the real estate sector. An individual finds success as a sales or leasing agent and makes the decision to launch their own agency. Property Management goes hand-in-hand with sales and you find yourself with a new service offering. You quickly pick up a few management’s and launch yourself into managing them with energy and enthusiasm… things are going really well! 

Fast forward a few years and the demands of juggling the management of a rent roll, staff, compliance, growth and of course your core sales and leasing duties are all starting to pile up. Somewhere along the line your purpose has blurred and it all feels a little too unmanageable.

What are you saying no to, or forced to forgo with so much time and resources allocated to property management? Have sales numbers slipped? Error rates climbing? Ho-hum service standards become the norm? Are you still enjoying the day-to-day of your Agency?

Our recent acquisition is a perfect example of the above scenario. The seller wanted to get out of property management and refocus on their core area of strength, sales and leasing. We were able to negotiate fair and reasonable terms and the sale was a huge success for all involved.

Succession planning

Highlighted by Macquaries survey results, succession planning should be a key consideration for principals approaching their golden years. Principals have often spent many valuable years investing in and growing their business. 

Don’t leave money on the table through lack of planning.

Whether you use a rent roll broker or prefer to engage directly with a buyer experienced in rent roll purchases such as Perth Commercial Property, selling a commercial property rent roll can be a strategic move offering several benefits if the time is right for you.

  • Financial gain. 

Often the most immediate benefit. A well-maintained rent roll can be a highly valuable asset providing a cash boost that could be used to pay down debt, invest in other areas of the business, or take as profit. Shifting out properties that no longer serve, can reduce serviceability costs – improving your bottom line.

  • Free time to focus on core strengths.

We all know managing a rent roll requires significant time and resources. By selling a rent roll that no longer aligns, a boutique agency can free up time and resources to focus on other areas of the business. Investing where your expertise shines or realising greater opportunities for growth.

  •  Reduced risk. 

We operate in a cyclical industry influenced by various factors such as economic conditions, changes in legislation, and market demand. Selling a commercial property rent roll can help reduce exposure to these risks.

The decision to sell should be made carefully and with the right partner.

There are a number of key considerations:

  • Sale multiple.

Rent rolls typically sell on a multiple of revenue per property

  • Retention.

Retention of new clients/properties is key. In some circumstances if the buyer loses a client or property during a specified period (the retention period) then they are not required to pay for that property/client. This makes the quality of the buyer and their ability to professionally manage their Agency and the new properties critical. 

You have built a reputation and a service level that your landlords have grown to expect. Selecting the ideal partner for your rent roll sale is essential for all parties involved.

Trust is paramount, not only for the service quality the acquiring commercial agency can provide to your landlords and tenants but for your sale price. You will want to communicate your confidence in the buyer with your landlords and the tenants during the settlement and retention period. Partnering with an agency that shares your values, has a proven track record and commitment to exceptional customer service will aid this transition.  

Transparency and discretion are key to a smooth transaction.

Be transparent about your motivations for selling and your future aspirations. Potential buyers will be keen to understand these aspects, especially your plans within the industry.

Are you planning to remain in the industry and potentially become a competitor? Perhaps if you are getting out of property management altogether, you can agree on an ongoing referral relationship? 

Recognise that your future endeavours can influence a buyer’s stance on crucial sale elements like pricing, retention, and non-compete clauses.

Transparency and discretion ensure the landlords are communicated with appropriately and the vendor and purchaser are better able to transition the rent roll across.

Do you need a broker?

While rent roll brokers would argue a resounding yes, our recent acquisition was proof that private commercial rent roll sales are not only possible but can also be more efficient.

Selling privately eliminates the need for a formal marketing process, saving both time and money. The absence of broker involvement translated to zero broker fees and a streamlined transaction.

Our transactions are always transparent and upfront, allowing both parties to conduct independent due diligence. Recognising our shared values, personalised approach and long-standing property management team, our recent seller was confident in our ability to guarantee consistency and top-notch service to their commercial property landlords.

If you are struggling to find a buyer or are selling to a commercial property agency without experience in these transactions a broker may be a good call. 

At the end of the day rent roll sales shouldn’t be complicated or taboo. With the right partner, you can rest assured your landlords and tenants will be in good hands, and free up the resources needed to manage a portfolio that brings the most value to your business.

If you are considering what a rent roll sale would look like, no matter the size, we welcome an obligation-free and 100% confidential chat.

Feel free to contact Marc of Anna directly to discuss in more detail.