The post covid economic landscape for real estate; as for business generally, will be challenging.
But adversity can be opportunity knocking. Rent rolls continue to be tradeable assets, especially large ones.
For sellers, the sale of a rent roll or rent roll parcel is an opportunity to generate much needed post covid cash flow.
For rent roll buyers, opportunities to purchase; normally hard to find rent roll assets, should be easier to acquire.
Larger purchases are more likely via merger, than direct acquisition, and merger offers the additional opportunity for a Purchaser to acquire skilled, highly trained staff, ‘free ’of recruitment fees.
Merger offers a Vendor, an ultimate succession opportunity and an ongoing involvement with the Purchaser business, without the stress of financial risk of ongoing business ownership.
A merger may also add value to the selling price due to the synergistic and economic benefits to the Purchaser being realised via economies of scale in a new larger entity.
Current experience shows that banks are still lending on rent roll assets; but selectively.
Typically, banks are lending to long established customers that have a proven track record of successful acquisitions.
Currently lenders are focussed on much needed post-covid cash flow and how this is accounted for in forward budgets and strategic planning.
Special care is required in forecasting future post covid sales income.
Similarly, estimates of future property management income should be conservative, with appropriate adjustment for potentially, lower future rents and management fees.
The purchase of a rent roll offers stable cash flow with the solid asset backing of the rent roll.
The market for rent rolls and agencies is currently complex. A successful sale is still possible.
Proper preparation, an experienced marketing team and total confidentiality throughout the sale process is critical in protecting and enhancing a rent roll’s asset value.