Property management rights industry worth $9.4b

“We now know of over 4250 schemes nationally, which represents over 310,000 lots under management, worth an estimated $211 billion,” Mr Mangleson, author of the latest report, said. “Our market coverage now exceeds 90 per cent.”

Management rights are long-term contracts to perform caretaking and property letting duties in apartment buildings, holiday rentals and townhouse complexes. Owners of management rights often own a unit in the building as well.

These businesses are paid a salary (through strata levies paid by apartment owners) for performing caretaking duties such as maintaining gardens, mowing lawns, cleaning pools and vacuuming hallways. They also earn property management fees for leasing out apartments in the letting pool either as short stay or long-stay accommodation.

The industry, which has its roots in the high-rise boom on the Gold Coast in the 1970s and 1980s, is highly concentrated in Queensland and dominated by small business owners. Some of the bigger players include Accor-owned holiday apartment operator Mantra and Oaks Hotels, part of Minor International.

Developers often sell management rights to new projects off the plan or upon completion, Management rights to existing buildings are sold on the open market through real estate agents.

Hotel management agreements – or HMAs – are a different type of contract and are not part of the management rights industry.

In other states, most apartment buildings are managed by strata managers through controversial strata management contracts. These are facing calls to be overhauled because of their perceived unfairness and for being impossible to terminate, following an ABC investigation.

While management rights contracts can cover terms of more than 20 years, Mr Mangleson argued they work better than strata management contracts because the owners of these rights typically had to buy a unit in the building as part of the deal (or live close by).

“They are more invested in the longevity of the building because they will want to on-sell their own apartment [for a profit] and so there is value in maintaining a good relationship [with other owners],” he told The Australian Financial Review.

However, apartment owners are still wedded to management rights operators with little recourse to remove them if they provide poor service.

Management rights are typically bought on multiples of net profit. This year’s report shows they have returned to pre-pandemic levels.

Interest rate rises

“Downward pressure on multipliers has been driven by two factors,” Mr Mangleson said.

“First, interest rate hikes have increased borrowing costs. Second, real estate price increases mean buyers can’t afford to pay as much for the business component of management rights to get the same return on investment.”

Brisbane was the most active market in FY24 with 94 sales recorded. Deals included the sale of management rights to 220-unit Haven Newstead on the Brisbane River for $5.64 million on a multiplier of seven. The project was developed by Marquee Development Partners.

There were 69 sales of management rights on the Gold Coast including the purchase of rights to 388-unit Cambridge Residences at Robina for $5.29 million on a multiplier of 6.9. The project was developed by SPG Invest.