Rent-roll sales are much more complex than they appear and the role of the rent-role broker is far more involved than a real estate agent.
On the surface a rent-roll sale is simply a case of establishing the value of the rent-roll and then finding an agency willing and ready to purchase.
In reality, the steps and nuances of such a transaction require a specialist rent-roll broker.
An experienced and successful rent roll broker will cover all the following steps:
VENDOR MOTIVATION
Understand why the vendor is selling in the first place. A vendor who is looking to retire usually wants to sell their entire rent-roll and they are often concerned about the future of their staff as well as the landlords they have developed relationships with.
Some vendors are looking to refine the type of agency they are and may only be passing on a portion of their rent roll, while maintaining their staff and premises.
And some are a mix of both and may wish to remain involved in some capacity with the business.
Determining the overall goal of the sale has bearing on what strategy the broker will recommend.
PROPERTY ASSESSMENT
The rent roll broker will also asses the types of properties on the rent-roll. Are they mainly inner city apartments, or suburban houses, are the landlords big investors with growing portfolios, or do they have one or two properties as nest eggs for retirement?
These first two steps will help determine the most suitable buyers, as well as begin to establish the value of the rent roll.
DRAFT INFORMATION MEMORANDUM
The broker will then endeavor to find potential purchasers who are a good fit, and consult with the vendor on a strategy to approach the list.
Brokers with deep local knowledge and many industry connections will be able to navigate these seemingly calm waters – however in terms of progressing the sale, this is one of the most delicate parts of the process.
MARKETING THE OPPORTUNITY
Once the strategy has been agreed upon, the broker will then quietly make contact with any suitable prospective purchasers on their database.
This is done as discreetly as possible – the broker must be mindful of keeping the sale private as the vendor will not want his staff or his landlords to know what is going on.
ESTABLISH IF THEY ARE ACTUALLY A PURCHASER - WITH INTEGRITY
All prospects will be thoroughly researched to further establish their suitability for the transaction.
SPLITTING RENT-ROLLS IN SOME INSTANCES
Not all purchasers will want to, or have to capacity to purchase the entire rent-roll and may only want a portion of it. The broker will then split the rent-roll and find and match multiple purchasers to cover the entire sale.
NEGOTIATE THE COMMERCIAL TERMS + HEADS OF AGREEMENT
The broker will then liaise with both the vendor and purchaser’s solicitors to ensure all the commercial terms are met. This phase can involve a fair amount of negotiation – particularly when there is more than one purchaser. They are also responsible for making sure all the required finance is in place and ready for the settlement.
While the process is involved, it appears to be relatively straight forward - what we’ve not mentioned is the integrity and confidentiality with which a rent-roll sale requires.
A rent roll broker needs to be part diplomat, part corporate head-hunter with a twist of cold war spy!
Unlike a property sale where the more people who know about the property, the sale and any specifics, the better, a rent roll transaction must be done covertly, and with great integrity.
A good rent roll broker will place high priority on conducting a smooth transaction by ensuring the staff and landlords involved are not unduly alerted to the move and the vendor and purchaser are also able to seamlessly transition the rent roll across.