The Agency went into liquidation. Opulence Consultancy was employed to undertake a rent roll due diligence on the rent roll of approximately 340 managements for the purpose of sale.
Employment of Opulence Consultancy
Opulence Consultancy started to work on the rent roll due diligence for the Client and found that the files of the agency were a complete mess due to the following:
Opulence Consultancy liaised with their client and requested that the liquidator extend the rent roll due diligence and finance clause which occurred. The liquidator in turn employed a temp to combine the files into one computer file so that Opulence Consultancy would be able to review the files quickly and efficiently.
While the rent roll due diligence was on hold for the Client, Opulence Consultancy was employed by the liquidator to complete first sale.
Within 4 days of employment by the Liquidator, Opulence Consultancy achieved the successful result of 70 signatures by landlords and the liquidator was able to settle the first contract.
The temp was let go and the rent roll due diligence for the Client was able to be begin. Within 10 working days, the files had been successfully reviewed and a full report provided to the Client for their review. Unfortunately, the client was unable to attain finance.
When a second buyer was found, Opulence Consultancy was employed by the Liquidator to assist with completing the contract of sale which again had a special condition of the number of managements which were required to be signed to a new Form 6 management agreement. The liquidator provided Opulence Consultancy with 1 week to produce 100 signed managements. The employment of Opulence Consultancy began on a Monday and ended on the Thursday of the same week. At 2.20pm, 116 managements had been signed, transferring the management to the Buyer.
Due to time delays with contracts, finance and the lack of preparation of the rent roll before being placed on the open market, the result in multiple declined as did the asset:
The original buyer of Portfolio C was under contract at a multiple of 2.80 and 333 residential managements in October 2018. Because the time frame between buyer A and Buyer B being 6 months, the rent roll sold at a multiple of 2.10 and only 173 managements went across to the buyer.
This is what it looked like in dollar figures:
Number of Properties
Annualised Management Fee Income Per Property Per Annum
Management Fee Income Generated
Total Income Generated
The loss of managements and damage that occurs on a rent roll during liquidation over a period is not uncommon.
The overall loss equated to approximately $1,606,000 in a short period of time.
The first sale was not pleasant due to the lack of rent roll due diligence which occurred, employees were stressed and not performing due to the lack of leadership. The second contract which settled was in far better preparation for sale however, due to unfortunate events the original buyer was unable to attain finance.
Real Estate businesses should be prepared to be sold at any time. No matter what unfortunate events occur, reducing time on market and minimising the risk of a contract being terminated is important. Regularly undertaking rent roll due diligence is key to ensuring that your employees are operating efficiently, you are minising risk associated with running a rent roll and should unfortunate events occur or you decide its time to step out, the process to meet the open market is available to you.