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Run Property - is it worth another look?

Discussion in 'Shares' started by Nigel Ward, 21st Feb, 2007.

  1. Nigel Ward

    Nigel Ward Team InvestEd

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    Run Property listed and is now trading at a massive discount to the listing price.

    At a share price of 14-15 cents that values the company at around 9-10m according to some research I've seen.

    Given they have supposedly rejigged the business model and cut some costs, I wonder if the company is worth another look. Surely the rent roll sold on its own would be worth more than that figure?

    I'm doing some digging, but does anyone know what sort of multiples property manager's residential rent rolls usually change hands for? Is it 2-4 times or higher?

    Run is not yet profitable, but I wonder if it's at a tipping point?

    Rents are supposed to be rising. The anecdotal evidence seems to support that. Whilst that's no doubt due to supply side constraints, query to what extent property managers like run can get a revenue boost as a result.

    Disclosure: I don't own RNC but I'm toying with speculating on it. Yes I use the word "speculate" deliberately. :D

    Anyone have views on what's a reasonable valuation multiple for a rent roll?

    Thanks
    N.
     
  2. Glebe

    Glebe Well-Known Member

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    Also, what's their retention rate of landlords from bought rental rolls?
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Although I think it depends largely on the location - in my experience, rent rolls usually sell for multiples of between 1.5 and 2 times annual rental income.

    Retention rate varies greatly - but again, you'll probably see up to 20% loss within the first few months, and possibly quite a bit higher within the first few years. This will depend greatly on who the staff managing the rent roll are - landlords tend to develop a personal relationship with their PMs, so if the PM changes because of a rent roll sale, they will often move.
     
  4. handyandy

    handyandy Well-Known Member

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    Hi Nigel

    My personal view is that the 'Run' model is flawed.

    You would need to investigate the management retention rate as my feeling is that a lot of landlords would move their properties away from the impersonal methods they envisaged utilising.

    Cheers
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    handy - that's exactly what I heard had happened ... landlords found it too impersonal, so they've had to change strategy and open up shop-fronts everywhere. There's one here in Artarmon now.
     
  6. Glebe

    Glebe Well-Known Member

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    That's a similar lesson to what the banks learnt. ANZ admitted they shut too many branches and lost their ability engage customers. So they're opening branches now..
     
  7. JoannaK

    JoannaK Member

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    the area the rent roll is located in will determine it's price. in QLD rent rolls are selling around the $3:$1 mark...in Sydney 6 years ago I sold my rent roll for $3.50:$1 (which was a record at the time)...so I would say in Sydney now for a quality rent roll a purchaser would be looking at a minimum of $4:$1.

    Retentions usually last for 3 to 6 months....but at the end of the retention period the purchaser is credited back anything that has been lost, so the purchaser doesn't pay for it anyway, so really shouldn't impact on any cost analyses when considering a purchase.

    I initially believed the RUN model was completely flawed...initially RUN didn't even OWN the rent rolls they were managing or have agency agrements with each landlord, they were operating more like an outsourcing service I believe.

    I also believe they've changed their model, but I haven't been keeping an eye on the company so can't comment on their new model.

    I feel, from my own personal experience, that landlords expect a much more personal service than what RUN is offering. I would much rather see a national corporate or franchised model with top of the line technologies and systems and procedures, and this will still allow for the personal touch that landlords expect, and deserve, and tenants expect and deserve.

    Just my thoughts...