For investors wanting exposure to the Management Rights industry, opportunities may still exist to acquire an interest in larger buildings and resorts by forming a partnership of investors or a syndicate.  Typically, we have found that a group of investors will normally form with 1 of the investors acting as the active building manager and the remaining investors (anywhere from 2 to +20) acting as silent investors in the acquisition.​

Structuring the deal can take on many different shapes depending on the level of sophistication of the investors and the everyone’s individual tax strategy. Options might include forming a partnership structure, a proprietary limited company (investors own share capital according to their equity interest), or they can invest via a fixed Unit Trust Structure. In some circumstances, a Self Managed Superannuation Fund (SMSF) may also be able to invest in the acquisition (depending on the structure chosen) whereas an SMSF would generally not be able to operate a business in its own right. ​

The borrowing is usually conducted in the entity that owns the management rights (e.g. at the partnership, company or unit trust level) and the percentage ownership can be split into any ratio.

We recommend engaging a specialist management rights lawyer to draft a partnership agreement to protect each investors rights along with any roles and responsibilities that need to be defined.​

Some of the benefits of entering into a partnership structure include:​

• Ability to purchase a larger complex and potentially larger and more consistent returns /cashflow​
• For silent investors it achieves a return on investment in management rights without working as an on-site manager​
• Economies of scale with a greater number of units in the pool​
• Increased options for sale​

How Can Alto Help?

If you are thinking of getting involved in the managements industry either as passive investor or managing directly, speak to Murray to understand your options. We can help ensure your structure is optimal and connect you with industry specialist lawyer, brokers and lenders.

Author: Murray Kilpin