Interested in acquiring a commercial property management company
January 18, 2020
by a searcher from Eastern University in Atlanta, GA, USA
Does anyone have any experience in DD, acquiring, or financing property management companies?
from University of Southern California in 1 World Way, Los Angeles, CA 90045, USA
They are generally very localized and it is an especially fragmented industry (save for the big developers who generally have it in house). If you can install systems (maintenance requests, tenant payment portals, dispatching for repairs), you are in good shape. Many of the mom and pop shops are run through phone calls.
A couple of things to call out:
1) Contracts are key in this type of business especially between management company & owner & tenant & management company - liability is key
2) A lot of management companies will float the owners of the property in lieu of going directly to the owner every time there is a capital call - this is fine when the owners pay in a timely manner but as you can imagine can sometimes be disastrous
3) Fiduciary Responsibility - because these companies handle deposits and rental income for the owners, you need to be sure everything ties back to the leasing contracts
4) Accounting - be sure to have someone who knows the real estate space check the accounting because many of these shops will mix the business accounting with the actual property accounting and then have to back out the individual properties
DM me if I can help in any way as you go along your journey.
from Fordham University in Norwalk, CT, USA
"The trailing 12-month EBITDA multiples paid for management companies in REIT roll-up and internalization transactions ranged from 2.9x to 14.0x, with a mean of 7.9x and a median of 7.5x. As shown in the chart below, over 60% of the EBITDA multiples implied by the transactions analyzed were at or below 8.0x trailing EBITDA."
https://www.duffandphelps.com/-/media/assets/pdfs/publications/transaction-opinions/how-much-is-your-management-company-worth-in-a-reit-roll-up-transaction-may-2019.ashx