Whereby both the freehold property and the business housed therein are wholly owned and operated by the same party.
Traditionally, the model of owner-operator dominated New Zealand’s accommodation and hospitality sector, and it remains a preferred option for many. With the advent of motel leases, some 30-40 years ago, progressively most Freehold Going Concerns have been split into a Freehold Investment and a Business Investment leaving few Freehold Going Concerns in place. There are obvious advantages in owning and controlling both the business and the land and buildings. Under this model, your asset is both an income generating enterprise and a substantial commercial property investment. It is both home and livelihood. Each component offers growth opportunities.
The real estate asset, independent of the business, can continue to appreciate in value. Prime sites may afford excellent prospects for gain, particularly where future expansion or redevelopment potential exists. Owners are also free to capitalise on the real estate value through improvements, knowing all the effort and money invested in upkeep and upgrading will benefit you by enhancing the value of your asset.
At the same time, the value of the property relates to how well the business is run. Here again, an owner-operator is in control. You reap the reward of all your effort and ability to market and build the business for maximum profit and growth - increasing your income while enhancing the real property value.
Finally, you always have flexibility. At any time, you may sell the business as a separate operation, retaining the freehold investment. This can realise a substantial sum to invest elsewhere, while you earn on-going income from annual rental to a lessee. This option is frequently the goal of astute buyers who purchase a freehold going concern, fully intending to build the business before on-selling the lease.
© Resort Brokers Limited, mreinz Licensed under the REAA 2008