Receiver Sales Create New Opportunity

May 22 2024

The number of receiver sales is increasing on the Gold Coast, bringing pain but equally, opportunity for savvy investors.
Receiver Sales Create New Opportunity

As the property cycle progresses, opportunities are coming for investors quick to recognise and pivot to meet them.

Receiver or forced sales are on the rise on the Gold Coast, helping to reset the market.

While higher-risk assets are among the first to come to market as receiver sales increase, history show us that that other asset classes will follow suit.

Therefore, it’s essential to understand what receiver sales entail, the potential benefits they offer, and who stands to gain from them.

Defining the Sale 

Receiver sales typically occur when a court or creditor appoints a receiver to oversee and sell off assets belonging to a financially troubled company. The receiver’s goal is to maximise the recovery of the outstanding debt.

This differs from a liquidation sale, where a company’s assets are sold off as part of the liquidation process when the company is winding down.

These sales are often conducted to pay off creditors and distribute any remaining assets to shareholders.

The receiver must act in the best interest of the seller, but there are opportunities for buyers.

Commercial | Kollosche

Playing the Advantage 

As the receiver’s aim is to pay down debt, emotion has no part in this sales process, unlike the case when dealing with a vendor.

Rather than emotion and profit, logic and debt levels rule the day. If the buyer pool is small and the asset has been properly advertised to the market, the receiver will be looking to move on it sooner rather than later.

Moreover, receivers are not in the business of preparing a property for sale as extensively as a vendor would.

They are looking to pay debt, not spend money or indeed time on an asset being disposed of under those circumstances, which also impacts the sale price.

In a period of the cycle that already favours the buyer, the advantages can stack up further.

First cab off the rank 

Historically, non-income-producing assets are the first to be sold, and that’s already playing out in the Gold Coast market as sites come up for sale, propelled by ongoing high construction costs.

This time around, there’s a direct correlation between the construction crisis and the number of sites hitting the market as more projects fail to stack up.

For investors with patience, these sites can offer a long-term investment as they ride out the downturn and the building cost issue is resolved, as it must.

Following the logic and experience of past cycles, the next subsector on its way to market will be retail, followed by commercial and industrial, and then residential.

It makes sense, of course –riskier assets go first, so the tax-free family home is always the last to go.

And for investors, the assets coming to sale under these conditions still present value-add opportunities. Development upsides mean greater potential.

Indeed, as with any investment, there’s no absolute sure thing, so the risks and rewards of scooping up these assets require scrutiny.

Commercial | Kollosche

The wider market 

As more forced sales surface, the market more broadly can be affected.

These sales can reset expectations and set price precedents. While the circumstances may differ to a general sale, for the market, the price is being set and it’s no easy task to convince otherwise.

An increase in properties in a particular subsector, such as development sites, for sale can lead to oversupply if demand doesn’t match. Again, that will recalibrate market expectations and drive down prices.

That means if you’re looking to divest, there’s a choice to be made –sell now, before the upsurge in forced sales sets that price precedent, or play the long game and wait for the cycle to swing back, which could be three to four years.

More to come 

There’s no doubt the number of forced sales coming to the Gold Coast market will increase over the next three to four years as the market adjusts and begins its ascent

This will bring opportunities of a quite specific nature. For investors across the nuances of receiver sales, it can be a time of real opportunity.

Reach out to Kollosche Commercial for strategic sales and leasing advice. 

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