False Advertising and promotion by Falls Creek

Apresski

Pool Room
Ski Pass
Jun 18, 2007
49,234
13,162
1,515
Melbourne
I owned an apartment in Falls Creek for 12 yaers and sold it 4 years ago, because of diminishing returns. I can't say that I don't miss it. Every year when I go up to Falls and have to drag all the paraphenalia for a family of 4, I realise how much easier it is when you own a flat. When we first purchased at Snowski (which we still refer to as Snow Crystal, can't believe that Mr Wu was allowed to register the name), we used to get 13 weeks rental every season. We would use it ourselves and spent January and Easter up there. Over the years this gradually dropped to 6 weeks, which barely covered costs. The main reason for this was not snow conditions but the proliferation of apartment buildings, which makes me wonder why even more are being built currently.Goodluck to ASB on his returns, but I think it would be fair to say that his experience is not a general one. My friend owns a wonderful apartment in Alpine Woodsmoke, very expensive development and they had very poor rentals this year. When I was up staying at Snowski at the start of the School holidays, the mountain was pretty empty. I might add that these were not the Vic. State school hols., but I think Queensland were on holiday.
As much as I would love to take my family skiing o/s every year, I am afraid it is not really an option, which would be the case for most average skiing families. So there is always a market but it is not a growing market, which does make one wonder what will become of all the new ski apartments.
 

Hunter

Part of the Furniture
Endless Winter
Aug 21, 2000
13,461
537
813
goughs bay
Snorkler said:
If the supermarket at Hotham has not sold, it is simply because the asking price is too high
That is a gross assumption based on what exactly ?

There could be other reasons equally as true, ie the market has diminished, demand has fallen away, confidence has faded, poor snow seasons have had an impact.
To beat your chest and declare the "definative" reason is because the price is too high underminds your claim to being an authority and I would go carefully when you declare that others
clearly don't have much idea about finances.
rolleyes.gif
 
Last edited by a moderator:

Ulmerhutte

One of Us
Oct 7, 2005
3,544
20
188
Melbourne
www.stantonamarlberg.com
Hunter said:
Snorkler said:
If the supermarket at Hotham has not sold, it is simply because the asking price is too high
That is a gross assumption based on what exactly ?

There could be other reasons equally as true, ie the market has diminished, demand has fallen away, confidence has faded, poor snow seasons have had an impact.
To beat your chest and declare the "definative" reason is because the price is too high underminds your claim to being an authority and I would go carefully when you declare that others
clearly don't have much idea about finances.

...which is all another way of saying the price is too high! The market will generally value commercial property on ROI and risk to that ROI. Whatever it might have sold for in the past is irrelevant - it must, and is, valued on what income it can generate today.
 
Last edited by a moderator:

ausi ski bum

A Local
Jan 1, 1970
11,854
82
648
Near Cootamundra NSW
Of the three properties I bought in FC one was a long term thing that I am very unlikely to sell but the other two were a pure investment based on some very good figures in my business plan. It would not have mattered to me where these were the figures were good because they were sold to cheap in the first place.

Its not often an opportunity such as that comes along, the trick is recognising it when it does.

I am pleased with this years results, they are better than the average I used in the original projections I made. When investing in the snowfields ignor the snow and look at the fundamentals, if they add up, move if not well why buy a bad investment just because its white outside. Buy snowfields properties in summer, you get less distracted from the facts.
 

Snorkler

Part of the Furniture
Jan 1, 1970
18,212
548
813
Melbourne, Vic
Ulmerhutte said:
Hunter said:
Snorkler said:
If the supermarket at Hotham has not sold, it is simply because the asking price is too high
That is a gross assumption based on what exactly ?

There could be other reasons equally as true, ie the market has diminished, demand has fallen away, confidence has faded, poor snow seasons have had an impact.
To beat your chest and declare the "definative" reason is because the price is too high underminds your claim to being an authority and I would go carefully when you declare that others
clearly don't have much idea about finances.

...which is all another way of saying the price is too high! The market will generally value commercial property on ROI and risk to that ROI. Whatever it might have sold for in the past is irrelevant - it must, and is, valued on what income it can generate today.

See there are people around here who truly understand investment and how to make a decision based on sound financial principles. If the supermarket was making the correct annual profit compared to the price, I'd buy it, so that makes the price too high. The ONLY reason a business does not sell is because the price is too high. If you want to know how to price a business, have a look at Rupert Murdoch's last aquisition, The Wall Street Journal. The price of a business has NOTHING to do with the value of any fixtures or stock within the business, anyone who thinks so is deluding themselves and good luck on finding another sucker to purchase the business.

ASB has the right idea, if anyone wants advice, this would be the man to speak to. Pick his brains, don't critisise him because he has been succesful at what he does.
 
Last edited by a moderator:

Hunter

Part of the Furniture
Endless Winter
Aug 21, 2000
13,461
537
813
goughs bay
Rubbish, many influences outside its control can be the cause of its value to diminish rather than the owner has just set the sale price too high.
 

Ian D

Pool Room
Staff member
Administrator
Mar 14, 1995
46,798
12,260
1,515
Newcastle
ski.com.au
If its value diminishes then the sale price is too high.

It might sell next year if there is a good season then the value has increased and so the sale price could go up. But if the market has diminished, values have dropped etc then at that time the sale price is too high.
 
Last edited by a moderator:

Hunter

Part of the Furniture
Endless Winter
Aug 21, 2000
13,461
537
813
goughs bay
Exactly, it has been OUTSIDE influences that may cause the price to be too high not the "as stated absolute fact that the seller has simply set the sale price too high"
 
Remove ads with a
Ski Pass

Scott No Mates

One of Us
Sep 14, 2003
3,562
495
263
Sydney - LNS
Markets change over time. Properties exchange/sell on a 'willing buyer/willing seller' principle. Properties are valued in a number of ways (one of them isn't sentimentality) - they are though direct comparison (generally residential property), capitalisation method/dcf (income producing properties), summation/cost approach.

Resgistered Valuers (certificate of registration & or valuation member of Aust Property Institute), generally use two of the above methods, one as a primary method, another as a check method - an experienced valuer knows when to use each as the most appropriate primary method.

Business valuations are not the same as property valuations as other factors are analysed (methodology used is similar). Freehold can be valued separately from the leasehold value of the business + value of stock. Business brokers use established industry guidelines to determine the value of a business (those not on the stock market).

There are other methodologies used for valuations but these are used depending upon the intent of the person requesting the valuation eg for insurance purposes, for replacement value, capital gains/estate purposes, resumption by Govt etc.
 

scottski

A Local
Ski Pass
Sep 7, 2004
6,688
6,185
563
Homebush NSW
Your correct on valuation methodology Scott. Valuing businesses I have always used a capitalised EBIT model and DCF of cash flows to check and to forecast earnings upside and downside.

The problem with a lot of valuation is the failure to correctly interpret risk. a 5 times capt Ebit ( ie : 20% return pre tax and abnormals and funding) may be appropriate for a low risk high quality of earnings small business.

A dress shop in Chatswood or a supermarket in a ski resort would have a far greater level of volatility and risk and required return. What return would you need, 25%, 30%, 50%. The higher the risk, the higher the required return, the lower the value. The same with income earning property in ski resorts.

The uneducated buyer with emotion rather than rational analysis will make a comparison to their local real estate market in assessing value. They will fail to or pay a cursory view to volatility ( risk ). It is this type of investor who will only ever tell you of their gains and never their losses.

Look at the share market boom. The uneducated risk takers are everywhere telling about the fabulous profits they have made. They can never tell you why the business was a good buy, only what they have made and never what they have lost. It fits my theroum of the Rich Dumb Millionare. That is another story.
 

Hunter

Part of the Furniture
Endless Winter
Aug 21, 2000
13,461
537
813
goughs bay
No dispute with any of that, the point is a drop in value or causes for the business to become "over priced" can very often be caused by outside factors totally independant of the concern, ie in this case poor snowfall for one.
 

Scott No Mates

One of Us
Sep 14, 2003
3,562
495
263
Sydney - LNS
A few bad years on the ski fields will result in price depression (for properties/businesses but not lift tickets). However, optimism, built on the back of this year's reasonably good season, should see an increase in early bookings (lack of early bookings this year saw vacancies and quiet periods) and a strengthening of prices which looked overpriced earlier in the year.
 

Ulmerhutte

One of Us
Oct 7, 2005
3,544
20
188
Melbourne
www.stantonamarlberg.com
Hunter said:
No dispute with any of that, the point is a drop in value or causes for the business to become "over priced" can very often be caused by outside factors totally independant of the concern, ie in this case poor snowfall for one.

Exactly right - the price the market is prepared for to pay for a business can vary hugely without any fundamental change in the business itself. To draw a broad analogy with equities. The market yesterday thought that BHP was worth around the mid-$38/share. Right now, that figure is around $40.18. How has BHP itself changed in a day? Not much. What has changed is the market's perception of its earning/growth/risk propects (plus a good dose of herd mentality :)).

Yesterday, you would have had no buyers at $40, today you would be swamped at that price.

In short, if it not selling, then has been priced above what the market is prepared to pay.
 
Last edited by a moderator:

ausi ski bum

A Local
Jan 1, 1970
11,854
82
648
Near Cootamundra NSW
There are two types of property investment, one gives good returns from increases in the properties value and the other from a healthy income from the rent. The objective is in the short term try and buy a cost neutral property through good rental income, most investors are not able to carry large losses over the first years of investing. Once you have a decent protfolio you can then afford to speculate a little more on growth rather than immediate income.

Remember a rent increase of just $10 per week can increase the properties value by $5,000 - $10,000 so if you find a rental property that has room to move up its worth considering.

This theory was largely behind the growth in value of the FC properties as the building was run down the rent was low (hence the purchase price) once the building was renovated, balconies added and more the rents also went up accordingly as well as occupancy rates, as a result you then had the choice of earning good income from your investment for many years or selling at the increased value what was still a good investment for the new owner. I chose to sell two and keep one.
 

Scott No Mates

One of Us
Sep 14, 2003
3,562
495
263
Sydney - LNS
An investor looks for value + scope for improvement. Cash-flow neutral properties may be hard to find but do exist, so do undervalued ones. High yield properties give little capital growth but provide the returns to enable investment in other areas.
 

hair-raiser

Hard Yards
Nov 25, 2003
1,282
0
36
Firstly, there is no way an increase of $10 a week, over a 12 week season, or $120 p.a, would lead to a valuation increase of anything like $5,000 to $10,000. What nonsense! $120 capitalised at 7.5% (generous) produces an increase of $1,600 in value

Secondly. folks, this is the Internet. Anybody who believes financials posted here would be naive in the extreme. If someone says "Hey I got a really good price", and they still hold assets at the same place - what does that tell you? Come on, give me a break, as LJH said yesterday.

Finally all talk of cash flow neutrality is meaningless when stated broadly. Real estate in Australia is bought for cash and borrowings. The individual case of what was borrowed needs to be known before you can discuss anything about gearing. Some put down 10%, some 90%. And every other combination.
 

Snorkler

Part of the Furniture
Jan 1, 1970
18,212
548
813
Melbourne, Vic
Wow, this has gone a fair way off topic. But hunter, you're suggesting that the price of the business is as volatile as the price of a simple commodity one buys from a shop. Wrong. In determining the price of a business,it should be valued over an extended period of time, in this instance 5 years or more would be better due to the variances from year to year due to snow cover. There are people out there who prefer to value a business more upon what it has earned in a good year (maybe just last year) that is to say they value based on what it can earn, not what it does earn.

So what could have happened, if over the last two years, profits have been bad due to snow, then yes an average over five years would appear to decrease the value. But we're talking unsold for two years, which means that the price was even too high when it was better the two years prior. In the other case where profits have gone up over the last two years, it's simply that the price was always a ceiling price and always too high. So we can see that the asking price is too high based on the return one would apply to such a volatile business.
 

ausi ski bum

A Local
Jan 1, 1970
11,854
82
648
Near Cootamundra NSW
I stand correted, I was refering to an increase of $10 on an average rental property that is rented 52 weeks of the year but how the same theory works in the snowfields when the rental income increases significantly due to renovations and improvements. Another thing that increases or decreases values int he snowfields is the length of the lease nad any works that may be required to gain a new lease.
 

hair-raiser

Hard Yards
Nov 25, 2003
1,282
0
36
Many real estate purchases, both leased and freehold, and also many goodwill purchases too, are made up of a fair component of "lifestyle" and other amenity factors. These sometimes completely drown out the economic value when a buyer weighs up the pros and cons. (text books have many case studies).

The "Snow" is well known in the property world as a strong candidate for emphasising these non-economic values in marketing programs, small and large.

As climate change grips the Australian mind more firmly, the traditional amenity values of snow resort ownership will slip. Possibly to be partly replaced by more "green" attraction, but at a much lower price, since "green" is available in abundant supply.

The current apparent variation in what seems a reasonable price to pay in the Alps is due to the climate change effect hitting home in a random way at the moment, until community attitudes settle into a regular pattern. Community uptake of new ideas, policies and "what is normal" always establishes in a haphazard fashion.
 

Hunter

Part of the Furniture
Endless Winter
Aug 21, 2000
13,461
537
813
goughs bay
Yes he would and whats more quite possibly get it wrong...............

ausi ski bum said:
I stand correted, I was refering to an increase of $10 on an average rental property that is rented 52
 
Last edited by a moderator:
Remove ads with a
Ski Pass

Log in

or Log in using
Remove ads with a
Ski Pass