Marketing Steps For Selling RML

Selling RML offers ALL owners a tremendous opportunity to generate a VERY significant amount of money – including the potential for a large, one-time cash distribution to ALL owners, perhaps in the $5,000 to $12,000 range to each of us - depending on the eventual selling price and how much is kept back for reserves.   

However, bear in mind that selling RML is going to be a VERY time consuming effort for someone at Deer Ridge.  To improve efficiencies and expedite timelines, I recommend the following marketing steps be implemented to successfully sell RML: 

Primary Marketing Approach: 

•  Develop comprehensive web site dedicated to the sale
•  Web site could have an intro page accessible by anyone that summarizes the deal and inviting interested, qualified companies to email the Prime Deer Ridge Contact requesting access information.
•  Detailed information on the sale would be on password protected pages.
•  The detailed information on the pages would include:
  • Benefits page
  • Purchase analysis highlighting the financial opportunity
  • Summary financials
  • Detailed financials
  • Photos of the property and cabins along with all common areas
  • Description of current employees that might be hirable by the new company
  • Web presence including all domain names that are to be conveyed along with a discussion of all web marketing currently being used by RML.
  • Copies of current Rental Agreement and access to locked Acrobat file that contained all current rental agreements in one file.
  • Past annual occupancy reports / economic occupancy reports
  • Copies of RML tax returns and audited financial statements in locked Acrobat format
  • List of all current marketing arrangements such as with Hotels.com
  • List of all agreements to which RML is a party
  • Asset Page listing all assets that would be conveyed with a sale
  • Discussion of Ridge Realty – assuming that is part of the sale.
  • All details required for due diligence would be included on the web site to expedite decision making and offers.
  • Contact page for more information / setting up an appointment for inspection.
  • By using this web page approach, we save a lot of time and postage sending out the same information, and answering the same questions, repeatedly,
•  Develop a comprehensive list of addresses and email addresses for all property management companies in the Gatlinburg / Pigeon Forge / Sevierville / Knoxville area.
•  Give web page access to ALL Deer Ridge Owners.
•  Develop a special, private page on this site that is a status report to owners so ALL owners can check on what is happening with the sale.  This page should be in a blog format so that it is a reverse chronological log so all previous status reports can always be viewed on the same page.
•  Contact all the above companies simultaneously with a standard email or mailing giving the basic info highlights and the special web address.  Since all these companies are known, the log in user name and password would be included in the email or mailing.
•  If no offers then, two weeks after the first contact, resend same info to all parties via email or mail.
•  If no offers then, six weeks after the first contact, resend same info to all parties via email or mail with lower asking price.
•  If no offers then, ten weeks after the first contact, resend same info to all parties via email or mail with an even lower asking price.
•  Once there is interest from a serious prospect, provide full due diligence information.
•  Evaluate offers.  If more than one company is interested, motivate others to enter competitive bidding so that multiple offers can be entertained and simultaneously negotiated.
•  Negotiate price and terms.
•  Do complete due diligence on the BUYER.  Deer Ridge does not want RML bought by just any company.  We need to ask the right questions to ensure that we end up with the right kind of buyer who will professionally manage the rental function and maximize rental revenues for those owners in the rental pool.
•  Legal review
•  Close sale

W³ – Who?  Is going to do What?  When? 

•  All of the above action items are VERY time consuming and require someone who understands the business of property management, due diligence and contract negotiations.
•  Using Joe Thomas:
  • While Joe very much understands property management, it is not clear that he has any skill sets related to a corporate acquisition.
  • Since Joe has an active bid to buy RML, albeit a ridiculous low ball bid, it would be unjustifiably foolish to have him in charge, or even part of the process, of either soliciting and/or negotiating competing bids that would be better than his own bid.  This is even more true if he wants to submit a more realistic bid for RML.
  • Right now, Joe has a triple vested interest at Deer Ridge:  General Manger of the HOA, President of RML and President of Ridge Realty.  He makes money from all three positions.  He makes money by brokering units for a 7% sales commission even when owners get fed up with both all the discord at Deer Ridge and that they continue to lose money each year from having their unit in the Rental Pool. The more discord, the more owner frustration = more units to sell = more money for Joe to make. While this is an understandably great deal for Joe, it is NOT in the best interests of all owners to support and continue with even a double conflict of interest, let alone the existing triple conflict of interest.  Joe is not an owner at Deer Ridge so he only makes money with his triple vested interest.
  • Because of all of the above reasons, even if Joe were supposedly no longer interested in actually buying RML, he has so many conflicts of interest against the eventual sale that he would not be able to best represent the company to expedite a sale.  Conflicts of interest for Joe include:
    • If RML sells, he is probably completely out of a job unless the HOA decides to separate the HOA management from the rental program management.  I strongly suggest we do this to avoid the rampant conflicts of interest we have now.  If we do this, then Joe would probably be a very good candidate for the position if he was willing to work at market level salaries for that job. My strong suggestion is that Joe remains as General Manager of the HOA but that both RML and Ridge Realty be spun off to generate sales proceeds for all owners and to make these relationships independent third party ones without all the inherent conflicts of interest.
    • If RML sells, Joe may lose his rights to Ridge Realty and/or its on site location at Deer Ridge. It currently is not clear if Ridge Realty is part of the RML sale or not.
  • For all the above reasons, it would NOT be in the HOA’s best interest to have Joe involved in any way with the sale of RML.
•  Using a business broker:
  • They typically charge 10% - 12% of the selling price as a commission for the sale.
  • Major concerns about using a business broker:
    • They probably don’t understand the property management business and their only motivation is how much money THEY will earn.  They will not have to live with the consequences of a buyer who would not be good for Deer Ridge or the owners.
    • Often, they broker businesses to individuals who want to have their own company.  While that is all well and good, RML needs to be sold to an existing management company in this area that can both provide a very professional level of service for our owners and be a company that can benefit from the synergies of acquiring RML.
    • There are a lot of charlatans out there in the business broker space.  We would need to ensure we hired a reputable and experienced company.
    • Even using a business broker, they will need a primary HOA contact who can immediately respond to requests for information and potential offers.  The Board needs to decide WHO this best person would be.  It needs to be someone who thoroughly understands the deal and the nuances of the sale and knows how to negotiate the RIGHT business issues during the contract phase.  For all the reasons mentioned above, it should NOT be Joe due to all the inherent conflicts of interest.
  • Using a competent, knowledgeable business broker is probably the best approach for the sale of RML.
•  Using Ceo Resource:
  • Ceo Resource is owned by Robert who totally understands the process and who can produce the above web site, provide the contact flow and handle all the steps involved in the offering, negotiation and sale of RML.
  • Please see www.CeoResource.com and www.DeerRidgeOwners.com for details and samples.
  • The charge would be 7% of the total selling price due only upon the successful sale of RML or transfer of its assets plus any out-of-pocket costs associated with the sale. All the work and analysis I’ve already done regarding the RML sale has taken a huge amount of time…but nothing like the time that will be required to market, negotiate and close a sale successfully.  Hence, while I am glad to serve the HOA by doing it all for a discounted price, I can’t afford the time to do all of this for free. 
  • While this approach is an alternative for the Board, the business broker approach may be the best approach since it is a total third party dealing with no potential for any conflicts of interest.
•  Using the members of the Board or other owners:
  • No one has any experience in the required areas, as far as I know.
  • No one may have the time available.  Bear in mind that this is a VERY time consuming job – especially for the due diligence tire kicking and the detailed negotiation phases.
•  Other approaches?

These are the marketing steps required to successfully sell RML, as I see them.  Nothing will happen until the Board votes on its choice of the above alternatives and kicks the action plan into full gear.

 Robert
A-202

PS:  If you would like to download this page as an Acrobat file, click RML - Marketing Steps

PPS:  If you want to see the absurd, almost laughable way that Vic "tried" to sell RML, click Vic's Sales Pitch to Other Management Companies.