Network Pacific Strata Management: Franchising Success

Network Pacific Strata Management: Franchising Success

Market-leading Strata Management Company Network Pacific Strata Management began trading in 1994, starting out as a home operation. The group now operates as a successful and vibrant business, boasting multiple offices and managing strata properties across Australia.

John Botha is the Managing Director of JFB Management Services Pty Ltd, which commenced trading as the founding Franchisee of Network Pacific Strata Management in January 2015.

As a previous employee of Network Pacific, Mr Botha began running his own business after being given the unique opportunity to purchase his Network Pacific portfolio and set it up as a franchise of the group.

John Botha

Mr Botha has been with the Network Pacific group of companies since moving to Melbourne in February 2008, when he took on the role of Owners Corporation Manager. Seven years later, he was given the opportunity to purchase his portfolio and set up a franchise.

Managing Director of Network Pacific Strata Management Group, John Botha
Managing Director of Network Pacific Strata Management Group, John Botha

“I own a franchise of Network Pacific Strata Management,” he says, “and I work closely with the franchisor, who was my prior employer. So I’ve gone from employee to franchisee within Network Pacific Strata Management.”

Mr Botha emigrated from Namibia, in Southern Africa to New Zealand at age 15, where he later completed a Bachelor of Commerce degree at the University of Canterbury, majoring in advanced corporate finance and investment analysis in 2005.

After graduating, Mr Botha was employed in a Residential Property Management role with a company called Braziers in Christchurch, which he did for two years before looking to further his career in the property industry.

The next step was a move away from Residential Property Management and onto Owners Corporation Management. To do this, Mr Botha decided to move to Melbourne and look for work, where within a week he was employed as an Owners Corporation Manager at Network Pacific.

“I’ve been managing Owners Corporations since February 2008,” Mr Botha tells us. “Within a couple of years I moved up within the Network Pacific organisation, taking on the Senior Owners Corporation Manager’s role.”

Stepping up into a team leader role, Mr Botha was now heading up the Owners Corporation department, working as an intermediary between the MD and CFO and the Managers who take care of the day-to-day client management services.

Two years later, negotiations were underway for Mr Botha to purchase his portfolio and begin the franchise chain, the details of which were finalised in December of 2014, with the franchise officially commencing business in January 2015.

Network Pacific Strata Management

“Within my franchise portfolio, I manage 20 Owners Corporations,” Mr Botha says, “thus 20 different legal entities, and they comprise about 1,600 lots under management, including residential apartments and mixed use commercial space.”

The wider group of companies is about ten times the size of Mr Botha’s franchise, meaning he essentially bought 10% of the group’s business. When asked about the success of Network Pacific, Mr Botha is full of praise for his franchisor.

“We are essentially, a specialist Owners Corporation Management Company, we’re not born out of some of the traditional models where you’d have a Real Estate Sales and Property Management Company who suddenly decides to start managing Owners Corporations as well.” Network Pacific’s core business is Owners Corporation Management.

A particular focus on customer service is key to Network Pacific’s success, ensuring a high level of staff availability and endeavouring to make any client interaction as pleasant and seamless as possible.

Network Pacific are problem solvers for any issue that may arise for its clients. “When someone takes the time to ring you,” Mr Botha stresses, “obviously they’ve got an issue they’d like addressed, and they’d like it addressed as soon as possible.”

In addition, the company has always maintained a very high staff to property ratio, exceeding the industry standard of a single full time staff member to every 1,000 lots under management.
“We operate a lot closer to 750 lots per full time employee,” Mr Botha says, “so when you look at it, we’re essentially 33% overstaffed, but we actually take pride in that, being able to deliver valued service to the clients by not having any staff member over-burdened, and there is always someone available to assist our clients.”

The company prides itself on a team management approach to Owners Corporation management, ensuring there are always two people working on any portfolio, allowing for holidays, sickness and other commitments to be covered by a member of staff familiar with the portfolio, which ensures constant management.

As a feature of its business, Network Pacific has also set up many sister companies that provide essential services to address clients’ most significant issues, ranging from fire and electrical services to other innovations such as the car park lock.

“This is a common complaint within Owners Corporations, when somebody parks illegally in somebody else’s car parking space. The only legal way to deal with that is to deter people from parking in your spot, so we came up with the car park lock.” In addition, Network Pacific also offers a share car product, a tailor-made service for some of the larger properties that may want to establish a share vehicle within the building exclusively for the use of residents.

Network Pacific endeavours to offer a range of services outside of its core responsibilities to owners, making the lives of their building residents easier by adding value and benefits to the management of the property.

Founding Franchise

Mr Botha’s team has a strong and proven track record in successfully administering a portfolio of Owners Corporations, ranging from 5 lots to in excess of 250 lots per Owners Corporation, averaging in excess of 100 lots per plan under management since 2008.

The team’s diverse experience and exposure ensures it is able to successfully attend to all Owners Corporation Management needs for various properties of any size and description, including residential, commercial, high-rise, mixed use and many more.

“Since purchasing my portfolio” Mr Botha says, “and setting it up under the Network Pacific banner, I have been leasing office space within their head office”. This allows the franchise to share many back-end resources with the company, such as reception, data entry and administration staff. Within the next 12-24 months, depending on growth, the plan is for Mr Botha to set up his own office in an alternate location.

“Setting up the first franchise, provided an opportunity to retain myself within the Network Pacific group,” he tells us, “whilst also catering for the organisation to continue to expand and grow through the franchising structure. At this stage, JFB Management Services Pty Ltd is the only franchisee of the Network Pacific group.” However, in time, Network Pacific will look to further expand the business by introducing additional franchisees to the program.

“Network Pacific as a group purchased an 1,100m2 office building in Burwood East, in January this year, which is the company’s new Head Office where all the Victorian operation of the Network Pacific group of companies is based.” The company also has branch offices in Bundoora Victoria and Brisbane Queensland. Furthermore, Network Pacific also has an international office in Malta which is where most of the administrative and back of house functions are carried out.

The international office offers an excellent opportunity for streamlining the business, as it takes care of any process type work that comes in during the day i.e. accounts payable, Owners Corporation certificate preparation, financial support etc, which is turned over at the Malta office for the following Australian workday. “We’ve seen a good opportunity in efficiencies there, by moving that operation offshore, which is working extremely well thus far.”

Having the offshore office allows Network Pacific to dedicate more resources to the back-of-house operations on a similar cost base, which allows our Owners Corporation management team in Australia more time to focus on the relationship management aspect of the business.

Strata Management

“Network Pacific Strata Management deals with anything and everything related to the day-to-day operations concerning Owners Corporations, which includes everything from the financial management and administration of that entity; through to the day-to-day operations of organising repairs and maintenance for anything related to common property.”

A typical Strata Management service includes the management of all facilities, the tendering of all relevant service contracts and the overall financial modelling and forecasting for the Owners Corporation. “That is approved by the owners at the AGM, in terms of setting the operating budget for the year. Then, based on that budget, we issue Owners Corporation fee notices to all of the owners on lot liability basis, and we also deal with the collection of those fees.”

Funds are collected and deposited into independent trust accounts held in the name of each Owners Corporation, as they are their own independent legal entity. The company then administers those trust accounts on behalf of the Owners Corporation. These funds are used to cover any maintenance or upkeep issues that arise within the communal areas of the building i.e. common area cleaning, maintenance, building insurance, electricity usage etc.

“At the AGM you would have a committee elected, which is a group of owners and/or their proxy representatives, who we would liaise with on a very regular basis concerning any items pertaining to their building/Owners Corporation.” The committee makes the majority of the decisions on behalf of the Owners Corporation members, and we would meet with them on a quarterly basis to present any quotations of service contracts and act on the committee’s instructions to carry out any works.

There are several key issues that affect the running of an Owners Corporation, highlighting the benefit of hiring a professional Strata Management company to oversee the needs of the Owners Corporation and act as arbitrator for its needs. “Simply put,” Mr Botha says, “if you can get 100 people to educate themselves on the legislation and then agree on anything, if that was possible, then you wouldn’t have the need for professional Owners Corporation Management.” The reality is that it is impossible to get perfect agreement between owners, meaning it is vital for services like those provided by Network Pacific to be available for the committee to take advantage of. “It is becoming a more complex and litigious landscape that we operate in,” Mr Botha adds, “and the demands on Owners Corporations are such that you really do need a specialist in the field to look after it for you.”

“We obviously deal with the dispute resolution side of it as well, which is becoming more and more prevalent in society across the board. But where you’ve got ‘X’ hundred people living in one building space, for them to live together harmoniously you need a level of governance in place so that you don’t have anarchy.”

Era Apartment 2
Era Apartment 2

Building Defects

A large challenge in the industry at the moment is the growing number of buildings across the country reaching in excess of 50 or 60 years of age , putting more pressure on those Owners Corporation members to plan and act on continuing building maintenance issues.

“For anyone looking to purchase a property,” Mr Botha tells us, “there are already provisions in place under the Section 32 documentation, of sale of land, particularly for multi-dwelling sites where there is an Owners Corporation Certificate included, which actually contains a lot of very useful information.”
Prospective buyers are therefore given an idea of how well run an Owners Corporation is before they buy, as well as the financial details and level of fees for the lot. Naturally, the older the building, the more repairs and maintenance are generally needed, as well as the day to-day operational costs, which also increase with the age of the building.

“The industry is very slowly moving in the right direction in taking away some of the historical barriers when it comes to dissolving a plan and knocking the whole thing down and rebuilding it, which previously required a 100% unanimous resolution.” Steps have been taken in New South Wales to ensure this kind of action only needs a special resolution, 75% of owners’ approval, to go ahead. Mr Botha believes Victoria will follow suit in the near future. “Particularly given the ageing buildings that there are out there, this is a positive step in the right direction. Ultimately, it’s not just the financial burden; it’s also looking at the safety of the residents and the occupants within those buildings.” The reality is all buildings have a finite lifespan and the “cost of repairs and maintenance of infrastructure is outweighed almost against the cost of dissolving the plan, and rebuilding it again. I think there are positive steps being taken by the industry in that regard.”

Credit should also be given to the legislators for setting the wheels in motion to drive this change. Mr Botha refers to the model used in Singapore, where it is more commonplace for an entire building to be knocked down and rebuilt. “Provided that’s handled appropriately,” Mr Botha adds, “which I think will come in time, as Australia becomes more and more experienced with it, as to how to relocate all the residents from one building to another building, in freeing up that space.” The industry would need to work closely with property developers in order to facilitate this change, though Mr Botha doesn’t believe this will prove to be a significant issue.

“If you have a site that has 20 or 30 apartments in it now, you could negotiate with a developer that those 20 or 30 unit owners would own a property within the new development on the site where their property was.” One of the benefits of this action is that there is the opportunity for developers to expand and add units to the new development, meaning more housing stock is made available as well as lessening the on-going costs per unit.

“Then, rather than having a derelict property that they’re living in,” Mr Botha adds, “they’ve got a nice, modern, safe/compliant, high quality, new property.”

One solution to the practical problem posed is for developers to acquire a parcel of land very close to the existing property, with the aim of completing work on a new property and rehousing residents before the old building is taken down.

Owners Corporations

There is plenty of information available out there for people looking to get involved in an Owners Corporation, but Mr Botha believes it takes more than just a large amount of money to run a successful Owners Corporation. “Having a large pool of funds is important on the one hand,” he admits, “but secondly you’ve got to look at whether the assets within the property are being maintained.”

Some committees are very stringent on spending money, but equally very good at building up the pool of reserves, meaning when they really do need to use money they don’t have to call on additional capital levies as the funds are already available. “It’s a balancing act between having enough reserves in place for the long term capital maintenance required, but at the same time spending some of that along the way to preserve the capital value of the existing assets in place.”

Keeping a close eye on the overall financial position of the Owners Corporation is therefore very important, as well as carrying out inspections on the property to assess the level of maintenance against capital reserves.

Prospective purchasers will also have access to the previous year’s Annual General Meeting minutes, which can provide valuable insight into how well the Owners Corporation is currently being run. “If not,” Mr Botha adds, “any prospective purchaser can also contact the Owners Corporation manager and request to inspect and view the Owners Corporation register, which will include copies of all minutes of meetings, including committee meetings.”

“You can gain a pretty good insight as to whether there’s a functional committee in place. Occasionally, for whatever reason, committees do become dysfunctional. The saddest thing to see is when an Owners Corporation, and particularly its committee, loses perspective on their overriding obligations.” The job of the strata manager is to guide the committee and keep them focused, so they can continue to protect the interests of the Owners Corporation at large and act in good faith.

“We can’t give legal advice,” he says, “but generally provide guidance to a committee and refer them to the relevant experts eg. Legal, engineering, etc who can advise them on what matters to consider in any dealings that they do have, so as to ultimately obtain a commercial outcome that’s in the best interests of all owners and the Owners Corporation.”

Mr Botha uses the example of an Owners Corporation faced with a $100,000 building defect, which may be better served raising a levy of $2,000 from each owner and fixing the defect rather than going through the lengthy and expensive process of legal action. “To run any decent sized defect litigation matter through to the end,” Mr Botha says, “you are going to spend a significant sum of money in legal and expert witness costs in doing that, and I mean six figures plus. Not all of the costs are recoverable even in the event of a favourable outcome which in itself is never a certainty”

“The constant challenge for us is up-skilling,” Mr Botha concludes. “As a professional manager you’re expected to know a little bit about everything, you’re expected to be a lawyer, a building consultant, but most importantly you’re expected to be a mediator and a peace-keeper.”

Keeping up with the changes in various legislation affecting Owners Corporations and knowing how to apply them in each individual scenario is an on-going challenge, especially with the industry evolving into a more professional one. “We strive for the upmost level of professionalism and excellence in everything that we do in servicing our clients, rather than a model where you just maximise the number of properties you’ve got under management.”

Counting the number of cranes dotting the Victorian skyline, as well as the number of properties in various stages of planning and construction, Mr Botha can see significant growth in the industry in increasing the volume of stock that will require professional management.

“The challenge for the industry is going to be having enough new people enter the industry who have the right skill sets to be able to competently and professionally administer those additional Owners Corporations/properties that come online.”

o read and download the full profile click on the cover image below. To view this editorial as it appeared originally in The Australian Business Executive magazine, click here.

Written by Nicholas Paul Griffin