From beneath the waves to high-rise returns

Posted on: 2 June 2022

Patrick Bell featured in Resort News

Patrick Bell, Director of StayCo and Finexia, is featured as the ‘Person of Interest’ in the June edition of Resort News.

The article explores Patrick’s journey from the ocean depths as a naval submariner to becoming a major player in the management rights industry.

To read more, see page 14 of Resort News in June or continue below.

By Grantlee Kieza,
Industry Reporter

This month Resort News talks to Pat Bell who has risen from the ocean depths as a naval submariner to become a major player in the management rights industry.

His company Stayco already controls four properties and has plans to run at least 15.

You are making big inroads into the management rights industry. What’s your background?

I was a corporate banker. That’s probably a bit of a swear word for some people but I’ve had three main chapters in my life. I was a submariner in the Navy for 11-odd years and that was fascinating. I lived in Adelaide and Sydney and Perth, and obviously travelled pretty extensively. The second chapter was corporate banking at the Commonwealth Bank for another 11 years. Then I left the bank and for the next six or seven years I was involved in finance. The last few years I’ve gone from providing loans to specialising in investments and funds management and private equity businesses.

How did you become a submariner?

When I was at school, I always wanted to join the Defence Force. My parents are ex-army people who served for over 25years. I lived all over when I was a kid as they would change bases every couple of years.

Both my dad and my stepdad were in defence. So, I went along to the recruiting one day and said I wanted to be in the Navy. I didn’t even really know what a submarine was until I got on one for the first time. It was an awesome experience. The work was bloody hard, but I met friends for life. I spent a while on the HMAS Onslow which is now on display at Darling Harbour in Sydney. I’ve taken people there, including my two kids, to show them exactly what my life was like and how cramped the conditions were.

How did you transition from working on a submarine to working for the Commonwealth Bank?

In the last couple of years before I left the Navy, I did my business degree at sea on a submarine. I was working six hours on, six hours off. In one of the six hours off I studied and exercised, and I decided to do a business degree. I left the Navy, and I was working for the bank for a couple of years in country New South Wales and other places and I eventually made my way to the Gold Coast which is where I learned about management rights. I helped with some big organisations who were buying and selling management rights.

Then you decided to go out on your own?

I left the bank in 2012 and went into business in finance. I live at Currumbin now. I always wanted to have a place where I could see the ocean. I’ve got a son who is almost 20 and a daughter who is almost 17.

My son has just embarked on his own career at sea. He works in the Merchant Navy and travels around the Tiwi Islands delivering food in shipping containers. My daughter is a student at Miami High.

You’re a director at Finexia, an ASX listed company. Were you one of the founders?

No, Finexia has been around for a number of years, and it bought out a small business that I ran with some partners. That business was called Creative Capital and we were private lenders. There were four partners, three of us working, and one silent partner who manoeuvred us into this listed business which was good for us. Finexia is a boutique financial services company. We do stockbroking, funds management and we have a licence to work with retail and wholesale investors. We provide all kinds of investment products, and we are about to launch a crypto product. We invest in infrastructure, childcare and private lending among other things. We are a wide spectrum financial services company and one of the key things we are definitely into is holiday accommodation.

Management rights is a good fit for your business?

We see a future as a mini Mantra with some key differences in focus and scale for the next few years. Holiday letting is such a natural business to sit inside an investment product because it provides great returns. We understand management rights and from an investment point of view it is really attractive.

You’ve gone out to the market and bought four management rights businesses and you are about to buy another four very soon?

Yes, our aspiration is to build up to between 15 and 20 properties and then dispose of them either through an IPO or a trade sale. Stayco is the company that owns the buildings. We will be a holiday letting business going forward, that’s where we think our future lies. Finexia has a fair percentage of Stayco. So we have a vested interest in its success.

Please tell us about your management rights buildings.

We bought the first of them around September last year and we will buy the next round in July. After that we’ll continue to grow. The two holiday buildings we have now are Bel Air at Broadbeach and Ivory Palms at Noosa, along with two permanent-letting buildings in Brisbane.

We are going through the due diligence now for the other four buildings. I can’t reveal their names at this stage, but as we build to at least 15 we want to have a vehicle which is large enough to get enough lift in the value and make it financially viable to sell it via an IPO or to another party. One of the advantages we have in getting the next four buildings is that we can market more effectively. We have more capital than most operators, so that allows us to make better decisions than someone in a small business where money might be very tight.

So how do you go about running the buildings?

The man who oversees these four businesses is Mike O’Farrell (who has just been made a life member of ARAMA). We have managers who have been involved in the industry for over 25 years.

You launched Stayco during COVID?

It was a pretty tough time to do it but it’s amazing how many good businesses you hear about that were launched during difficult times and have done well. We’ve paid our investors a 12 percent return since we started, and we pay them every month. Most of our investors live on that money and the investment is backed by a listed company. It’s going to continue as a good investment for them. The 12 percent is a great rate of return, a lot better than you can do at the bank. We have twice-a-year redemptions if people want to withdraw their money, but so far no one has wanted to do that because it’s such a great return. Our existing investors have all wanted to put more money in.

That fund for the first four buildings is fully subscribed now?

Yes, but we are just about to launch another product which we will offer to retail investors at a target of 8 percent. We may pay even more, but we never promise more than we can deliver. It’s been a golden time for management rights over the last six months and we know things might get tougher. But we are happy to offer the product based on our past performance. Going forward, retail investors have a different risk appetite to wholesale investors. Our bank gearing is very low, and we are never at risk of the bank coming along and asking us to change terms dramatically. Finexia is a public company, and we have other businesses and profits that support what we do. Everything we commit to say we’ll do for investors, we do it. Investors can put in as little as $10,000 so that’s attractive for a lot of people getting very little interest at the bank.

Your investment model in management rights is different to many others?

There are a lot of partnership deals in management rights, which are basically private people getting together. We are regulated in what we do, including regular reporting to the ASX on top of regulatory oversight from ASIC so we can’t make plans that we can’t meet. We have an Australian Financial Services Licence which is very valuable to us and allows us to invest for retail and wholesale clients, and also means we are rigorous in our reporting. We have a proper full independent audit every year. So, we are a genuine corporate business that operates under the regime of any public business or bank. That’s very different to partnerships or syndicates in management rights where you might have an arrangement with an accountant or finance broker who puts you into a business and where there are not the same protections as working with a listed company. We have much stricter requirements in how we invest and what we can offer.