REHDA INSTITUTE CEO SERIES 2016 REINVENTING GREATER KLS OLD STRATA - - PowerPoint PPT Presentation

REHDA INSTITUTE CEO SERIES 2016

“REINVENTING GREATER KL’S OLD STRATA DEVELOPMENT THROUGH EN-BLOC ACQUISITION AND TRANSFORMING THEM INTO NEW DEMAND DEVELOPMENT SPACE

18 AUGUST 2016

FOO GEE JEN

MANAGING DIRECTOR – CBRE | WTW

WHAT IS EN BLOC SALE

3 REHDA | INSTITUTE CEO SERIES 2016 CBRE | WTW

WHAT IS EN BLOC SALE

• En bloc is a French word which means " as a whole“
• En bloc often refers to bulk purchase of real estate in a particular property

development or Collective Sale of an apartment block mostly for redevelopment.

• Typically, an En Bloc Sale takes at least one year after the Collective Sale

process has commenced and up to another six months before the completion of the Sale.

• A collective sale (or commonly termed en-bloc sale), is a combined sale by the
• wners of 2 or more property units to a common purchaser. The most common

en-bloc sale is the sale of all the units in a strata or flatted development to a

• purchaser. The sale proceeds are then divided amongst all the unit owners.

Other variations of en-bloc sales include the sale of all units in a development together with an adjoining development or landed properties. - “Strata Titles Boards, Singapore”

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WHAT IS EN BLOC SALE

• Common characteristics of En Bloc properties

– Old building >10 years – Poor in conditions – In popular and demand location

• Only allowable after a minimum number of owners have agreed to the sale
• Achievable in three ways

– By consensual agreement – Approach a group of residents – Company acting as a middleman in a sale, negotiate with the owners and sold to a third party

RATIONALE OF EN BLOC SALE

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WHY DO WE NEED EN BLOC SALE?

RAPID URBANIZATION

• As at 2014, World Urbanization Prospects

states 54% of world’s population resides in urban areas and projected to increase to 66% by 2050. (cf. 1950: 30%)

• Africa and Asia urbanizing faster than
• ther regions and projected to reach 56%

and 64% by 2050. (cf. 2014: 40% and 48%) SHORTAGE OF LAND IN URBAN AREAS

• Land is a scarce and diminishing

recourses therefore sustainable usage requires to be judiciously made for common good

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WHY DO WE NEED EN BLOC SALE?

EXTENSION OF INFRASTRUCTURE

• Promote local economy by improving

access to and quality of public infrastructure, enhance tourism development and improve people’s welfare URBAN DEVELOPMENT

• Rapid growth of population and

increasing of new housing needs leads urban renewal to play an important role in the policy towards sustainable development of citites

• Allow plots of land to realize their full

development potential and to allow rejuvenation of urban development

EXPANDING THE CITY BOUNDARY IS NOT THE SOLUTION!

WHY EN BLOC SALE IS IMPORTANT

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WHY EN BLOC SALE IS IMPORTANT?

The Nail House of Chongqing, China, 2008

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WHY EN BLOC SALE IS IMPORTANT?

The Nail House of Wenling, Zhenjiang province, China

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WHY EN BLOC SALE IS IMPORTANT?

Seattle Up House, USA

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WHY EN BLOC SALE IS IMPORTANT?

“Million-Dollar Corner” – 34th Street, Broadway, New York

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WHY EN BLOC SALE IS IMPORTANT?

Farmhouse at Narita Airport, Tokyo

ANY LEGISLATION GOVERNS EN BLOC SALE IN MALAYSIA?

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• National Land Code 1965
• Strata Titles Act 1985 / Strata Management Act 2013
• Land Acquisition Act 1960

ANY LEGISLATION GOVERNS EN BLOC STRATA ACQUISITION?

• Blocks can only be sold if all owners agree
• A single owner can stop a sale
• Relevant rights highlighted in Article 13 of the Federal Constitution

– No person shall be deprived of the property save in accordance with law – No law shall provide for the compulsory acquisition or use of property without adequate compensation

WHAT IS THE CURRENT ISSUE?

100%

METHODOLOGY & APPROACHES PRACTICES BY OTHER CITIES

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COMPARISON WITH MAJOR CITIES

DO WE NEED EN BLOC SALE?

Countries Area (km2) Population Density Singapore 719 5.618 mil (2015) 8,226 km2 Hong Kong 1,106 7.313 mil (2015) 6,654 km2 Tel Aviv, Israel (Urban only) 228 1.765 mil (2014) 7,743 km2 Penang Island 293 765,000 (2015) 2,611 km2 KL (Urban only) 243 1.768 mil (2015) 7,276 km2

18 REHDA | INSTITUTE CEO SERIES 2016 CBRE | WTW

SINGAPORE

• Rated as globally third most densely populated city nation
• Introduced in 1999 in juncture with the rapid economic growth.
• Thresholds set aim to prevent minority unit owners from stopping the sale /

redevelopment

• If building is <10 years, 90% consent
• If building is >10 years, 80% consent
• A General Meeting of Owners to determine whether the requisite consensus is

met

• Maximum 3 owners must then be appointed to form a sale committee to handle

sale progress

• Guide for valuation guidelines on collective sales
• For Public Housing,”Selective En-Bloc Redevelopment Scheme” (SERS) is

introduced to rejuvenate old estates and redevelop them – Usually in good location – For higher economic value for moving HDB flats out and rezoning them

METHODOLOGY & APPROACHES

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HONG KONG

• Rated as globally 4th most densely populated city nation
• Introduced in 1990s
• At least 90% consent
• At least 80% must agree, if

– Building more than 50 years old – Each unit makes up more than 10% of the undivided shares in the lot

• Land Tribunal must be satisfied that redevelopment is justified due to age or

state of repair of property

• Majority owners have taken reasonable steps to acquire the minority lots
• On approval by the Land Tribunal, a trustee is appointed to conduct the sale
• Property to be sold by public auction unless all parties agree to another method
• f sale

METHODOLOGY & APPROACHES

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ISRAEL

• Urban areas mainly consist of 3 -4 storey condo buildings constructed as far

back in 1930s

• An “en-bloc” type law known as “Pinui-Binui” was introduced in 2006

– Also known as “Evacuation and Construction” – One of government initiative to promote urban renewal projects – A process that permits the replacement of old housing complexes and

• utdated infrastructures by a large number of new apartment buildings

– Contractor pays all costs for demolition, construction, relocating apartment

• wners and renting their temporary homes during construction

– Requiring just 75% of original owners to agree – Guarantee ownership to the original owner

• Consist two options for evacuating the residents

– Evacuate and allocate occupants to rental apartments in close vicinity to their existing homes – First build a new structure near the buildings slated for removal, then evacuate to new building and later relocate to the initial building, and so on. (this is subject to authorities approval)

METHODOLOGY & APPROACHES

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WHAT ABOUT OTHER MAJOR CITIES?

City Requisition New York and Washington 80% New Zealand 75% Alberta, Canada 75% Tokyo 66.7% Seoul 66.7% Guangzhou and Shanghai 66.7% of the property owners owning a total of 66.7% of the total building floor area Taipei

• Expedited urban renewal areas: 50% of the property
• wners owning 50% of the total land and building floor

area

• Priority urban renewal areas: 60% of the property owners
• wning 66.7% of the total land and building floor area
• Other non-designated area: 66.7% of the property
• wners owning 75% of the total land and building floor

area

REQUISITE MAJORITY CONSENT FROM PROPERTY OWNERS FOR COMPULSORY SALES IN SELECTED CITIES

EN BLOC SALE PROCESSES

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Final Step 8: Preparing for Completion and Handover

• f Property
• Time Required:

3-6 months

Step 7: Preparations for the Application to STB

• Time Required:

6-8 months

Step 6: Sale by way of tender

• Time Required:

1-6 months

Step 5: Getting the requisite

Step 4: Work

• ut the pre-

sale considerations

• Time Required:

1-2 months

Step 3: Engage the professionals

• Time Required:

2-4weeks

Step 2: Set up a pro-temp committee

• Time Required:

2-4weeks

Step 1: Determine eligibility of the building for En-Bloc sale

EN BLOC SALE PROCESSES (SINGAPORE)

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COMMON APPORTIONMENT METHODS

• Share Value

– When units are of the same or similar strata / floor areas with same

• r similar share values
• Strata / Floor Area

– When units are of the same or similar strata / floor areas or the unit value rates are similar for various sizes

• Average Strata Area & Share Value

– When there are wide difference in the share value and / or strata / floor area among the various unit

• Valuation

– When the general attributes of the property are to be considered

MALAYSIA EXPERIENCE

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WHILST EN BLOC SALES NOT EXISTENCE IN MALAYSIA, UPGRADING WORKS ARE COMMONLY SEEN IN MOST OLDER STRATA DEVELOPMENT

Sungai Wang Plaza CMMT acquired 205 strata parcels, representing 62.8% of voting rights in Sungei Wang Plaza Management Corporation Amcorp Mall Refurbished and held flea market every weekend had revived the attractiveness of the mall

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WHILST EN BLOC SALES NOT EXISTENCE IN MALAYSIA, UPGRADING WORKS ARE COMMONLY SEEN IN MOST OLDER STRATA DEVELOPMENT

Viva Home (Formerly known as UE3 / Plaza Uncang Emas) With 3 unsuccessful attempts to revive over the past 10 years, Bernard Bong Yam Keng, Director

• f Kha Seng Corporation, in 2011,

successfully revived the mall with the introduction of Viva Home Wisma Central Ben Fadzlee, Citylab Studio rejuvenated and upgraded existing space into a contemporary work- leisure hub

IS EN BLOC SALE FOR REDEVELOPMENT A SOLUTION TO URBAN PLANNING?

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WHEN EN BLOC SALE IS REQUIRED?

SCENARIO

• You live in an old walk-up apartment with rapid transformation had taken place

in the neighbourhoods. Based on latest planning provision for the building site, the land is now zone as city centre commercial with permissible plot ratio of 1:6. as compare to earlier development planned as low density residential zone

• use. Should we go for en bloc sale?
• Feasibility of En Bloc Sale (Generally)
• Increase in Plot Ratio
• Re-zoning of land
• Built-up not fully utilized
• Test of HABU

 Physically permissible  Financially viable  Legally permitted

PROBLEM AND IMPLICATION OF EN BLOC SALE

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DEVELOPERS AIMING AT OLD STRATA DEVELOPMENT THAT ARE DUE FOR REDEVELOPMENT

Desa Kudalari Built in 1985 by Tan & Tan Development Berhad Shahzan Court Buit in 1980’s by Berjaya Land Ampang Park Opened in 1973, developed by Low Keng Huat Brothers Realty Sdn Bhd

32 REHDA | INSTITUTE CEO SERIES 2016 CBRE | WTW

DEVELOPERS AIMING AT OLD STRATA DEVELOPMENT THAT ARE DUE FOR REDEVELOPMENT

Galaxy Ampang Developed by Shencourt Sdn Bhd. Completed in 2005 Plaza Ampang City

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THE REDEVELOPMENT OF OLD STRATA DEVELOPMENT ENABLES TO UNLOCK THE POTENTIAL VALUE AND OWNERS ABLE TO REALISE THE BEST PRICE FOR THEIR UNITS

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CASE REFERENCE – DESA KUDALARI

Desa Kudalari Tan & Tan Development Berhad

CURRENT STATUS

• Built in 1985 (>30 years)
• Land area : 7.35 acres
• Current plot ratio: 1:0.8 (on net salebale area)
• Latest transacted price indicates ~RM1,250 per sq.

ft which translates land price about RM960 per sq. ft POTENTIAL

• Surrounding plot ratio : 1:8 to 1:10
• Zoned as City Centre Commercial
• Plot ratio of 1:8 in the DBKL Draft Structure Plan
• Proposed KLCC East MRT station adjoining to its

northwest, provide direct links via underground access to KLCC, thus ready for redevelopment

• Indicative land value within KLCC vicinity between

RM2,000 – RM3,500 per sq. ft

BELOW MARKET PRICE

200%-350% ABOVE EXISTING VALUE

LESSON LEARN

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POSITIVE

• Allowing for Urban Renewal and thus

ensuring the city’s economy and nation grow accordingly

• Unit owners able to realise the best price

for their units without having to fork out any substantial capital expenditure just to keep their units pegged at a current prevailing sales price

• Converts an unrealised value into cash
• Able to unlock the potential land value by

re-zoning and with higher plot ratio

• Able to attract demand with newer and

larger properties NEGATIVE

• No legislation governs en bloc acquisition

thus making the acquisition process defenceless

• Whilst blocks can only be sold if all owners

agree, the acquisition will be stopped if

• ne owner disagrees
• Potentially prolonged the acquisition

process should minority of the owners refuse to sell

• Strata ownership is a double-edged sword

where it may benefit the smaller investors, but it can preclude the opportunities of unlocking the premium value of the development under the current situation

KEY TAKEOUT

EXAMPLE OF SUCCESSFUL PROJECTS

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SOPHIA RESIDENCE, SOPHIA ROAD, SINGAPORE (FORMER SOPHIA COURT)

BEFORE

• Tenure: Freehold
• Land area: 166,140 sq. ft
• Plot ratio: 1:2.1
• No. of Units: 272 Apartments
• Mode of Sale: Collective Sale (“En-Bloc)
• Consideration: SGD661 (over land area)
• Year of transaction: 2006

AFTER

• Type of Property: Apartment
• Launched Year: 2009
• Launched Price: SGD1,555
• Unlocked Value (%): 135%

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PARC IMPERIAL, PASIR PANJANG ROAD, SINGAPORE (FORMER WESTERN GROVE)

BEFORE

• Tenure: Freehold
• Land area: 49,696 sq. ft
• Plot ratio: 1:1.4
• No. of Units: 138 Apartments
• Mode of Sale: Collective Sale (“En-Bloc)
• Consideration: SGD390 (over land area)
• Year of transaction: 2009

AFTER

• Type of Property: Apartment
• Launched Year: 2009
• Launched Price: SGD1,200
• Unlocked Value (%): 208%

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RIVERBAY, MAR THOMA ROAD NO. 13-19, SINGAPORE (FORMER KAI SHENG COURT, 21 & 23 MAR THOMA ROAD)

BEFORE

• Tenure: 999 years leasehold
• Land area: 21,463 sq. ft
• Plot ratio: 1:2.8
• No. of Units: 147 Apartments
• Mode of Sale: Collective Sale (“En-Bloc)
• Consideration: SGD250 (over land area)
• Year of transaction: 2007

AFTER

• Type of Property: Apartment
• Launched Year: 2013
• Launched Price: SGD1,350
• Unlocked Value (%): 441%

MOVING FORWARD

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• Percentage of owners requisition can be determine by building age

– < 10 years : 90% – >10 and < 20 years : 80% – > 20 years : 75%

• Establishment of Strata Title Board
• Govern and protect the owner’s right e.g. Should owner suffer

financial loss or unable to redeem their mortgage, En Bloc Sale should be rejected

• Owners, especially for public housing will be offered priority to

purchase new units in the redevelopment i.e. SERS / PINUI-BINUI

• Learn from en bloc sales processes in Singapore and Hong Kong that

can be adopted in our country POTENTIAL REGULATION FOR EN BLOC SALE

THANK YOU

18 AUGUST 2016

CBRE-WTW Joint Venture

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