“reinventing greater kl’s old...
TRANSCRIPT
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 JENMANAGING DIRECTOR – CBRE | WTW
WHAT IS EN BLOCSALE
3 REHDA | INSTITUTE CEO SERIES 2016CBRE | 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
owners 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”
4 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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
other 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
7 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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
9 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
WHY EN BLOC SALE IS IMPORTANT?
The Nail House of Chongqing, China, 2008
10 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
WHY EN BLOC SALE IS IMPORTANT?
The Nail House of Wenling, Zhenjiang province, China
11 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
WHY EN BLOC SALE IS IMPORTANT?
Seattle Up House, USA
12 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
WHY EN BLOC SALE IS IMPORTANT?
“Million-Dollar Corner” – 34th Street, Broadway, New York
13 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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 i.e. 100%• 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?
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 2016CBRE | 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
• Establish sales committee of between 3 to 14 members
• In the sales committee, appoint not more than 3 owners to represent the
majority owners in connection with the application
• 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
of sale
METHODOLOGY & APPROACHES
20 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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
outdated infrastructures by a large number of new apartment buildings
– Contractor pays all costs for demolition, construction, relocating apartment
owners 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
21 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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
owners owning 50% of the total land and building floor
area
• Priority urban renewal areas: 60% of the property owners
owning 66.7% of the total land and building floor area
• Other non-designated area: 66.7% of the property
owners 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 of 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 out 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)
24 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
COMMON APPORTIONMENT METHODS
• Share Value
– When units are of the same or similar strata / floor areas with same
or 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
26 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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
27 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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
of 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?
29 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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
31 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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 2016CBRE | 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
33 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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 LEARNT
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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
one 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%
39 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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%
40 REHDA | INSTITUTE CEO SERIES 2016CBRE | WTW
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 VentureV(1)0071