“REINVENTING GREATER KL’S OLD...

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”


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


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


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


WHY EN BLOC SALE IS IMPORTANT?

The Nail House of Chongqing, China, 2008



The Nail House of Wenling, Zhenjiang province, China



Seattle Up House, USA



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



Farmhouse at Narita Airport, Tokyo

ANY LEGISLATION GOVERNS EN BLOC SALE IN MALAYSIA?


• 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


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


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


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



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)



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


Final Step 8: Preparing for Completion

and Handover of Property

• Time Required: 3-6 months

Step 7: Preparations

for the Application to

STB


Step 6: Sale by way of

tender


Step 5: Getting the requisite

Step 4: Work out the pre-

sale considerations


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)


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


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


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?


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


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


DEVELOPERS AIMING AT OLD STRATA DEVELOPMENT THAT ARE

DUE FOR REDEVELOPMENT

Galaxy Ampang

Developed by Shencourt Sdn Bhd.

Completed in 2005

Plaza Ampang City


THE REDEVELOPMENT OF OLD

STRATA DEVELOPMENT ENABLES

TO UNLOCK THE POTENTIAL VALUE

AND OWNERS ABLE TO REALISE

THE BEST PRICE FOR THEIR UNITS


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


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


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%


PARC IMPERIAL, PASIR PANJANG ROAD, SINGAPORE

(FORMER WESTERN GROVE)

BEFORE

• Tenure: Freehold







AFTER






RIVERBAY, MAR THOMA ROAD NO. 13-19, SINGAPORE

(FORMER KAI SHENG COURT, 21 & 23 MAR THOMA ROAD)

BEFORE

• Tenure: 999 years leasehold







AFTER





MOVING FORWARD


• 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

Date post:	09-Feb-2020
Category:	Documents
Upload:	others
View:	2 times
Download:	0 times

“REINVENTING GREATER KL’S OLD...

Documents