Transcript Disposing of a Property Asset

Disposing of a Property
Asset
Russell Martoo
Managing Director
RCP
Project Management – Development Management – Project Programming – Delay Claim Advisory
Disposing of a Property Asset
Asset Strategy is the decision as to whether to hold,
develop or dispose of a property asset
Prepare Asset Strategy
Hold /
Develop /
Sell
Hold
Develop / Sell
Highest and Best Use Study
Market Assessment
by Urban Planner
Town Planning
Assessment
Prepare Master Plan
options
Financial Assessment /
Feasibility
Confirm
Decision to
Sell /
Develop
Yes
No
Yes
Value Add or
Develop
Sell ‘as is where is’
Rezoning, Site
Remediation,
Demolition,
Refurbishment etc
Marketing / Sales
Contract
Negotiation and
Management
Settlement
Disposing of a Property Asset
• Three phases in the disposal process
• Deciding how to sell the property, i.e. ‘as is where is’ -vs- ‘value
adding’ before offering for sale
• Adding value to the property before it is sold
• Marketing and selling the property
Disposing of a Property Asset
• ‘As is where is’ -vs- ‘adding value’
• The market value of a property asset, or the price a vendor may
expect to achieve in selling it, depends on its ‘highest and best use’
(HBU)
• HBU means “the use of an asset that maximises its potential and
that is physically possible, legally permissible and financially
feasible”
• The HBU of an NPO’s property asset is very often not based on its
current use, but some other physically possible, legally permissible,
financially feasible use
Disposing of a Property Asset
• To determine the HBU of a property asset it may be
necessary to engage a range of property consultants
• Economist
• Town Planning Consultant
• Surveyor
• Architect
• Cost Planner
• Valuer
• Media and Communications Consultant
• Development Manager
Disposing of a Property Asset
• A decision to sell a property ‘as is where is’ is a low risk
strategy which pushes the risks associated with a
rezoning onto the purchaser
• Number of disadvantages
• Purchaser is likely to discount the true value of the property asset by
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factoring in a ‘risk premium’ – rezoning, decontaminate the site
Purchasers offer will be conditional on these things being satisfactorily
resolved by the purchaser
May significantly delay the realisation of funds from the sale of the asset
May rule out some potential purchasers who are not prepared to take on
the risks. Reducing the number of potential bidders may reduce
competitive tension in the market
NPO is more likely to encounter less public and political resistance to an
appropriate rezoning
Disposing of a Property Asset
• Adding Value
• Very likely that the HBU will not be used on its
existing use
• Unattractive in its current condition to other
potential users or buyers
• Number of ways an owner may ‘add value’ to a
property asset
• Rezoning the site to permit the HBU
• Site remediation where contamination may be an
issue
• Demolition of existing improvements
• Refurbishment of existing improvements
• Redevelopment of the property
Disposing of a Property Asset
• Rezoning – addressing the technical issues
• May also be necessary to engage additional specialist consultants
• Traffic
• Hydraulic
• Acoustic engineers
• Environmental scientist
• Rezoning application supported by a number of technical reports
• A planning report prepared by the town planning consultant
• Economic impact assessment
• Environmental impact assessment
• Acoustic report
• A traffic impact assessment
• Water, sewerage and storm water report
Disposing of a Property Asset
• Rezoning – addressing the political issues
• The rezoning decision notice
• Development Manager
Disposing of a Property Asset
• Marketing and Selling the Property Asset
• Memorandum of information (MOI)
• A typical MOI contains the following:
• PART 1
A.
B.
Invitation to Tender
Property Report
a)
b)
c)
d)
e)
f)
g)
C.
Introduction
Summary of Offer
Property Details
Site Plan
Area Overview
Ambitions / Desires
Development Potential
Concept Plans
Disposing of a Property Asset
D.
Planning Report
a)
b)
c)
d)
e)
f)
g)
h)
E.
F.
G.
Introduction
Site History
Zoning
Road Closure
Development Control Plans
City Council Requirements
State Government and Regional Issues
Conclusion
Specific Requirements for the Site
Environmental Issues (if applicable)
Council Approval
• PART 2
• Tender Document
• Conditions of Tender
• Terms and Conditions of Sale
Disposing of a Property Asset
• Due Diligence
• Building inspections
• Legal investigations
• Confirming the seller is legally
entitled to sell the property
• Investigating encumbrances, e.g.
mortgages, leases, covenants,
easements etc
• Town planning checks
• Concept designs and preliminary
feasibility assessments
Disposing of a Property Asset
• Contractual and Legal Risk Management
Matters which may be managed under a conditional
contract include:
• Purchaser has to get all the approvals and must be seen to be
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acting promptly to achieve all the approvals
Purchaser has to achieve all the requested amendments to
particular approvals
Environmental approvals must be carried out within an appropriate
timeframe
Purchaser might need the consent from the vendor to undertake
their applications
Insurances (payment of statutory fees, statutory obligations)
Disposing of a Property Asset
• Transaction Management
• Most of the transaction process will be managed by your legal
representative
• A Development Manager would:
• Liaise with your legal representative
• Manage and clearly outline the steps and timeframes to achieve
settlement
• Undertake a co-ordination role to follow upon what is required to
happen, by whom and in a timely and complete manner
Disposing of a Property Asset
• Putting up the ‘For Sale’ sign
Disposing of a Property Asset
Questions?