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 ID: 268706
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Disposing of a Property Asset
Russell MartooManaging DirectorRCP
Project Management – Development Management – Project Programming – Delay Claim AdvisorySlide2
Disposing of a Property Asset
Asset Strategy is the decision as to whether to hold, develop or dispose of a property assetSlide3
Highest and Best Use Study
Prepare
Asset Strategy
Hold / Develop / Sell
Market Assessment by Urban Planner
Town Planning Assessment
Financial Assessment / Feasibility
Prepare Master Plan options
Confirm Decision to Sell / Develop
No
Yes
Hold
Develop / SellSlide4
Yes
Settlement
Sell ‘as is where is’
Value Add or Develop
Rezoning, Site Remediation, Demolition, Refurbishment etc
Contract Negotiation and Management
Marketing / SalesSlide5
Disposing of a Property AssetThree phases in the disposal process
Deciding how to sell the property, i.e. ‘as is where is’ -vs- ‘value adding’ before offering for saleAdding value to the property before it is soldMarketing and selling the propertySlide6
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 useSlide7
Disposing of a Property AssetTo determine the HBU of a property asset it may be necessary to engage a range of property consultants
EconomistTown Planning ConsultantSurveyorArchitectCost PlannerValuerMedia and Communications ConsultantDevelopment ManagerSlide8
Disposing of a Property AssetA 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 disadvantagesPurchaser is likely to discount the true value of the property asset by factoring in a ‘risk premium’ – rezoning, decontaminate the sitePurchasers offer will be conditional on these things being satisfactorily resolved by the purchaserMay significantly delay the realisation of funds from the sale of the assetMay 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 marketNPO is more likely to encounter less public and political resistance to an appropriate rezoningSlide9
Disposing of a Property Asset
Adding ValueVery likely that the HBU will not be used on its existing useUnattractive 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 propertySlide10
Disposing of a Property AssetRezoning – addressing the technical issues
May also be necessary to engage additional specialist consultants TrafficHydraulicAcoustic engineersEnvironmental scientistRezoning application supported by a number of technical reportsA planning report prepared by the town planning consultantEconomic impact assessmentEnvironmental impact assessmentAcoustic report
A traffic impact assessment
Water, sewerage and storm water reportSlide11
Disposing of a Property AssetRezoning – addressing the political issues
The rezoning decision noticeDevelopment ManagerSlide12
Disposing of a Property AssetMarketing and Selling the Property Asset
Memorandum of information (MOI)A typical MOI contains the following:PART 1Invitation to TenderProperty ReportIntroduction
Summary of Offer
Property Details
Site Plan
Area Overview
Ambitions / Desires
Development PotentialConcept PlansSlide13
Disposing of a Property Asset
Planning ReportIntroductionSite HistoryZoningRoad Closure
Development Control Plans
City Council Requirements
State Government and Regional Issues
Conclusion
Specific Requirements for the Site
Environmental Issues (if applicable)
Council ApprovalPART 2Tender DocumentConditions of TenderTerms and Conditions of SaleSlide14
Disposing of a Property Asset
Due DiligenceBuilding inspectionsLegal investigationsConfirming the seller is legally entitled to sell the propertyInvestigating encumbrances, e.g. mortgages, leases, covenants, easements etcTown planning checksConcept designs and preliminary feasibility assessmentsSlide15
Disposing of a Property AssetContractual 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 acting promptly to achieve all the approvalsPurchaser has to achieve all the requested amendments to particular approvalsEnvironmental approvals must be carried out within an appropriate timeframePurchaser might need the consent from the vendor to undertake their applicationsInsurances (payment of statutory fees, statutory obligations)Slide16
Disposing of a Property AssetTransaction Management Most of the transaction process will be managed by your legal representative
A Development Manager would:Liaise with your legal representativeManage and clearly outline the steps and timeframes to achieve settlementUndertake a co-ordination role to follow upon what is required to happen, by whom and in a timely and complete mannerSlide17
Disposing of a Property AssetPutting up the ‘For Sale’ signSlide18
Disposing of a Property AssetSlide19
Questions?