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

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 / Sell

Yes Settlement Sell ‘as is where is’ Value Add or Develop Rezoning, Site Remediation, Demolition, Refurbishment etc Contract Negotiation and Management Marketing / Sales

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 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.Invitation to Tender B.Property Report a)Introduction b)Summary of Offer c)Property Details d)Site Plan e)Area Overview f)Ambitions / Desires g)Development Potential C.Concept Plans

Disposing of a Property Asset D. Planning Report a)Introduction b)Site History c)Zoning d)Road Closure e)Development Control Plans f)City Council Requirements g)State Government and Regional Issues h)Conclusion E. Specific Requirements for the Site F. Environmental Issues (if applicable) G. 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 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?