8 December 2023
SUMMARY
This is an old block of flats that is no longer
up to today's living standards. This is seriously affecting capital and rental values. One way to restore vale is to upgrade the outside and the public areas and facilities, but this would require more money than many of the owners are prepared to put in.
Therefore the problem is how to convince these owners to join and fund a rehab program.
First we need some data : we need to know by how much the building is undervalued and whether the proposed redesign and rehab could pay for itself.
If the case is proven but the proposal won't be passed at the Residents Association, a strategy is needed to split the no vote. Those decidedly for or against can be put to one side, in order to focus on the group of undecideds. An issue which would split this group can be created. Thus a majority in favour of the proposal can be created.
It is also necessary to bring on board those who do not have the means to pay for the work.
For example, a subsidised loan could be offered, the cost of the subsidy could be added back to project financing costs and shared.
Then a campaign could be organised to canvas support with the waiverers, which if successful will mean the work could go ahead.
PROBLEMS / REQUIREMENTS
There is a problem, because although this block of 120 apartments is old, 30 years old, it is nonetheless in one of the best areas of the city, near to a couple of embassies; the rooms are large by modern-day standards; this is a good location near protected forest, fresh air off the nearby river; opposite a pretty place of worship with a recent by-law requiring any new-build be low-rise; and yet entertainment too a short walk away, being central to the principal gate to this walled city; giving a "rus-in-urbe" feel; and what's more, despite complaints of noise from ongoing apartment modernisations, it is a relatively quiet block with a peaceful mixed population 50-50 local and foreign; service and land charges are low; the property is well run along the "rule of 3Es" - economy, efficiency, effectiveness.
So you would think an attractive premium investment.
But no! The problem is that the per-square-foot (PSF) retail market value, buy or rent, is about half or perhaps 2/3 of the cost PSF in more recent post-2010 blocks. This block cannot compete with modern living standards, it seems.
And yet for these recent blocks, the apartments are smaller; the insulation is less; locations are less favourable, sometimes out of town; charges are certainly higher for a similar standing.
So what can be done about this?
Evidently the solution is to upgrade the quality of the built environment ie a rehab project, starting with external dec.s, followed by upgrades to the lobby and other public areas; and publicise this improvement to attract warranted attention, increase demand; and obtain more inward investment and up property values and returns.
GOAL
That is the goal then : to raise capital and rental values, from a program of building upgrade, to be publicised on social media. Noting that any proposal for change must be approved by the well-run Residents Association, aka "The Committee".
RISK
The difficulty getting this through the committee is that many of the membership and the committee itself are viscerally opposed to any capital expenditure projects beyond schedules of preventive maintenance and the basic minimum necessary to meet legal requirements.
How to convert a majority against change into a majority in favour of change?
STRATEGY
To get this public areas rehab project through the committee, one way could be to
1. get a list of all owners and tenants and with the Property Manager if available, evaluate the likely attitude of each person, splitting the list into three groups :
- those who would support the project
- those who would certainly oppose
- and then a middle group of doubters / undecideds
Focus on the undecideds. (We have little time, there is no point in spending time and stirring up feelings on those already strongly committed.)
2. Find an issue which would split the doubters into those for the proposal and those against.
3. Thus, if you could persuade the committee to consult owners, and you have successfully split the doubters, then you would stand a good chance of your proposal being approved.
What issue could split the undecideds? Who is this group?
CAMPAIGN PLAN
A possible way forward to discuss with fellow activists:
If you know the PSF cost of the rehab, and could value PSF the post-project, then you have a cost-benefit analysis and you know the PSF cost that can be charged back to owners, by majority agreement.
This CBA and chargeback should sell the proposal. (For info, owners and tenants have equal representaion on the Cttee.)
But what if it doesn't? What if the committee doesn't approve the expenditure? What if some owners refuse to pay their share? Here are the sticking points.
A solution might be to offer a subsidy on a loan the Committe can organise, that some owners might need if they are to be convinced them. But offer only to people who've been here for a minimum five years, or who have an income below a certain threshold, or whatever criteria will create a division.
And simply include the cost of this subsidy back in the project financing costs.
Now you can canvas the undecideds, offering them a helpful low-cost subsidy (at zero capex) that will tilt the vote at a Special AGM.
IMPLEMENTATION
to be continued ...
