Trials and triumph of a flat owner in dealing with buyout proposals

HONG KONG: When owners of flats in older buildings in Mid-Levels became the target of buyout offers from developers aiming to redevelop the buildings, owners were presented with the choice of accepting the offers or fighting for more.

Richard Wright, who owned a flat in Merry Terrace, decided on the latter course because, as he put it: "I am in charge of my own destiny."

So rather than leaving his fate in the hands of the developers and the majority decision of owners in his building, Wright — a Canadian who left Vancouver in 1997 to come to Hong Kong — set about negotiating on his behalf as that of the other owners.

He was prepared for the demands on his time and energy, but not for the low point in the campaign which came when an officer from the Independent Commission Against Corruption came knocking on his door after receiving an anonymous complaint against him.

The story of his fight began on a spring day in 2005 when owners found letters in their mailboxes from a property agent who said he represented an unidentified developer who wanted to buy their units. The initial reaction from most was positive, but after closer scrutiny of the offer and checking prevailing market prices, they were disappointed since the offer seemed on the low side, recalled Wright.

That was when they decided to join forces and attempt a joint sale of their units through a tender.

Wright was elected as chairman of their "development committee" and given the responsibility of engaging a legal representative and property consultant to arrange the tender.

"I spent thousands of hours on the exercise," he said, holding numerous meetings to explain developments to individual owners and to ensure the tender sale would be transparent.

But the tender failed, he said, because of the owners' over-optimistic expectations.

Wright recalled that Charles Chan Chiu-kwok, chief valuer for property consultancy Savills, originally suggested owners hold out for a reserve price of HK$3.4 billion (RM1.4 billion) for the building. But another consultant, Jones Lang LaSalle, suggested a reserve price of HK$4 billion.

Owners went for the higher reserve and appointed Jones Lang LaSalle to arrange the tender. "We received five bids and none met the reserve price," Wright said.

And so the attempt at a joint sale failed and dashed Wright's faith that the differing expectations of owners could be reconciled.

But the attractive location and high redevelopment potential of the property attracted other offers, and a year later a property agent representing Henderson Land approached owners with another offer for their units.

Henderson secured approvals from about 60% of the flat owners while 20% (Wright included) sold their units to another investor and the remainder held out for higher prices, Wright said.

Wright did not disclose the sale price but said it was about 5.5 times his original purchase price. According to Land Registry records he sold his flat for HK$19.66 million.

But there were some painful memories. "I was criticised by individual owners. My wife, who is a Chinese, was shocked by the [Cantonese] words they used," he said.

Worse was to come. "About two years ago, I received a phone call at my office. An officer from the ICAC said he wanted to come to see me. The first question I asked was, `Will you wear a uniform?' But he said no, `just a suit', so I said that's fine."

The ICAC officer duly arrived in his suit and told Wright some concerns had been raised over the sales procedures. But nothing further transpired and the ICAC investigation proved groundless.

"I was deeply disappointed by the developments," Wright said.

Following the sale of his unit, Wright recently bought a flat in an old 10-unit, three-storey building in Happy Valley — another potential target of developers for redevelopment.

So following his experiences, what advice does he have for flat owners who may find themselves in a similar situation?

"I would recommend they consider a joint sale. But they need to be very transparent in their dealings and they must also be realistic in their expectations — developers will not easily share their profits.

"They should try to unite for the common goal of a sale, rather than letting greed destroy the opportunity," Wright said. — South China Morning Post